This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious




China To Ease Entry For Foreign Banks

by Mary Swire, for LawAndTax-News.com, Hong Kong

13 August 2004

Perhaps influenced by the enormous overhang of domestic and foreign exchange holdings in its citizens' hands and the inefficiency of domestic banks, China has said it will allow an acceleration in the rate at which foreign banks can open branches on the mainland and significantly lower the capital requirement for conducting yuan-denominated business with domestic customers.

The China Banking Regulatory Commission (CBRC) will scrap a mandatory one-year waiting period between branch openings by foreign lenders, and cut the minimum capital requirement for foreign bank branches to conduct yuan business with mainland companies 25% to 300 million yuan, while the requirement for branches doing yuan business with Chinese individuals will fall to 500 million yuan from 600 million yuan.

Sixty-four foreign banks were operating 192 outlets in China at the end of last year, but they have been allowed to offer yuan-based services to mainland companies only since December. Under a timetable agreed with the WTO, China is scheduled to allow foreign banks to do yuan business with mainland citizens from the end of 2006.

The Chinese government has also been reported to be actively considering a proposal to establish a market for trading yuan denominated bonds in Hong Kong, in what is presumably another attempt to entice its citizens away from the forbidden fruits of foreign exchange, although many bankers question whether such a market could succeed while the yuan remains non-convertible.

Along the same lines, a Hong Kong funds industry body recently urged the Chinese authorities to allow mainland foreign exchange deposits to be invested in Hong Kong domiciled funds. “Hong Kong has been a capital formation centre for China in the past decade. Given our international investment management expertise, we will still have a key role to play for China's fund management industry,” said Au King-lun, chairman of the Hong Kong Investment Funds Association.

.

 

 






Write a comment