China has eased rules which will provide market access for foreign banks, in a move to further open up the domestic banking sector.
The Chinese Cabinet published the amended rules today which will no longer require a specific amount of operating funds to be transferred from the parent foreign bank to its newly-established Chinese branch.
Previously, a foreign bank would have to unconditionally allocate at least 100 million yuan (around $16.4 million) or the same value in other freely-convertible currencies.
The requirement has had a restrictive impact on capital replenishing at foreign banks’ China branches.
Meanwhile, direct capital injection from parent companies to their branches would also be treated as foreign direct investment, which often involved a complicated approval process from multiple government agencies, state-run Xinhua news agency reported.
The new rules will also scrap the previous requirement that foreign banks or Sino-foreign joint venture banks should first establish a China representative office before they could set up branches.
Renminbi business
Meanwhile, the new rules have relaxed requirements on foreign banks’ application to carry out Renminbi business.
Foreign banks will be able to apply for such business if they have operated in China for at least a year, down from the previous requirement of three years.
No profitability requirement
The banks applying for such business will also face no profitability requirement, a change from profit making for two successive years in the past.
Under the new rules, if a foreign bank has one branch already carrying out RMB business, its other branches will no longer face restrictions in launching the same business.
The new rules will take effect on January 1, next year.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.