Proposition 1: Dividend cheques determine the share prices of the world's big banks, now more or less indistinguishable from one another and matured into utilities dealing at the basic end of their business in just another commodity (loans). Proposition 2: Profit determines the size of dividend cheques. QED. Short of an upheaval to the system, profit growth must be sustained at high enough levels to leave cash in the kitty for dividends after the mega banks have met the rising costs of doing business and made the steadily increasing investments necessary to stay at the top and in favour with shareholders. As margins were steadily compressed in the plain vanilla business of making loans in mature home markets, banks responded by cutting costs through branch closures and staff lay-offs, investing in automated and online delivery systems, and shifting resources to fee-generating products. The strategy worked but has delivered the last of its big-shift gains. Enter the emerging markets, China chief among them, where the cycle can be rerun from go and profit momentum secured once the mainland banking market is fully opened in 2007 under access agreements negotiated through the World Trade Organisation. With their vast distribution networks, brand identities and virtually inexhaustible customer deposits, mainland incumbents were never likely to be a pushover, however, forcing foreign banks jockeying for position ahead of 2007 into niche offerings. Arguably the best-positioned of them, HSBC has shown its hand - insurance and credit cards will be the first mass product offerings to locals once the market opens. A case of 'back to the future', with some adaptations, to secure survival. On May 13, HSBC's mainland partner, Bank of Communications, formally launched its first credit card, licensed to carry HSBC's name and its hexagon logo. 'Be careful with the wording,' advised Ron Logan, the chief executive of Bocom's Pacific Credit Card Centre. 'It's to demonstrate we are in co-operation'. That is because it will not be until 2007 that the status of the card operation may be formalised as a revenue-sharing joint venture, he points outs. But in anticipation of that deadline, HSBC has invested substantial (albeit undisclosed) sums. 'I can't talk, partly because Bocom is preparing its IPO and we are in lock-down, but the aspirations we have are very substantial,' he says. 'We have 400 staff working in the business, so draw your own conclusions.' Add HSBC's investment in mainland insurer Ping An (the owner of a banking licence and proposed issuer of a credit card) and its two-pronged entry strategy into the market through cards and insurance becomes clear. The architects of that strategy will take comfort from the results of a recently released Asia-Pacific poll conducted by McKinsey & Co, Asia-Pacific personal financial services survey. Intuitively, one would expect demand for personal financial service products to correlate with per capita gross domestic product, says survey co-author Matt Bekier, who is also a partner and head of the consulting firm's financial institutions practice in Greater China. A poor community is likely to show less interest in yield-enhancing products to cater for retirement than a rich one. Not so in China, the poll shows. Asked if they were concerned that they had enough money to retire, 83 per cent of respondents said they fully or somewhat agreed, against just 55 per cent in Hong Kong. Another strong sentiment to emerge in the survey, Mr Bekier says, is an old-fashioned preference for hands-on help in bank branches. With seven of respondents' top 10 bank selection criteria being service-oriented, foreign banks do not have a prayer when it comes to delivering products to the mass market - a point underlined in another survey finding that although Chinese consumers indicated some willingness to use foreign banks, their preference for local banks remained significant. Seventy-eight per cent of respondents said that dealing with local institutions was important to them, up from 66 per cent in 1999. But whereas a cultural bias against debt remains broadly unchanged since the first survey in 1997, cracks are appearing. 'Cut the responses up to the below-30s and the affluent, and it is clear that while the 1.2 billion may not have changed their attitudes, 100 million have,' Mr Bekier says. Credit cards will be in demand and economies of scale will be available to newcomers despite the relatively small group of consumers who may be tempted by the demon debt and have the right credit profile. Outside of basic banking products (local currency savings and time deposits and a debit card) the 844 customers polled in the McKinsey survey ranked pension/retirement products, health insurance, and life insurance as their next priorities. The lessons that emerge? Domestic institutions might be better placed to defend their market position against foreign entrants than is commonly supposed, but a strategy that targets the young and wealthy in major cities, with cards and investment products aimed at assuaging those retirement concerns, should serve foreign players well.