China has cut the waiting time for foreign banks to conduct renminbi business from three years after establishing operations in the mainland to one year.
Also, it dropped the requirement that a bank should be profitable for two consecutive years before applying for a renminbi license, the Financial Times reported Monday.
Foreign banks without a renminbi license are limited to foreign currency business.
They controlled only 1.7 per cent of total banking assets at the end of 2013, according to official data.
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”.
However, the changes, which take effect on Jan. 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 licenses, the report said.
A request to eliminate the three-year waiting period for obtaining a renminbi license was included in a long list of recommendations by the European Chamber of Commerce in a 2014 position paper.
It does not appear in the latest white paper of the United States Chamber of Commerce.
The cabinet also eliminated a requirement that foreign banks transfer a minimum amount of operating funds from their head office in China to each new bank branch opened in the country.
That requirement is not mentioned in either the Europe or US position papers.
In the lead-up to China’s joining the World Trade Organisation in 2001 many domestic bankers and regulators worried that highly competitive foreign banks would swamp domestic institutions.
But a myriad of restrictions on funding sources, branch openings and acquisitions ensured that did not happen.
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