Foreign banks hope China's new leaders will loosen up regulators

Sun Nov 4, 2012 4:21pm EST
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By Gabriel Wildau and Kazunori Takada

SHANGHAI (Reuters) - For all the hopes that China's forthcoming leadership change will herald a new wave of market reforms, foreign bankers don't expect to get the level playing field they crave any time soon.

Trends are positive, but progress can be frustratingly slow.

"My outlook is basically optimistic, particularly in the medium term. The near term is always always uncertain," Christian Murck, president of the American Chamber of Commerce in China and independent director of J.P. Morgan Chase (China) Ltd, told Reuters.

A lighter regulatory touch on bond writing, derivatives and funding channels are seen as crucial to foreign banks' growth in China.

But the best they can hope for in the short term is that the new faces in the Communist Party's standing committee adopt a broadly pro-reform stance that gradually works through to front-line regulators, whose discretion on licensing and product approval can mean the difference between feast and famine.

"The attitudes that they take towards whether market reform needs to be accelerated again is absolutely crucial," Murck said.

Foreign banks in China had their best year ever in 2011. After-tax profits grew 115 percent to 16.7 billion yuan ($2.68 billion) in 2011, according to a survey of 41 banks by accounting firm PricewaterhouseCoopers (PWC).

Onerous regulation and unequal treatment compared to domestic rivals still restrain their growth. Foreign banks' assets rose by 24 percent last year, but their share of China's total banking assets remained under 2 percent.   Continued...