Foreign banks to compete on more equal terms

The draft amendment also allows foreign banks to simultaneously establish domestic branches and subsidiaries, which could be wholly foreign-owned banks or joint ventures.[Photo/VCG]

Foreign banks will be able to compete on more equal terms and operate more flexibly in China, as part of the country's commitment to opening up its financial sector, according to a draft amendment to regulations, which was announced on Thursday.

Clients of foreign banks' domestic branches will be allowed to deposit at least 500,000 yuan ($72,000) into their accounts as time deposits per transaction, down from the 1 million yuan minimum stipulated in the current regulation, according to the draft amendment published by the China Banking and Insurance Regulatory Commission.

"The decrease will help foreign banks to develop their time deposits business in China, while offering better convenience for their clients," said Liu Chunsheng, an associate professor at the Central University of Finance and Economics.

The new rule treats foreign and domestic banks more equally, given that domestic institutions will not have a lower minimum per deposit, Liu said.

"Other revisions in the amendment could also spur more equal competition between foreign and domestic banks, such as permitting foreign banks to act as agents to issue and sell government bonds," Liu said.

Zeng Gang, director of banking research at the Chinese Academy of Social Sciences' Institute of Finance and Banking, said the amendment is a significant move in opening up the country's banking sector. The new rules treat foreign banks' branches in China and domestic banks in line with almost the same requirements, he said, as reported by bjnews.

The draft amendment also allows foreign banks to simultaneously establish domestic branches and subsidiaries, which could be wholly foreign-owned banks or joint ventures.

Liu from CUFE said setting up two types of entities would enable foreign banks to operate more flexibly in China, especially in terms of choosing what kind of entity to set up to better suit their operations.

The revisions represent part of promised financial opening-up measures as mentioned in April by Yi Gang, governor of the People's Bank of China, the central bank.