As part of the wider plan to open up China’s domestic financial sector to global competition, a number of market access restrictions for foreign banks have been loosened. Tight regulations have been a frequent complaint of foreign lenders that believe this has directly impacted their opportunity to grow in this market. Back in November 2013, China’s top leaders endorsed the economic reform blueprint that aimed to “expand the openness of the financial sector and deepen the openness of the banking industry.”
A snapshot of the changes taking place from 1st January 2015:
- The cabinet decreased the waiting period for foreign banks to conduct renminbi (also known as the yuan) business from three years after establishing operations in China to one year, and they no longer have to prove they were profitable for two consecutive years before applying for the renminbi licence.
- The renminbi licence is still vital to obtain, as foreign banks can only conduct business in foreign currency until this licence is granted.
- The cabinet also eliminated a requirement that foreign banks transfer a minimum amount of operating funds from their head office in China to each new bank branch opened in the country.
China promised in December 2006, five years after joining the World Trade Organization, to remove geographic restrictions on overseas banks and allow them to start renminbi lending and deposit services, as well as issue credit cards. Before that, the firms focused on currency-exchange services for foreigners.
The loosening of such restrictions will be great news for foreign businesses looking to enter the China market, giving them access to funding that would otherwise be difficult to obtain.
Our team at Azure Group China have long standing relationships with many foreign banks that can assist businesses expand into China. For more information please contact ourteam@azuregroup.com.au.
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