The financial industry will be particularly relieved as its landscape has become increasingly dotted with foreign firms over the past year.

But there has been no sudden disruptive impact, as doom-mongers had feared.

"China's financial industry, both now and in the future, will continue to function steadily," declared People's Bank of China Governor Dai Xianglong earlier this month, citing a slew of key financial indicators that continued to improve.

But the financial landscape has been revised, rapidly and irreversibly. During the past year, foreign banks were allowed to conduct renminbi business in five further cities and set up 14 new representative offices.

US-based private equity fund Newbridge Capital became a strategic investor in Shenzhen Development Bank while the Hongkong Shanghai Banking Corporation, along with its partners, bought minority stakes in the Bank of Shanghai and Ping'an Insurance Company.

Foreign insurers are busy setting up shop in Shanghai, Guangzhou, Foshan, Dalian and Shenzhen - the cities where such business is permitted.

Some have bought into local insurance firms, and more negotiations are under way. In June, the American International Assurance Company became the first foreign insurance provider in Beijing, and is already reaping brisk policy sales.

On the stock market, the first Sino-foreign fund management joint venture was established. Foreign investors were allowed to buy untradable shares in listed companies and, in a bolder policy move, allowed to trade A shares through the qualified foreign institutional investor (QFII) scheme.

And intensifying foreign competition is anything but a blunt blade. In March, the Nanjing Ericsson-Panda Mobile Telecommunication Equipment Co Ltd paid back loans early to its Chinese lenders just to ingratiate itself with Citibank. The giant bank also sparked heated controversy in March when it announced a charge on accounts below US$5,000, offending many Chinese depositors that are used to free deposit services. It also forced the hand of local banks, which later said they would follow suit but have not yet taken concrete action.

That is just the beginning. And it is too early to predict that those worst-case scenarios - one of which asserts the possibility of local banks raising renminbi deposits from their sprawling networks only to lend to foreign rivals to feed their loan agreements - will never surface.

Foreign banks will be allowed to offer renminbi services to Chinese corporations by the end of next year and non-life foreign insurers will be selling policies to Chinese individuals; one more year down the road, foreign securities firms will start filing applications for joint ventures.

Domestic financial institutions are already feeling the heat, and are stepping up preparatory efforts. The question is: Can they move fast enough to stand firm when the gust blows hardest at the end of 2006.

(Edited by china.org.cn from China Daily December 11, 2002)