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China Opening It's Doors To Outside Banks

On December the eleventh the banking market within the mainland of China will be open for full competition; this could herald the beginning of a long and bloody battle between national and international banking institutions.

Banks from outside of China will be able to issue cards under their own brand names following the agreement of a new rule but only as long as they incorporate locally with a readily available capital deposit of at least $127,000,000 (US).

Large foreign financial houses such as ABN AMRO, HSBC Hang and Seng Bank a have stated that they applaud the introduction of the new are rule and are more than prepared to invest locally.

National banks have been calm about the policy which opens up the market to foreign competition.

“Foreign banks have expertise in many areas such as managing risk and innovation; we as domestic banks can learn from this" said the executive vice president of Bank of Communications.

BoCom percent in the fifth-biggest lender in the mainland and is partially owned by HSBC.

This view is shared by many other banks and institutions who see the Chinese mainland as big enough for everyone to have their own market, their own customers and their own sector. Analysts think a fierce scrap is unlikely in the near future.
It is more likely that the foreign banks will set out to romance the large and rich clients whilst the home grown banks will look to their existing networks and try to entice the huge numbers of small clients.

On top of this the overseas banks will only be allowed a maximum of 210 outlets between them compared to the colossal seventy thousand plus in the domestic market.  
There could be issues with credit cards as experience has shown that this side of the business does not always succeed on a branch level.

CMB, Chinas largest issuer of credit card shows how this can be. One of the top ten banks on the mainland; they have gained 33% of the  credit card market by issuing around 7,000,000 credit cards even though it is severely wanting in comparison to the outlet network of the top four banks.

Networks are important in their own and can be vital to some business but loyalty for products such as credit cards can not always be held by a branch.

Citigroup has had a huge success in the credit card and mortgage market in places where it does not have a huge network, places like Singapore and Taiwan .

Banks as any other business need to balance their books and cannot afford to throw money at building a bricks and mortar network when the money can be used to finance simpler, cost efficient and profitable channels.
The Chinese sector has long been eyed greedily by overseas banks and they are looking forward to the publishing of the new rules so plans can be put into action. When these banks buy into the domestic market credit cards will be the easiest first target with the retail business the ultimate goal.

Major overseas banks in credit card tie-ins include, Citigroup with Shanghai and Bank of China. HSBC and BoCom and China Construction Bank and Bank of America

These alliances will make it easier for foreign investors to infiltrate and use the domestic network; on top of that it will give the population of China a much bigger choice of where they bank….especially if the queues are shorter.

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