Magazine article American Banker

World: U.S. Banks in China See Obstacle Course Becoming Marathon

Magazine article American Banker

World: U.S. Banks in China See Obstacle Course Becoming Marathon

Article excerpt

U.S. banks that piled into China at the start of this decade asserted they were in it for the long haul.

But with China struggling through a recession and the nation keeping tight restrictions on foreign banks, the long haul is looking longer than ever.

Last Thursday, U.S. and Chinese officials got together in Auckland, New Zealand, in the latest attempt to iron out differences over the terms for China's entry into the World Trade Organization.

U.S. trade representative Charlene Barshefsky used the usual terms "positive" and "constructive" to describe the talks, but she said little else.

Though China-watchers believe an arrangement eventually will be reached, U.S. and foreign banks are wondering when they will be able to do more than just handle foreign currency business with non-Chinese companies and limited local currency business with foreign companies from special branches in Shanghai and Shenzhen.

In April, responding to demands from the United States for major concessions as a condition to China entering the WTO, Chinese premier Zhu Rongji proposed a three-step liberalization.

In a first stage, foreign banks would be allowed to open branches across China instead of in only a handful of cities but still would be limited to doing business with foreign companies. In a second stage, within two to three years, foreign banks would be allowed to handle business with Chinese companies in local currency. In a third stage, after five years, they could engage in local currency transactions with Chinese consumers.

An ill-timed decision by U.S. officials to disclose the Chinese proposals before Mr. Rongji had time to discuss them back home triggered a major backlash on his return to China. Talks became even more difficult after NATO planes bombed the Chinese embassy in Belgrade over the summer. …

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