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China may ease limits on foreign banks
By Michele Batchelor/Karen Gullo (Bloomberg News)
Updated: 2005-09-14 07:57

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."

Citigroup, HSBC Holdings and other overseas banks are buying stakes in local lenders and opening more branches in the world's most populous nation as they compete for customers with $165 billion of foreign currency assets.

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 household deposits held in local currency.

China will announce further reforms to its bank policies before lifting the foreign ownership limits on its lenders, Liu said.

The government is working on a draft document regarding its World Trade Organization commitments to open the banking system, including easing geographical restrictions, he said.

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