China eases rules on foreign banks in branch openings
The mainland eased restrictions on branch openings and yuan transactions by foreign banks as it opens its domestic financial industry.
From January 1, it will drop the requirement that a foreign bank's parent transfer a specific level of operating funds to any new mainland branch, according to a statement posted on the State Council's website at the weekend.
Foreign banks would be eligible to apply to conduct yuan transactions after operating on the mainland for one year, from a previous three years, and the requirement for two consecutive years of profit would be dropped, the statement said.
"These rules are aimed to bring more competition to the banking industry and expand the opening-up policy," said Wu Kan, a fund manager at Dragon Life Insurance. "By doing so, China's also preparing for internationalisation of the [yuan]."
The changes will make it easier for foreign lenders including Citigroup and HSBC Holdings to expand their footholds in the world's second-largest economy. Until now, overseas players were largely shut out of the mainland's banking industry as they faced government restrictions on adding branches and offering products.
Obstacles to building branch networks have made it difficult for foreign banks to gather deposits and issue loans. Restrictions on stock and bond sales have thwarted investment banks, including Goldman Sachs Group and France's BNP Paribas.
Under the new rules, banks are no longer required to establish a mainland representative office before they set up branches, joint ventures or wholly foreign-owned lenders.
Beijing promised in December 2006 to remove geographic restrictions on overseas banks and allow them to start yuan lending and deposit services, as well as issue credit cards.
