Shanghai-based Bank of Communications announced the launch of a credit card unit together with the HongKong and Shanghai Banking Corp (HSBC) on Wednesday.

It marks the two banks' business co-operation has entered a new and concrete phrase, according to a news release by the Chinese lender.

Zhang Dandan, the spokeswoman of HSBC in the mainland, also confirmed yesterday the launch of the jointly-operated credit card unit.

HSBC did not make further announcement on its future plan in the aspect. But the unit is expected to offer the UK-based banking giant the opportunity to put its brand on another mainland-issued credit card.

Early this year, HSBC already made a similar co-operation in co-branded credit card issue with the Shanghai Bank, in which it holds an 8 per cent stake.

HSBC's investment in the Bank of Communications is so far the biggest by an overseas bank in a Chinese bank. It signed a deal in August to acquire a 19.9 per cent stake in the bank, which would cost it US$1.75 billion but would enable it to directly take part in the management of the Chinese bank.

Since then, HSBC has nominated two board directors to the Bank of Communications. It will also send a senior executive to join the top management of the Chinese bank.

Ron Logan, an executive from HSBC, will be the CEO of the new credit card unit, which is named Pacific Credit Card Centre.

The centre, not a joint venture or corporation but a subordinated unit to the Bank of Communications, will be financially independent. And HSBC will be in charge of the daily management.

China's fast growing credit card business and the big savings pool have drawn attention from overseas institutions years ago.

US-based Citibank also bought into Shanghai Pudong Development Bank last year and launched a co-branded credit card in February.

But so far, no foreign banks have been able to issue their own cards within the mainland independently due to regulatory restraints. Both HSBC and Citibank have been lobbying for such a licence.

However, as a strategic investor, the foreign banks are still eying more business opportunities in the mainland through the local partnership other than credit cards.

HSBC and the Bank of Communications will also seek co-operation in fields of fund and risk management, in which both sides have shown interest, a spokesman with the Bank of Communications said.

HSBC will continue to provide technological support to help the bank upgrade expertise in risk management, corporate governance, strategic development planning and capital operation, he said.

The fifth largest lender in China, the Bank of Communications is also preparing for an initial public offering in Hong Kong. Senior bank executives said earlier the H share offering is hopeful to kick off in the first half of 2005.

(China Daily November 5, 2004)