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February 24, 2006
How's progress on opening up the banking system in China?
Apropos of my last post on China, macroblog quotes from these two Wall Street Journal articles. His parentheticals along with a couple of quotes...
More competition (and opportunity) looms...
China is opening its vast retail-banking market to foreign institutions at the end of the year, under its World Trade Organization obligations. Foreign investors will then have a shot at China's $1.7 trillion in savings.
... sort of:
But foreign banks' true access to that money is limited by their tiny branch networks. HSBC has the biggest presence of any foreign bank in China, with its 20 banking outlets, compared with some 20,000 for ICBC, the country's biggest bank.
And there is this (also on page C1):
Chinese regulators are planning a policy change that could trip up foreign banks in China just when they are being granted fresh rights to expand.
Within the next few months, the China Banking Regulatory Commission plans to ask foreign banks to change the way they are incorporated, as well as to make accounting and management changes, to roughly conform to the way Chinese banks are structured, according to a senior official at the watchdog agency...
The most far-reaching measure is a request that foreign banks put China operations into a stand-alone entity that is locally incorporated, according to the official and a senior officer of a foreign bank who has been briefed on the plans. The steps are necessary to enhance regulation and control risk, the regulator said.
Under the new rules, foreign banks would face requests to pony up more capital and possibly higher taxes than they now pay, the official said.
It seems likely that they are worried about foreign banks repatriating their profits. Locally incorporated stand-alone entities would be easier to regulate. More twists and turns in this process are turning up all the time.
Posted by William Polley at February 24, 2006 3:51 PM
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