Foreign Banks in China Approved to Accept Yuan Deposits

On Monday morning, four foreign banks -- Citigroup, HSBC Holdings, Standard Chartered and Bank of East Asia -- will begin accepting deposits in yuan from private Chinese citizens for the first time. They are also cleared to offer loans to individuals. This marks the culmination of the liberalization of China's financial sector under its obligations to the World Trade Organization, which it joined six years ago. Chinese households have approximately $2 trillion on deposit. The market is among the most desirable in the world for the banking industry because of the country's enormous population, high household savings rate (about 25%) and fast income growth. Citigroup, HSBC and Standard Chartered will target the wealthiest citizens by imposing management fees on balances that dip below 80,000 yuan (about $10,400) or 100,000 yuan ($13,000). Hong Kong-based Bank of East Asia, taking a broader approach, will offer free banking to customers who maintain a balance above 5,000 yuan (approximately $650).

Sources: Wall Street Journal
Commentary: Four Foreign Banks Incorporate in China • HSBC, Citigroup, Get Key Approval for Chinese Banking • Citigroup CEO Outlines Planned Chinese Expansion
Stocks/ETFs to watch: HSBC Holdings plc (HBC), Citigroup Inc. (C), Bank of East Asia Ltd. [ADR] (BKEAY.PK), Standard Chartered plc [London: STAN]. ETFs: BLDRS Europe 100 ADR Index (ADRU), PowerShares Intl Dividend Achievers (PID), First Trust Morningstar Div Leaders Idx (FDL), WisdomTree High-Yielding Equity (DHS), SPDR DJ Wilshire Large Cap (ELR)
Conference call transcripts: Citigroup Q4 2006

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