Foreign competitors are unlikely to snatch a big share of the financial services market as China's entry to the World Trade Organisation ushers in unprecedented market access. However, newcomers might pose a serious challenge to domestic rivals in critical markets, threatening to further erode their bottom lines, said analysts. China's debt-ridden banks, along with the securities industry, are expected to bear the brunt of further liberalisation of the financial services market in the wake of China's WTO entry. Foreign banks are confined to foreign-currency transactions in select cities and yuan business only in pilot programmes. In a bilateral pact with the United States, China agreed to lift, upon accession, geographical curbs on foreign banks' foreign-currency transactions and yuan dealings with foreign clients. Under the agreement, Beijing will lift bans on foreign banks' yuan dealings with Chinese enterprises two years after accession, and with individuals five years from the date of entry. Foreign banks will be allowed to offer yuan services in four cities upon accession, with four more cities added each year thereafter. Nationwide market access is due in five years. Analysts said the impact on China's commercial banks would depend on whether they could use the transition period to restructure, recapitalise and rein in their non-performing loans. Analysts expect foreign banks to capture a 10 to 20 per cent market share in 10 years. Commercial banks derive 95 per cent of their revenues from the developed coastal regions. Foreign banks would not need to build extensive branch networks to rival domestic banks in the most lucrative markets, said Huang Yiping, Salomon Smith Barney vice-president of Asia Pacific economic and market analysis. Instead of competing on scale, foreign banks were likely to lure business and high-end retail clients with 'professional skills and service standards far better than domestic banks', said Fred Hu Zuliu, head of Goldman Sachs Greater China economic research. Foreign banks could pocket more than half the domestic market for fee-based banking services, including trade financing, credit-card services and cash management, Reuters quoted Chinese bank officials as saying. However, commercial banks, the largest of which boasted tens of thousands of branches around the country, were likely to retain a competitive advantage in absorbing deposits, said Mr Huang. Jittery domestic banks have sought to cushion themselves from the pending competition. The Bank of Communications, China's fifth-largest commercial bank, unveiled a plan to sell a 15 per cent equity stake to foreign strategic investors. China Construction Bank, among the largest four state-owned commercial banks, is also weighing the move. Chinese banks have also been rolling out new products to entice customers, speeding up non-performing loan disposal and seeking public floats to recapitalise. Beijing will also allow minority foreign-owned joint ventures into fund management on the same terms as Chinese firms. Three years after accession, foreign firms will be allowed 49 per cent stakes in joint ventures.