NANYANG Commercial Bank, a member of the Bank of China Group, is set to be among the first batch of Hong Kong financial institutions to offer yuan-related services on the mainland later this year. As part of measures to revamp the banking system, the People's Bank of China is mapping out a policy whereby selected overseas banks will be permitted to operate yuan business as early as September. ''Considering our history and scale of business on the mainland, I believe we will be one of the first foreign banks to be allowed to go into yuan business,'' said Nanyang deputy general manager Ng Lin-fung. In 1982, Nanyang took the lead in penetrating the mainland market, setting up its first branch in the Shenzhen Special Economic Zone. Branches in Shekou, Haikou and Guangzhou followed. In the second half of this year, the bank will open a branch in the northeastern port city of Dalian. It will also establish a bank in Ningbo in a joint venture with Zhejiang Commercial Bank, the Zhejiang branch of the Bank of China, Ningbo Bank of Communication and Zhejiang International Trust and Investment Bank. Nanyang's representative office in Beijing would also be upgraded to branch status, Mr Ng said. He said the bank's mainland operations were now limited to the foreign currency business of foreign-funded firms and to people from overseas staying in China. ''The relaxation not only shows that China welcomes foreign banks to take a greater part in its economic development, but also shows its determination to reform the banking system,'' he said. Through a decade of development, Nanyang has gained a leading role in the mainland market among Hong Kong banks. It provided loans to more than 600 projects in the transport, energy, telecommunications and industrial sectors. On the retail banking side, Nanyang is a pioneer in mortgage loans for housing and in the credit-card business in China. Nanyang, which is preparing for listing in Hong Kong, has more than 10 per cent of its total business volume generated by the China market. Noting that the policy relaxation would enable overseas banks to play a more active role in the China market, Mr Ng said Nanyang would thrash out strategies to cope with the change. He said: ''The impact of the policy on the business of overseas banks in China is substantial, especially on the retail banking side. ''In the past the source of funds was limited. But with the change of policy, overseas banks will be able to find more funds to support their expansion in China.'' Apart from yuan business, Mr Ng said Hong Kong bankers also wanted China to allow them to take foreign currency deposits. ''A large amount of foreign currency is in the hands of residents. If there were more outlets for the residents to deposit their holdings, the foreign currency could be channelled into more constructive uses,'' he said.