OFFPLAN NEWS

(06.07.2007 )
Real estate in China China paves way for foreign banks

China on Wednesday issued landmark rules allowing foreign banks to offer a full range of Chinese properties services to local customers – a liberalization promised as part of its 2001 entry to the World Trade Organisation.

The regulations were broadly in line with recent drafts that some foreign bankers saw as unnecessarily onerous, but did include operating fund requirements for local branches of overseas banks that were considerably lower than some had feared...

...The rules, to take effect on the December 11 anniversary of China's WTO entry, mark a historic step in the gradual opening of the country's financial sector, but are unlikely to have the dramatic impact expected by some observers in 2001.

Analysts and foreign bankers expect foreign influence on banking to grow only slowly, with many of the world's biggest lenders choosing to tap the market mainly by minority stakes in Chinese banks.

Some bankers have expressed dismay at bureaucratic hurdles and funding requirements, which analysts have said are designed to soften the impact of foreign competition on inefficient and often largely insolvent local banks.

To offer a full range of renminbi services for local customers, foreign-funded and joint venture banks must, like Chinese rivals, incorporate locally with registered capital of Rmb1bn and operating capital of Rmb100m for each branch. Some banks have protested local incorporation will complicate global operations. But Beijing has insisted it is necessary for consistent oversight and in line with global practice.

Chinese branches of foreign banks without a local subsidiary will be barred from accepting individual deposits of less than Rmb1m, excluding them from most retail business.

But the rules said the operating capital requirement for each such branch would be only Rmb200m; far less than the Rmb500m executives had been led to expect by draft rules. Some banks had lobbied Liu Mingkang, head of the China Banking Regulatory Commission, to ease the operating capital requirement.

China's official Xinhua news agency quoted Ba Shusong, senior official at the Development Research Centre of the State Council, or cabinet, as saying the rules would establish a platform for “fair competition” between Chinese and foreign banks. Mr Ba seemed to acknowledge a defensive role for the required local incorporation. Xinhua quoted him: “Since it is more costly to set up a corporate entity in China, the regulation will help protect domestic banks.”

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