FOREIGN banks will not be allowed to operate yuan business in China until the official exchange rate and the swap rate are unified, says Malcolm Williamson, group chief executive of Standard Chartered Bank. ''The Chinese Government has clearly set down its priorities. The most important job is to tackle inflation. Regarding foreign banks' operating yuan business, the time is not ready yet,'' said Mr Williamson, who stopped over in Hong Kong after a trip toChina. He and other directors attended a board meeting in Beijing, where they also met high-ranking mainland officials including Vice-Premier and central bank chief Zhu Rongji. ''Foreign banks in China have to wait until the yuan official and swap rates converge before they can operate in the local currency. That is the Chinese's priority,'' Mr Williamson said, adding that the priorities set down were sensible. ''If the two rates are not merged, it will be very difficult for foreign banks to operate yuan business.'' However, no definite time frame was given. ''Having recognised the importance of foreign banks' participation in the economic development in China, the Chinese are of the view that they are taking their time,'' Mr Williamson said. He said mainland banks should not worry about foreign rivals running yuan business, ''because of the sheer colossal size of lending to develop industries and the infrastructure.'' Standard Chartered is the foreign bank with the largest presence in China, running 12 branches and representative offices. The bank has provided more than US$3 million in direct and indirect loans over the past 10 years. It is also active in merchant banking and securities operations, being involved in 13 listings worth HK$4 billion on the Shanghai and Shenzhen stock exchanges. The bank was given a special broker seat on both exchanges, empowering it to trade B shares direct without going through a mainland broker. Subsidiary Standard Chartered Equitor acts as a clearing and depository agent for B shares on the Shenzhen exchange. On the group's future strategy in China, Mr Williamson said it would seek to establish more representative offices and branches. Hong Kong would still remain as an important centre for the group where products and expertise were being developed and exported to other parts of Asia, he said. Since a lot of lending to China was in the form of indirect financing to corporates in Hong Kong, maintaining close ties and liaison with these companies constituted a major consideration in its China business, he said. ''So, we have no intention of moving our China headquarters from Hong Kong to China despite having a large network [on the mainland],'' he said.