The mainland's big four state banks can expect to lose about one-third of their most qualified staff to foreign rivals, according to three leading economists. The three - Li Yang, Mei Jianguo and Huang Jinlao - paint a bleak picture for the banks, saying they will lose many of their best clients and staff to the more efficient and better-paying foreign banks. China Construction Bank, Industrial and Commercial Bank of China, Bank of China and Agricultural Bank of China account for more than 70 per cent of the country's financial business and are the only banks with nationwide networks. But membership of the World Trade Organisation means they face much stiffer competition than in the past. The four employ 1.6 million people, of whom 12 per cent have a tertiary education or better, according to the economists, whose comments were reported in the China Business Times. Of these, nearly 50,000 are expected to defect to foreign banks offering better pay, bonuses and training opportunities, compared with state banks that still have inflexible payment methods. In 1999, the average annual income, including wages and bonuses, for an operations officer working in a China-based foreign bank was 145,000 yuan (about HK$135,894), compared with 24,000 yuan for a counterpart in one of the big four. At the end of 1999, of the 169 local Chinese employed in senior management positions in mainland-based foreign banks, 32 had come from the Bank of China. Of the 29 graduates recruited by Bank of China's head office in 1997, 16 had left by last year, including all the computer specialists. Prior to China's WTO entry, foreign banks were extremely restricted in the business they could conduct. Their share of foreign currency deposits is now about 5 per cent, while they have more than 20 per cent of foreign currency loans. However, they have less than 1 per cent of yuan deposits. Under WTO entry requirements, foreign banks will be able to engage in local currency business with Chinese companies two years after entry and with Chinese individuals five years after entry. The report said foreign banks accounted for more than 40 per cent of export settlements in the domestic market, and that this would expand. It said foreign banks were specialists in derivative products, although they were severely limited in this sector. It also noted that some foreign organisations conducted illegal derivatives business, especially for long-term instruments. High expectations of a devaluation in the yuan made demand for such derivatives strong, especially as few domestic banks provided this service. While foreign banks will not attempt to rival the Chinese banks in the retail market, they will target the clients that provide the main profit for the big four, which derive 60 per cent of their profit from 10 per cent of their customers. The big four's profits are derived from their operations in Beijing, Shanghai and Shenzhen, and compensate for losses made in other parts of the country. The banks' best clients include foreign multinationals and foreign-invested joint ventures, as well as Chinese exporters, conglomerates, high-technology firms and rich individuals, to whom the foreign banks will offer personal finance services, credit cards, Internet and telephone banking, and consumer credit. Foreign banks are set to pose a major threat once they have access to the domestic banks' Golden Card credit-card system.