Banks are continuing to establish or expand their positions in mainland China with the aim of seizing opportunities they believe exist with the continuing opening up of China's banking sector under World Trade Organization (WTO) agreements.

Global banking giant HSBC is expanding its ability to offer yuan-denominated letter of credit (L/C) business in more mainland cities while Scotiabank has become the first Canadian bank to obtain a currency banking licence in China, thus enabling it to expand its range of services on the mainland.

HSBC rolls out

HSBC Holdings recently announced that it has obtained approval to expand its local currency business to the mainland cities of Qingdao, Tianjin and Guangzhou. The global banking giant has been providing yuan banking in Shanghai since 1997 and since 1998 in Shenzhen.

This means that HSBC is now able to provide yuan services in all five cities open to foreign banks. The Qingdao branch has already rolled out yuan services according to Dicky Yip, chief executive of the HSBC's China business who says that the Tianjin and Guangzhou branches will offer similar services early next year.

As well as L/Cs, the range of services for which HSBC has gained approval includes yuan deposits, loans, commercial draft acceptance and discounting, government and financial bonds, foreign exchange services and interbank borrowing.

Canadian entry

Meanwhile the authorities have granted Scotiabank's Guangzhou branch a currency banking licence, thus enabling the Canadian bank to conduct business using mainland China's currency with foreign companies and a select group of local companies in the nine industrialised cities open to foreign banks for this type of business.

Until this latest approval Scotiabank could only accept deposits and grant loans in foreign currencies in China. Its services in China include L/Cs, foreign currency exchanges, cash advances, loans, letters of guarantee, collections, balance reporting and wire/SWIFT transfers.

Scotiabank has been operating in China since 1982, with two branches in Guangzhou and Chongqing and a representative office in Beijing.

WTO prizes

There are now more than 150 foreign bank branches in China, of which 37 have been won approval to provide yuan services. China entered the WTO in December 2001.

While trade finance business is in industrial China us a much-prized commodity, several banks are eyeing the prospects of a share of the country's largely untapped personal savings market, worth an estimated US$1.3 trillion. A condition of China's WTO entry was that it must open up its retail-banking sector by 2007.

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