Red tape cut for foreign banks
Print Edition
CHINA has cut red tape for foreign bank branch openings and entry into renminbi business in its latest bid to liberalize the banking sector.
From January 1, it will no longer require foreign-owned and joint-stock banks to inject 100 million yuan (US$16 million) or an equivalent in other currencies of working capital into a newly opened branch, according to revised rules announced by the State Council, China’s Cabinet, yesterday.
The previous requirement had a restrictive impact on capital replenishment at foreign banks’ China branches. Meanwhile, direct capital injections from parent companies to their branches would also be treated as foreign direct investment, which often involved a complicated approval process from multiple government agencies.
“The amendment seeks to lower the threshold for foreign banks to set up branches and do business in China. It also marks the further opening up of the Chinese banking industry,” said Zeng Gang, a researcher at the Chinese Academy of Social Sciences.
Analysts said that the amendment showed a willingness to treat foreign banks and domestic banks equally.
“We have always stressed that foreign banks enjoy the same treatment as their domestic peers in terms of policies and regulations in order to nurture a level playing field, and China is moving toward this direction based on what we have seen today,” said Guo Tianyong, a banking industry researcher.
The new rules will also scrap the previous requirement that foreign banks or Sino-foreign joint venture banks should first establish a China representative office before they can set up branches.
Meanwhile, the new rules have relaxed requirements on foreign banks’ applications to carry out RMB business. Foreign banks will be able to apply for such business if they have operated in China for at least a year, down from the previous requirement of three years. Banks applying for such business will no longer face a profitability requirement. Previously, two successive years of profit was required.
And under the new rules, if a foreign bank has a branch carrying out RMB business, its other branches will no longer face restrictions in launching the same business.
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