Profit growth at overseas banks in China this year tripled the average increase during China's first five years in the World Trade Organization.

 

Overseas banks earned a combined 3.05 billion yuan (US$402 million) in the first five months, a whopping 43-percent surge from a year earlier, three officials from the People's Bank of China's statistics department said in a research report published in the China Securities Journal yesterday.

 

Overseas lenders' profit growth accelerated from an average 14 percent during the first five years of China's membership with the WTO since December 2001.

 

China fully opened its banking sector to overseas banks in December as part of its WTO commitments.

 

Banks like HSBC, Citibank, Bank of East Asia and Standard Chartered Bank started operations in April as locally incorporated companies, a status which allows them to offer an unlimited yuan service to Chinese.

 

China has allowed 12 overseas banks to be locally incorporated at the end of May. More have showed interest in gaining local incorporation which allows them to have full access to China's US$2 trillion household savings.

 

Overseas banks' combined profit from local-currency services more than doubled to 1.3 billion yuan in the first five months, the report said.

 

Yuan services posted a surging 121 percent profit growth in the first five months, 71.82 percentage points higher than the five-year average since China entered the WTO.

 

"Yuan lending and deposits will be the focus of competition between overseas and domestic lenders," the report said.

 

In the short term, cooperation will be the main theme among domestic and overseas banks but competition will get more intense in the long term.

 

Some overseas banks have teamed up with domestic lenders as strategic partners to enter China's banking market before its full opening.

 

HSBC has tied up with Bank of Communications while Citibank is in an alliance with Shanghai Pudong Development Bank.

 

(Shanghai Daily July 5, 2007)