CONFIDENTIAL #2
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25.
The foreign bank with the widest representation in China today is the Hongkong and Shanghai Banking
Corporation. It has branches in Shanghai, Shenzhen and Xiamen and representative offices in Beijing, Guangzhou
and Wuhan. The Standard Chartered Bank comes second,
while two Japanese banks, namely the Bank of Tokyo and the Sanwa Bank, occupy the third and fourth places.
26.
A full branch of a foreign bank can engage in
providing trade finance, issuing letters of credit, making foreign currency loans, handling foreign exchange transactions, and taking deposits in both foreign currencies and Renminbi. But in practice there are many restrictions. Deposits can only be accepted from foreigners or Chinese people residing overseas. Renminbi deposits can be accepted only if the foreign bank is acting as an agent for the ICBOC. The foreign bank earns
a small commission on such transactions. As far as
overdrafts, remittances and settlement of import
transactions are concerned, foreign banks can deal with non-local enterprises or individuals only. Being deprived of a local deposit base, the activities of foreign banks are confined mainly to the extension of credit.
27.
The severe restrictions imposed on branches of foreign banks are intended to protect Chinese banks from
competition. The functions of representative offices are even more restricted, as they are confined to the gathering of market information and the establishment of contacts. These representative offices are mainly
involved in helping their customers to do business in China (such as negotiating joint ventures), in handling
correspondent banking business, and in promoting the services of their parent banks.
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CONFIDENTIAL #B
Page 210Page 211
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