Chinese Banks Brace for Greater Foreign Competition

by Mike Bevel, CollectionIndustry.com

Things are about to get game-show exciting in China as regulators “pry open the financial sector” (in the graphic words of Reuters). China is set to lift restrictions on foreign access to the retail banking market as a five-year transitional period for China to implement its WTO commitments comes to an end.

Reuters goes on to predict that if foreign banks choose to incorporate as a local entity by stumping up 1 billion yuan ($128 million) in capital, they will gain full access to China's retail banking market, including some $2 trillion in household deposits and the ability to issue credit cards.

"2007 will be a very key year for all the banks in China, no matter foreign bank or Chinese bank, and we believe human resources will be the key," Tang Zhihong, a Merchants Bank vice president, said in a statement on Friday.

To balance out the excitement, though, are some naysayers. "Doing business according to WTO rules will present (Chinese) companies with a very serious challenge," warned Wu Jinglian, an influential economist at the cabinet's Development Research Centre.

China is can expect renewed pressure next week to open up its financial markets with the visit of U.S. Treasury Secretary Hank Paulson, who leads a high-level delegation to the country.

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