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SCMP Reporter

FOREIGN bankers in Shanghai are scratching their heads as they contemplate a tough decision - what price do they put on nostalgia?   In a bid to revitalise Shanghai as an international financial centre, the city authorities are inviting foreign banks to take up the 37 buildings on the Bund that were previously owned by major foreign institutions.

  The Bund, formerly the Wall Street of China and foothold for many renowned institutions operating in the country, is a strip of land along the Huangpu River housing many magnificent buildings.

   Last week, ABN AMRO Bank, the largest Dutch bank, boasted of being the first foreign bank to return to its former premises in the Peace Hotel on the Bund.

  ABN AMRO rented its old premises on a long-term basis. It refused to divulge details of the lease.

  ''We won't pay too much for our nostalgia,'' said Michael Drabbe, member of the bank's managing board.

   Although it can boost the banks' image and show its commitment to the China market, banks need to incur hefty renovation costs to make the buildings, constructed in the 1920s, useful for modern banking.

  Among the 37 buildings, the Shanghai city authorities' building, formerly the headquarters of Hongkong Bank, is no doubt in the centre of the spotlight.

  Commanding a usable area of 32,000 sq metres, the building will be auctioned for a 50-year lease.

  ''Going back to the former premises sends out a clear message of considerable resource commitment in China. But there is a limit to how much we are prepared to pay,'' said Au Kwok-on, manager of Hongkong Bank's Shanghai branch.

  He said the authorities had just hired international experts to revalue properties on the Bund. Since the tendering document has not been released, details on the price are not available.

  If the bank successfully outbid other competitors, it would rent out some parts of the building, he said.

   The building may also house the bank's China headquarters, now located in Hong Kong.

  ''Such a move is part of our long-term planning for China business, but that has to depend on actual needs, whether there is sufficient business to warrant transferring the decision-making base to China,'' Mr Au said.

  Last year, Citibank became the first foreign bank to move its China office to Shanghai. ABN AMRO said it would become the second, pending the formal approval from the People's Bank of China, the central bank.

  Citibank has just started looking at various buildings on the Bund for a possible long-term lease. ''The former Hongkong Bank building is too big for us,'' said C. P. Cheng, China country officer at Citibank.

  ''We take a practical view and would assess the functionality of the building to see if it is suitable for today's banking,'' he said.

  The old premises of the bank, located further from the Bund, was too small to accommodate the bank's China business.

   Standard Chartered Bank and American International Assurance (AIA), the only foreign insurer in China, are also interested in moving back to their former premises on the Bund.

  The International Bank of Paris and Shanghai, the only Sino-foreign joint venture in Shanghai, has a 10-year lease from the authorities in a 100-year-old building close to the Bund.

   The rising property price for office space in Shanghai is the catalyst prompting bankers to look for ways to lock in their operating cost.

   The sudden influx of foreign financial institutions in the past two years has tightened the availability of good office buildings. The rental charge in the modern Shanghai Centre has gone up from US$1.50 a square foot last year to $3, an increase that worries many bankers.

  With 27 foreign bank branches, more than 40 representative offices and more applications in the pipeline, the demand for office space is expected to accelerate.

  Also, it is part of the government's plan to move all Chinese financial institutions' headquarters to Shanghai. During the first phase, the city will take in all the international business departments of the four specialised banks, followed by their foreign exchange and treasury departments.

  Other Chinese banks, insurance companies and international trust and investment companies are expected to move their headquarters to Shanghai soon.

  This China Wall Street will further extend across the Huangpu River to the Lujiazui finance and trade zone in Pudong.

  The People's Bank is building its Shanghai office in the zone, a move that will likely attract other financial institutions to the area.

  It will not be long before Shanghai's skyline looks like Hong Kong and become another ''Nightless City'', as Shanghai used to be called.



The Bund is back in favour