China loosens regulations on competition for foreign banks

China has loosened market access restrictions on foreign banks, in a largely symbolic move to make good on promises to open the country’s domestic financial sector to competition.
The cabinet decreased the waiting period for foreign banks to apply to conduct renminbi business from three years after establishing operations in China to one year, and dropped the requirement that a bank be profitable for two consecutive years before applying for a renminbi licence. Foreign banks without a renminbi licence are limited to conducting foreign currency business.
Foreign lenders have long complained about regulations fettering their growth in China, where they controlled only 1.7 per cent of total banking assets at the end of 2013, according to official data.
In its announcement of the rule changes on Saturday, the cabinet referenced the landmark economic reform blueprint that top Communist party leaders endorsed in November 2013, which pledged to “expand the openness of the financial sector and deepen the openness of the banking industry”.
In practical terms, however, the changes, which take effect on January 1, may do little to improve the fortunes of foreign lenders. Almost all of the world’s biggest banks have long since fulfilled the waiting period and obtained renminbi licences.
A request to eliminate the three-year waiting period for obtaining a renminbi licence was included in a long list of recommendations in the European Chamber of Commerce’s 2014 position paper on the banking sector.