China Business

Apr 18, 2006

China may alter foreign banks' equity limit

BEIJING - China is mulling a new regulation regarding the maximum permissible equity participation of foreign banks in Chinese banks, the China Securities Journal reported on April 15. Both the ceiling of a 20% share for a single foreign bank and that of a 25% for all foreign investors together in a single Chinese bank could be changed.

The action can be seen as a mirror of the Chinese banking regulator's steadfast attitude toward accelerating reform and a

wider opening to the outside world.

Earlier this year, Wu Xiaoling, vice governor of the People's Bank of China, the country's central bank, said in a forum that China will fully open the yuan banking business to foreign banks by the end of 2006. At that stage, the proportion limit on the equity participation of foreign banks in Chinese bank will have no binding force on the business scope of foreign banks

Currently, foreign banks may invest in Chinese banks only when the equity participation of total foreign investment doesn't exceed 25% of the total and that of a single foreign investor doesn't exceed 20% of the total. However, the state will still take a dominant share of the five major state-owned commercial banks, while foreign investment may possess a bigger share and even a controlling share for joint stock commercial banks and city commercial banks.

(Asia Pulse/XIC)

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