Foreign capitals have set off a new high tide of entering China. Compared with 2003, 16 more foreign finance institutions had been founded in Shanghai by the end of 2004. The total number of foreign finance institutions had increased too.

The big rise in number of foreign finance institutions is attributed to two reasons. Some countries that had not entered China have started putting up banking offices in China. On the other hand, some finance institutions that had pulled out of China due to finance crisis have requested to come back again. This signifies recovery of confidence in global finance industry's, as well as their confidence for development of the Chinese banking industry.

Take root in the east, advance to the west

Foreign banks have advanced to west China and taken root in the costal regions with unprecedented trend.

The HSBC announced Jan 26 that the Banking Regulatory Commission of China had ratified to upgrade its representative offices in Chengdu and Chongqing to branches, making HSBC's number of branches in China grow to 12. It is also the first time that HSBC has put up branches in western China. The two branches will likely to open within the year, said its spokesperson Zhang Dandan.

The Standard Chartered Bank also submitted application to the Banking Regulatory Commission to upgrade its Chengdu Representative Office to branch.

Foreign banks have quickened their pace in building network in coastal cities too. The Hang Seng Bank of Hong Kong opened its first subbranch in Shenzhen on Jan 31. This is the 2nd foreign bank's subbranch in the city. The Bank of Holland and the National City Bank of New York will soon to open branches in Shenzhen. The Korean Woori Bank, Korea Exchange Bank and Bank of India have all expressed their will to set up branch in Shenzhen too. It is said the first foreign bank's branch in Beijing, HSBC's branch at the World Trade Center is to open in the first half of 2005.

Aim at high-end market

What lie behind expansion of foreign banks is various banking businesses they have slavered after for a long time.

Competition is rarely seen between Chinese and foreign banks in serving clients like large SOEs. The foreign banks will win favor in weak areas of Chinese banks, like value-added services and services that offer assistance in expanding overseas businesses. Many SMEs undergoing robust growth have been neglected by Chinese banks, while the foreign banks have already accumulated rich experience serving SMEs as they enter the Chinese market.

But in retail business, the foreign banks cannot fully exert their capabilities because of restrictions from policies and lack of a broad network. The impact of foreign banks will be seen primarily in the high-end market.

Seeking expansion through joint stock

For those foreign banks that intent to bypass policy obstacles to enter the Chinese market during the transition period, another strategy is to join stock with Chinese banks at appropriate time.

In 2004, the HSBC spent US$ 1.75 bln to acquire 19.9 percent stake of the Bank of Communications. The hot topic "seeking investment opportunity" inside the Standard Chartered Bank has become reality after it acquired 19.9 percent stocks of the Bohai Bank.

The Bank of Beijing will sell 24.98 percent stakes to at least two internationally renowned finance institutions, said Yan Bingzhu, Chairman of Board Directors of the bank.

According to an expert with the Macquerie Bank of Australia, through jointing stock with Chinese banks, the foreign banks will be able to test the Chinese market at low cost, accumulate experience for the future, and at the same time they will attain more power to control by investing less funds.

By People's Daily Online