Bausparkasse, the country's first specialized joint venture between a Chinese bank and a foreign bank, opened in north China's Tianjin Municipality on February 15.

The bank, with registered capital of 150 million yuan (US$18.1 million), was jointly established by the China Construction Bank (CCB) and Germany's Bausparkasse Schwabisch Hall AG.

The Chinese bank owns 75.1 percent of the joint venture, with the German partner holding the rest. The JV will mainly engage in housing loans.

Individual homebuyers who hold specified minimum balances in their accounts at the new bank will be allowed to borrow mortgage funds at a reduced interest rate.

The interest rate for a one-year loan from the bank is 3.30 percent, much lower than the 4.77 percent for the same term for ordinary housing loans offered by other commercial banks.

Bausparkasse Schwabisch Hall AG is the largest housing loan bank in Germany, with a history in the business of more than 70 years.

The company has also extended its services to countries such as the Czech Republic, Slovakia and Hungary.

The new joint venture in Tianjin was established after years of preparation.

In 1994, when the Chinese government launched the program to end its welfare housing system, Bausparkasse Schwabisch cooperated with Chinese organizations such as the Ministry of Construction, the People's Bank of China and the Ministry of Finance to explore the possibility of introducing German-style housing loans in China. The result was positive and the project won support from higher authorities.

In 1999, the German bank opened a representative office in Beijing.

Two years later, the bank signed an agreement of intention with CCB, China's leading housing loan provider, for the establishment of a joint venture housing bank here. They got the nod from the central bank in October 2002.

Experts say CCB's strong position in China's housing loan market and Bausparkasse Schwabisch's experience in the field will provide a good platform for operation of the new joint venture.

Establishment of the joint venture bank also suggests that Chinese financial authorities are strictly abiding by the nation's promise to open the banking sector gradually after entering the World Trade Organization in December 2001 said Niu Li, a senior economist with the State Information Center.

By teaming up with foreign financial institutions as partners or equity owners, Chinese banks are expected to obtain first-class management expertise to help them survive the mounting competition, he said.

The foreign banks, in turn, will gain first-hand knowledge of China's banks, enterprises and the economy, which is crucial to a bank's operation in a foreign country, he said.

Foreign banks have been speeding up their cooperation with Chinese banks over the past several years.

(China Daily February 17, 2004)