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Bank seeks clearing business for renminbi
( 2003-11-26 10:02) (China Daily HK Edition)

The Hong Kong branch of Bank of Communications hopes to become one of the second or third batch of clearing banks for renminbi business in the territory.

The branch of the mainland's fifth-largest lender is still considering applying for the first batch, for which it considers it has a small chance, Li Siu-kei, assistant general manager of the branch told China Daily in an interview yesterday.

Some major banks in Hong Kong have said they would apply for the first batch after the milestone memorandum for the opening-up of some personal renminbi business to Hong Kong was signed last week. Bank of China (Hong Kong) is widely seen as the most-probable winner.

Branches of Bank of Communications in Shenzhen and Zhuhai are considering issuing renminbi credit and debit cards to Hong Kong residents to be used on the mainland.

The Hong Kong branch may act as an issuing agent for the cards, Li said. "We hope to issue renminbi cards in Hong Kong next year."

Bank of Communications has issued Hong Kong-dollar credit cards in collaboration with Bank of China (Hong Kong).

Since use of renminbi credit and debit cards issued on the mainland will be allowed in Hong Kong, Shenzhen and Zhuhai branches are also talking with some Hong Kong banks on using the latter's card networks.

As another option, the Hong Kong branch is also considering setting up a credit card company to address the issue, Li said.

Bank of Communications accounted for 6.6 per cent of the number of bank cards issued on the mainland last year, according to the bank's annual report.

Transaction through the bank's cards accounted for 15.7 per cent of the total on the mainland last year, or the third largest among mainland banks, it said.

Financial institutions on the mainland had issued 569 million bank cards by the end of June this year, according to the central bank.

Expecting income contribution from renminbi business to Hong Kong banks to be relatively small initially, Li said the opening-up this time represents the first step towards further deregulation of renminbi business, which may feature yuan-denominated financial products, such as stock trading.

"The benefits should be more significant in the long term."

Hong Kong is expected to become an overseas renminbi business centre when mainland authorities lift controls on the capital account, analysts have said.

Since renminbi is also used in large amounts in some Southeast Asian countries, there would be a chance that some people from those countries place their renminbi in accounts in Hong Kong, which would help strengthen Hong Kong's position as a regional financial centre, Li said.

Having an advantage in conducting renminbi business, the Hong Kong branch and its mainland counterparts have been working to enhance interaction among them, he said.

His branch has started to co-operate with mainland branches in retail banking, in addition to their traditional ties in corporate banking.

The Hong Kong branch installed a computer system supportive of renminbi business in 1998 and would need to make only minor adjustments to comply with some detailed quantified requirements from regulators, Li said.

Instead of opening more outlets, Bank of Communications would cope with increased business in Hong Kong mainly by electronic means, such as call centres and Internet, Li said.

The bank's Hong Kong branch posted a 23.7 per cent growth in post-tax profit in the first half of this year, which stood at HK$173.41 million (US$22.23 million).

The non-performing loan ratio of the branch had fallen below 3 per cent this year, Li said.

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