The report doesn't say how profitable overseas banks in the city are, but according to an earlier PBOC report the banks earned US$60.8 million in pre-tax profits during the first six months of 2002.

"During the first year after China's entry into the World Trade Organization, overseas banks were actively carrying out a wider range of banking services to enlarge their presence in the local market," said yesterday's report.

During its bid to enter the World Trade Organization, China promised to gradually open its banking market to overseas investors by 2006. But foreign banks must have a minimum of 600 million yuan (US$72.3 million) in capital before they can provide a full range of both foreign currency and renminbi services to local clients.

"Foreign banks are definitely interested in providing as many banking products as possible to local clients, so long as the central bank permits us to do so," said Timmy Leung, vice president of the Shanghai branch of the Hong Kong-based Bank of East Asia Ltd.

The Hongkong and Shanghai Banking Corp. and Citibank have applied to the Chinese central bank to be custodian banks for qualified foreign institutional investors buying Class-A shares on domestic stock markets.

Eight overseas banks have begun to offer retail forex services to local residents and enterprises since the first half of last year, including Citibank, HSBC, BEA and Standard Chartered Bank.

By the end of last year, the eight banks had attracted forex-denominated deposits worth US$163 million, which represents 13.55 percent of all new forex deposits in 2002.

(eastday.com January 11, 2003)