HSBC, Europe's biggest bank, will quicken its expansion in China thanks to foreign banks being allowed to provide a retail renminbi business to local residents at the end of the year.

The bank opened a new sub-branch in Zhongguancun Science Park yesterday. With one branch and two sub-branches in Beijing, HSBC has the largest number of outlets among foreign banks in the capital city.

"We are also quite interested in opening a branch in Hangzhou once we receive the go-ahead from the China Banking Regulatory Commission (CBRC)," Richard Yorke, chief executive officer of HSBC China, told China Daily.

After setting up two branch companies in Chongqing and Chengdu last year, HSBC now has 21 outlets on the mainland, including 12 branches and 9 sub-branches. HSBC's investment in China has reached US$5 billion.

"We were very aggressive in exploring the mainland market last year, which is reflected in our rapidly increasing number of staff," said Yorke.

In 2005 the figure rose from 1,200 to over 1,700, "and the number will continue growing this year," said Yorke.

When adding to its network, HSBC wants to still be very focused on Beijing, Shanghai, Guangzhou and Shenzhen, key cities for its retailing business.

"Although the whole market is huge, we should concentrate our limited resources on key areas," said Yorke. "The population of those four cities combined is almost equal to Europe, still a big market for us."

On the other hand, HSBC is also busy with background preparation for further opening up the sector.

"We have to make our technical system compatible with that of the central bank if we start a renminbi business for local citizens, and it is also a time consuming process," said Zhang Dandan, a spokeswoman for HSBC.

The bank is researching renminbi wealth management products, "and we are waiting for the release of detailed regulations from the CBRC in this regard," said Justin Ting, manager of HSBC Beijing Branch.

While strengthening organic growth, HSBC is also enhancing co-operation with local partners.

"The combination of our strong points and our partners' competitive edges help to better serve our customers," said Yorke.

The pre-tax profit of HSBC Group rose by 11 percent in 2005, reaching US$20,966 million. And its profit from the Chinese side of its business jumped nine-fold, with 70 percent coming from local partners and 30 percent from organic growth.

HSBC has a 19.9 percent stake in the Bank of Communications (BoCom) and insurer Ping An of China. The bank recently obtained regulatory approval to set up a fund management joint venture with Shanxi Trust and Investment Corporation Limited, which is to be renamed HSBC Jintrust Fund Management Company Limited and headquartered in Shanghai.

The bank also strengthened co-operation with BoCom in the credit card and trade financing business.

By the end of December 2005, BoCom had issued 650,000 credit cards co-branded with HSBC. And HSBC launched its documentary credit (DC) advising services with BoCom.

"Such a combination will give our customers access to over 2,700 offices in 137 cities across China's mainland through BoCom's network," said Yorke.

As China's export volume soared by 28.4 percent to US$762 billion last year, export trade financing has become a key area in HSBC's commercial banking business, Yorke added.

According to the CBRC, 71 foreign banks had set up 238 operational entities in 23 Chinese cities by the end of October. Although they still account for just 2 percent of total banking assets, they have grabbed a 20 percent share of foreign-currency loans.

Since the local currency business with local businesses was opened to them around two years ago, foreign banks' renminbi assets have risen to 100 billion yuan (US$12.3 billion).

(China Daily March 15, 2006)