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BEIJING - The competition faced by Chinese banks is set to intensify this week as regulators in the world's most populous country pry open the financial sector.
China is to lift restrictions on foreign access to the retail banking market as a five-year transitional period to implement WTO commitments ends.
If foreign banks choose to incorporate as a local entity by stumping up 1 billion yuan ($185.5 million) in capital, they will gain full access to China's retail banking market, including some US$2 trillion ($2.89 trillion) in household deposits and the ability to issue credit cards.
"Foreign banks will leverage their experience and sophisticated products to attract customers, employees and business in the financial sector," said Yang Kaisheng, president of Industrial and Commercial Bank of China. "Competition will intensify."
Beijing has spent more than US$400 billion since 1998 cleaning up the top three state banks to try to lay a foundation to attract foreign strategic investors and launch successful share offerings.
Last month, ICBC completed the world's largest share sale, raising US$21.9 billion in Shanghai and Hong Kong.
Goldman Sachs, Allianz Group and American Express have all invested in ICBC and are helping the state bank to modernise its operations and introduce new products to lower its reliance on lending for profits.
While the state-run banks have benefited from central government largesse, China's private banks have been forced to deal with market forces for a longer period of time.
The mainland's largest non-state-owned bank, Merchants Bank, said it would increase staff by about 7 per cent in 2007 to compete with foreign rivals.
"That will be a key year for all the banks in China, foreign bank or Chinese, and we believe human resources will be the key," said a Merchants spokesperson.
- REUTERS
