China opens door wider to foreign banks

(Reuters)
Updated: 2005-12-05 20:42

China on Monday increased the number of cities where foreign banks can do business denominated in yuan, and eased capital requirements, opening the sector faster than required under international trade commitments.

The gradual introduction of foreign banks is ratcheting up competition for China's domestic banks, whose operations the government is keen to sharpen.

Foreign banks had maintained annual growth of more than 30 percent in China, the China Banking Regulatory Commission (CBRC) said in a statement that listed new cities where they could operate.

"Foreign banks have become an indispensable force in China's banking system," it said.

As required under commitments that Beijing made when it joined the World Trade Organization in 2001, the cities of Shantou and Ningbo were now open to foreign banks offering yuan business to Chinese and foreign companies and to foreign individuals, the commission said.

It also added five other cities that it said it was not yet required to open to foreign banks: Harbin, Changchun, Lanzhou, Yinchuan, Nanning.

The CBRC reduced the minimum operational capital requirement for a foreign bank branch to provide yuan business to clients, including Chinese residents, to 400 million yuan from 500 million yuan.

It also cut the minimum operational capital required for a branch of a wholly-owned foreign bank registered in China, or a joint venture, to 200 million yuan from 300 million yuan.