5 Years After China Entered WTO, Bumpy Road to Banking Freedom – Melissa Thomas

From Financial Times:

December 11 is the fifth anniversary of China’s entry into the World Trade Organisation and the deadline for Beijing to fulfil its final commitments. These include opening up retail to foreign banks for the first time. In preparation, the China Banking Regulatory Commission (CBRC) in August circulated draft Administrative Measures for Foreign-Funded Banks for comment. The measures are expected to be issued in November with only minor modifications.

Since accession, international banks have been permitted to grow their Chinese branch networks, compete for the business of foreign-invested companies and establish niches offering new services to domestic companies. But the scale of their business remains tiny compared with China’s state-owned commercial banks, now cash-rich from initial public offerings. International banks poised to apply for local retail licences are therefore anxious to know whether these measures will offer a level playing field or create a new set of hoops to jump through.

The answer is probably both. Most foreign banks carry their Chinese business directly through branches rather than locally incorporated subsidiaries. It is now clear that only subsidiaries, termed foreign-funded banks, will be licensed to offer full retail services. Foreign-funded banks will have to comply with the same capitalisation requirements as domestic banks: registered capital of Rmb1bn ($127m) and operating capital of Rmb100m per branch.[Full Text]

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