Citibank became the first fully overseas-funded financial institution to earn government approval to offer retail foreign currency banking services to Chinese customers, in a move which analysts say is probably to open the floodgates for other banks.
The People's Bank of China, the country's central bank, yesterday gave the green light to the United States-based banking giant to start the business in Shanghai in compliance with commitments China made during its bid to enter the World Trade Organization.
The eagerly awaited approval follows on the heels of the first license granted by the central bank to a joint-venture bank, the Xiamen International Bank, earlier this month.
"We have been looking forward for some time to the opportunity to introduce our quality banking services to Chinese citizens and corporations, and we are very pleased that this dream has now been realized," said Richard Stanley of Citibank.
The new license will allow the bank to set up foreign currency savings accounts and offer loans for Chinese clients. Before China's WTO entry, foreign banks were only allowed to serve non-Chinese citizens and overseas-funded firms.
Analysts say they can't predict the exact size of the foreign-currency banking business in China, but they expect it to be huge, based on the size of outstanding individual foreign-currency deposit accounts in the country, which are worth around US$90 billion.
During its bid to enter the WTO, China promised to allow overseas banks to offer retail foreign currency services to Chinese individuals one year after joining the global trade body.
They will be allowed to offer the same services to Chinese corporations one year later and start dealing in local currency five years after China's WTO entry, subject to the central bank's approval.
Ten overseas banks in Shanghai rushed to apply for the licenses in January after the central bank published new regulations covering the operations of overseas-funded institutions.
Analysts expected more overseas-funded lenders to receive similar government approval in the coming months.
The Hongkong and Shanghai Banking Corp, one of the banks which applied for a license in January, said the news that Citibank was approved first isn't a concern, insisting that their application is "being processed."
The bank would prefer to launch the business in Shanghai, Shenzhen, Beijing and Guangzhou at the same time, according to Zhang Dandan, HSBC spokeswoman.
The London-based lender said it plans to expand its services and presence in the city this year by re-locating its Shanghai sub-branch to a larger, more convenient premise, opening a second sub-branch as well as an HSBC premier center and establishing HSBC's fourth group-processing center.
Meanwhile, Citibank announced yesterday that it will open a sub-branch at Shanghai's Peace Hotel on the Bund tomorrow.
(eastday.com March 20, 2002)