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Integration of foreign banks

By Wang Zhaoxing (China Daily)

14:14, June 02, 2012

Despite suggestions to the contrary, China has been continuously deepening and broadening the opening-up of its banking sector

Foreign-funded banks have boomed on the Chinese mainland over the past decades, especially since China's accession to the World Trade Organization in 2001.

While playing an active role in bolstering China's rapid economic development, foreign-funded banks have also shared in the fruits of its rapid growth and enjoyed a big boost in the scale of their own assets and profits. However, some in the West doubt the achievements of foreign banks in China, citing the low proportion of their assets to the country's total banking assets.

Chinese mainland-based foreign banks accounted for 1.93 percent of the country's banking assets in 2011, only 0.11 percentage points higher than 2001. The proportion was 0.45 percentage points lower than the peak of 2.38 percent achieved before the global financial crisis. This is a low proportion whether in developed economies or in emerging nations. Some have also cast doubts on China's opening-up polices in the banking sector and its monitoring environment, arguing that foreign banks have encountered numerous policy restrictions and prejudice in China and the Chinese government has failed to grant them "real national treatment".

All these allegations are groundless. The low proportion of foreign banks in China's banking market does not contradict the fact that they have achieved sustainable and rapid development in the country. The number of both legal entities and subsidiaries foreign banks have set up in China has increased rapidly in recent years. By the end of 2011, some 98 foreign banks had established business organs in China, of which 39 enjoy a legal entity status, up from only 13 a decade ago. The number of their branches has also increased from 190 to 782. More importantly, these foreign banks have achieved a sustainable and rapid growth both in their assets and profits, with an average assets compound growth ratio of 19 percent and an average profit compound growth ratio of 26 percent. This is a praiseworthy performance, especially in the context of the global financial crisis.

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