People walk past advertisements of
foreign banks in a Shanghai street in this September 24, 2006 photo. China
will open the banking sector to foreign banks from December 11, 2006.
China's commercial banks are urged to widen financial product offerings,
while increasing lending risk control, in order to compete with a new wave of
competition from foreign banks.
In line with its WTO accession agreement, Beijing will fully open its banking
sector to foreign competition on December 11, 2006, five years after China
became a full member of the World Trade Organization.
The China Banking Regulatory Commission, Beijing's top banking regulator,
issued guidelines yesterday to encourage innovation by commercial lenders,
including increasing fee-based earnings and issuing less risky loans. '
Tang Shuangning, vice-chairman of the commission, said that Chinese banks lag
far behind their international counterparts in terms of financial innovation.
Beijing has implemented courageous reforms to restructure its banking industry
by encouraging foreign banking corporations to take holdings in Chinese lenders,
and moved to list them at overseas stock markets, mainly in Hong Kong, many in
the central government are worrying about domestic banks' performance after
Foreign banking giants like Citigroup and HSBC are expected to compete
strongly for high-income clients in the developed coastal provinces when they
are allowed to offer a full range of local currency products in the coming
months. And, Chinese banks are generally scant of expertise in risk management,
credit cards and consumer banking.
Tang said non-interest income accounts for more than 50 percent of the total
income of big international banks, however, Chinese banks typically earn less
than 10 per cent of their income from fees.
Tang asked domestic banks to increase financial product offerings. As Chinese
cities have seen their income grow, many now have increasingly diversified
In addition, the The China Banking Regulatory Commission
urged banks to clarify commercial banks' obligations to consumers, including
correct disclosure of information, professional services, protection of assets,
and offering effective complaint channels.
The CBRC's statistics show
the trading volume of major commercial banks reached 14 trillion yuan (US$1.77
trillion) in 2005. Up to 30 Chinese banks offer renminbi wealth-management
services, with a total value of 130 billion yuan (US$16.46 billion).
total of 17 foreign and Chinese banks have been approved to invest clients'
assets overseas under the qualified domestic institutional investor (QDII)
program. So far, they have launched nine QDII products, with sales of 2.3
billion yuan (US$291 million) in renminbi and US$87 million.
Tang disclosed yesterday that the Bank of Communications and China
Construction Bank, both listed at the Hong Kong stock exchange, have applied to
set up insurance companies.