Beijing eases entry for foreign banks in milestone plan
Mainland clears way for overseas lenders to set up wholly owned units in new free-trade zone that normally requires long approval process
Premier Li Keqiang has approved a milestone plan to allow foreign banks to directly set up wholly owned subsidiaries in Shanghai's new free-trade zone in a move designed to accelerate the opening of its financial services sector to global players, sources told the .
The move potentially cuts years from the time foreign banks must otherwise spend following a step-by-step regulatory roadmap before opening branches or subsidiaries on the mainland and is being seen as a sign of renewed effort to kick-start financial reform, the sources said.
"Li is keen to accelerate financial industry reforms. Allowing foreign banks to skip the previously required long approval process to directly set up business units in the free-trade zone shows his determination to bring in more competition to domestic banks," said one source, who declined to be identified because of the sensitivity of the information being disclosed.
The government would also encourage domestic private firms and foreign enterprises to set up financial services companies, such as accounting and rating agencies, in the zone, widely expected to be a testing ground for major policy reforms to free up cross-border commodity and capital flows, said another source.
Normally, a foreign bank needs to first set up a representative office, which will be used for communication and consulting purposes. It can apply to the China Banking Regulatory Commission to upgrade the office to a full-scale bank branch after two years, provided it has not breached any financial rules.
If the foreign bank wants to set up more branches, particularly to expand into new cities, or establish a wholly owned unit, it has to undergo a long approval process involving the banking regulator and relevant government bodies, such as the tax department.
