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Foreign banks get to move in early
By Zhang Dingmin (China Daily)
Updated: 2005-12-06 05:49
In a report released by PricewaterhouseCoopers in September, the most
important driver of change in the Chinese banking industry was the pace of
regulatory change, foreign banks surveyed said.
China is expected to scrap all restrictions on foreign banks at the end of
next year and allow them into such key areas as local currency retail business.
"The authorities are trying to prod local banks by promoting broader
participation of foreign players in the market," said Dong Chen, a senior
banking analyst at China Securities.
After a few years of restructuring and rescue plans, Chinese banks,
particularly the State-owned Big Four banks, are now able to stand on their own
feet in the marketplace, but need to improve risk management, corporate
governance and efficiency in a fully-competitive market environment, he said.
The Chinese Government has pumped in a combined US$60 billion as capital
infusions for three of the Big Four banks in the past two years to clean up
their balance sheets, but analysts say significant progress in areas such as
corporate governance has yet to be seen.
"We need to promote competition, which will benefit the Chinese banking
sector over the long haul," Dong said, noting domestic banks are not strong
enough to compete in the international market.
A total of 71 foreign banks had set up 238 operational entities in 23 Chinese
cities by the end of October, according to the CBRC. Although they still account
for a small 2 per cent of total banking assets, they have grabbed a 20 per cent
share in foreign-currency loans.
Foreign banks now account for 12.4 per cent of total banking assets in
Shanghai, China's financial centre. Since the local currency business started
opening up two years ago, foreign banks' renminbi assets have risen to 100
billion yuan (US$12.3 billion).
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