Four prominent foreign banks have just started their branch banking operation in China and medium will be domestic currency. Apparently the incident might look trivial but in reality an watershed in Chinese economy.
Citi group Inc., Britain’s HSBC Holdings PLC, Standard Chartered Bank PLC and Hong Kong’s Bank of East Asia Ltd. are those four path-breaking banks.
For decades, Chinese banks are performing the role of government’s flag runner. They do lend and provide primary banking services to Chinese population. But at the core, they follow what central and local governments ask them to do. Such practice has deterred the domestic banks’ health to grow despite economy’s improving physical size. That’s why banks in China primarily failed to service needs of newly developing wealthy class.
Such wealthy people, who are actually growing in numbers everyday, require services like investment advice, risk consultancy and wealth management. But existing banks’ inability to support these needs had generated a lacuna.
Those foreign banks are expected to fill the gap. They are going to service retails and that also in domestic currency. Profound expertise of these banks will add more strength to the ailing Chinese banking sector.
China’s entry into WTO in 2001 made such incident inevitable. Chinese authority had to open up domestic banking sector. But interesting fact to observe is how Chinese banks are reacting. And if existing banks improve their position and pose a challenge to foreign counterparts then Chinese depositors and investors are going to be the ultimate beneficiary.
