Govt eases rules for foreign banks

Eliminates capital, profitability limits

Chinese Premier Li Keqiang signed a State Council decree on Friday, which announced a revision of regulations that eliminate several restrictions on the operation of foreign banks in China.

The new rules eliminate several restrictions such as the operation capital minimum previously required for both wholly foreign-funded banks and joint venture banks to set up branches in -China as well as the need to open a -China representative office before setting up branches.

The number of years a bank has to be registered before it conducts renminbi business has been cut from three to one.

In addition, the requirement for banks to have two years of continuous profit prior to the application has been scrapped.

The new rules will come into effect on January 1, 2015.

Observers believe that the new rules will lower the threshold for foreign banks in China to set up institutions and enter the renminbi business, which means China's banking industry will further accelerate the pace of opening- up to the world.

Experts have said in media reports that this puts foreign banks on an equal footing with local lenders.

Xu Hongcai, director of the department of information in the China -Center for International Economic Exchanges, told the Global Times Sunday that -reducing the market access threshold for foreign banks will undoubtedly accelerate the development of foreign banks in China, but also have a positive impact on the development of China's banking industry because the catfish effect will push Chinese banks to keep improving.

Meanwhile, as globalization further develops, the area of services trade has resulted in new requirements, he said, noting that with trade deals, no matter whether it is the Trans-Pacific Partnership Agreement (TPP) or Transatlantic Trade and Investment Partnership (TTIP), all require the financial sector to become more open.

Moreover, the internationalization of China's currency, the yuan, needs a strong and healthy financial market environment, said Xu.

New rules will lay a solid foundation and have an impact on the political and economic state of the world, according to Xu.

China has been committed to financial liberalization for some time.

In September, China issued measures for the implementation of administrative licensing of foreign banks, including abolishing the limitation that foreign banks which want to set up new branches can only apply to open one branch in a city at one time and canceling the minimum amount requirement for working capital for each branch.

China has already widened the band for bank deposit rates. Since December, China started allowing brokerages to trade in the interbank foreign exchange market.