China opens up further for foreign banks

China Banking Regulatory Commission (CBRC) has announced increase in the number of cities where foreign banks can do business denominated in yuan, and had eased capital requirements.

As required under commitments to World Trade Organisation, the cities of Shantou and Ningbo were now open to foreign banks offering yuan business to Chinese and foreign companies and to foreign individuals, the commission said.

It also added five other cities that it said it was not yet required to open to foreign banks: Harbin, Changchun, Lanzhou, Yinchuan, Nanning.

The CBRC reduced the minimum operational capital requirement for a foreign bank branch to provide yuan business to clients, including Chinese residents, to 400 million yuan ($49.5 million) from 500 million yuan.

It had also cut the minimum operational capital required for a branch of a wholly-owned foreign bank registered in China, or a joint venture, to 200 million yuan from 300 million yuan.

Foreign banks are already allowed to offer foreign-currency business anywhere in China. From next December, they will be allowed to offer yuan business to anyone anywhere in China, subject to regulatory approval.

Beijing is eager to entice foreign cash and expertise into its banking sector, which is saddled with $200 billion in bad debt.

Major banks like HSBC Holdings Plc., Citigroup Inc. and Bank of America and invested billions already. At the end of October 2005, foreign banks had had total assets in China of $84.5 billion, about 2 percent of all banking assets in China. Foreign currency loans by foreign banks had been 25 percent of all foreign currency loans.

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