Katherine Tsang, CEO of Standard Chartered Bank China also announced the bank had submitted its application to China's banking regulator for local incorporation yesterday.

Hang Seng Bank said it planned to invest more than HK$1 billion (US$128 million) to expand its mainland network and service capabilities, including increasing its number of outlets to 30 from 15 by the end of 2007.

"The total assets of those banks who are willing to transfer to local corporations are accounting for 60 per cent of the combined assets of foreign lenders in China," said CBRC's Xu.

According to Wang Zhaoxing, assistant chairman of the CBRC, in order to lower the time and cost of local incorporation, the government will try to guide foreign banks. The procedure will normally take one to three months, Wang said.

Not an immediate threat

Though foreign banks are likely to siphon off renminbi services from local banks, which have grown by an annual average of 2 trillion yuan (US$246 billion) in recent years, experts say they won't pose an immediate threat to domestic banks.

Wang Yu, a 40-year-old lawyer who has years of experience overseas, said he does not plan to deposit most of his earnings into foreign banks.

"Currently the service in domestic banks are almost at the same level with those of foreign banks, and I don't feel there is a need to change my bank," he said.

He did say he would consider buying a few wealth management products from foreign banks once they start dealing in renminbi.

"Foreign banks are more sophisticated in providing wealth management service," Wang said.

A recent AC Nielsen survey said Chinese customers are increasingly interested in foreign bank services, especially young people.

But Yi Xianrong, a researcher from the Chinese Academy of Social Sciences, says Chinese banks already have a strong hold on the market. "Local banks have already built a nationwide network across the country, making it hard for foreign banks to compete," Yi said.

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