Five years after China became a member of the World Trade Organization, a total of eight foreign banks have opened their offices in China.
The group of eight is trying to enter a market with a potential of hundreds of millions of clients, and it includes some of the biggest names in the business: Hong Kong and Shanghai Bank (HSBC); Citigroup; Standard Chartered Bank; Bank of East Asia; Hang Seng; Mizuho Corporate Bank; Development Bank of Singapore and ABN AMRO.
From here on in, according to the entry agreement signed in 2001, China has to raise restrictions on the entry of foreign banks. The 5-year "honeymoon" provided domestic banks with time to get ready for foreign competition.
Foreign banks have long since declared their interest in entering the Chinese market, which, according to sources, is worth about US$5.1 trillion.
Deutsche Bank, Sumitomo Bank and Credit Suisse will soon begin operations in China.
Linda Wong, ABN AMRO director has said that, "once licensed, our priorities will be the retail bank, mortgages and credit cards".
According to a law passed in November that regulates foreign banking in China, foreign banks with national branches operating in the country will be handled differently from those operating from abroad.
Banks with no local branches in the country will only be allowed to receive deposits from residents worth one million renminbi or more, which limits their activities to the small but fast-growing Chinese millionaires market.
On the other hand, according to the law, banks with local offices in China will have no limitations in the renminbi retail market, although local regulations prevent them from lending more than 75 percent of the total renminbi deposits.
The retail market includes accepting deposits in renminbi, offering loans and mortgages and credit card emission in the local currency. Entrance into the Chinese market is restricted to banks with at least US$20 billion worth of assets by the end of 2006.
International institutions are mainly betting on credit cards issuance and financial management services to attract part of the US$ four trillion private savings market.
Chinese banks have the advantage of brand recognition and already established branches all over the country. There are some 70 thousand Chinese bank branches in China, compared to just 214 from foreign banks.