Foreign Banks Keen For Wto - seek entry to China's banking market - Brief Article

Business Asia, April, 2001

FOREIGN BANKS are twiddling their thumbs waiting for China to join the World Trade Organisation, sighing over delays to their much-anticipated penetration into its sheltered market.

A slew of overseas players, including the world's biggest banking giants, have set up shop in China, lured by Beijing's promises to open up its vast market after joining the WTO.

Foreign bank branches numbered 178 at the end of 2000, up 21 from the year before, according to state media.

But most are restricted to serving foreign clients and overseas-invested joint ventures, since even those with coveted local currency business licences -- 32 banks in all as of the end of 2000 -- are not allowed to take yuan deposits from locals.

This means they can only watch with envy as Chinese banks swoop in on foreign clients increasingly seeking yuan currency loans to avoid exchange rate risk and to pay lower rates.

Foreign banks can hardly wait for China to join the WTO, salivating at a Sino-US deal that allows them to do yuan business with Chinese firms two years after entry and with citizens after five years.

But in recent months, WTO negotiations on agriculture, insurance and services have hit new snags. While China's accession is a foregone conclusion, the timing is still unclear, especially after the recent standoff between Washington and Beijing over the US spy plane.

Some diplomats think Beijing is deliberately stalling for time to prepare for more competition. The next WTO chief, Thailand's Supachai Panitchpakdi, said talks could drag into the fourth quarter.

Newcomers to the Chinese banking market and those that don't yet have local currency licences jealously eye banks which do. "Foreign banks feel there is an urgent need to go for a local currency license," said Jasper Leung, general manager of the Shanghai branch of Germany's largest public bank WestLB. "Not being able to do renminbi business is a big disadvantage," he said.