Chinese lending market desired but unaccessible for foreigners

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Thursday April 28, 09:20

Chinese lending market desired but unaccessible for foreigners

(by Helen Snow)

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Chinese lending market desired but unaccessible for foreigners

Chinese top official announced governmental intention to introduce new rules to limit the expansion of foreign banks in China. The move if implemented would create essential obstacles for overseas investors like HSBC Holdings PLC and Citigroup Inc. that have injected great sums of money in the country.

State newspapers quoted Shi Jiliang, vice chairman of the China Banking Regulatory Commission, as saying the rules were being drafted to protect and prepare local banks for liberalization at the end of 2006.

He have not stated directly that foreign banks would be limited in access to prosperous coastal areas, but he hinted that foreigners would be encouraged to invest in poorer western regions.

Mr. Shi also added the new rules would prevent foreign banks from investing in more than two "large-scale" Chinese banks. Such a move could have a bad impact on plans of foreign banks to get increasing access to China’s lending market.

Three of China’s Big Four commercial banks – ICBC (Industrial & Commercial Bank of China), Bank of China and China Construction Bank -- all are making first moves to attract foreign investors. Last week, Beijing gave ICBC a $15 billion aid to help clean up its balance sheet.

At the same time, Mr. Shi’s speech contained some contradictions, leaving a lot of questions open.

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