Liberalizing banking in China

By Penny Hawthorne | 14 September 2005

China Daily reports that:

China may ease restrictions on ownership of its domestic lenders by foreign banks by the end of next year as it further liberalizes the industry, said Liu Mingkang, the chairman of the China Banking Regulatory Commission.

China allows foreign banks to own up to 25 percent of its lenders. No single financial institution can own more than 20 percent, an increase from 15 percent in 2003.

"We are working on a proposal how we can lift the cap," Liu told reporters in Beijing on Monday. "We will have future changes and the door will be open much wider."

Last month, a consortium of Royal Bank of Scotland, Merrill Lynch and the Li Ka-Shing Foundation agreed to buy 10 percent of Bank of China.

Bank of America, Citigroup and Britain's HSBC Holdings plc are among the other overseas banks getting into China. According to the Xinhua News Agency, "China will let foreign lenders conduct local currency business with its 1.3 billion citizens at the end of 2006, allowing foreign banks access to its $1.65 trillion in local currency household deposits." As part of its WTO membership commitments, the country agreed to open its banking sector to overseas competition.