Chinese Banks Covet U.S. Expansion

China Merchants Bank, the sixth-largest bank in mainland China, is the first Chinese bank in more than a decade to receive approval to open a U.S. branch, reports the Wall Street Journal. The approval is seen as a tactical move by the U.S., in order to push China to further open its financial markets. The Federal Reserve's approval assuages Chinese cries of unfair practices, since China has been receptive to American banks buying stakes in Chinese banks and expanding their local footprint. The decision also bodes well for other Chinese banks eager to expand to the U.S., such as Industrial & Commercial Bank of China, which has a pending application being reviewed. Meanwhile, the matter of foreign ownership of Chinese banks will likely resurface as U.S. Treasury Secretary Henry Paulson readies for another strategic dialogue with his Chinese counterparts this December. The long gap since the last Chinese banks were allowed to open shop in the U.S. is due to the enactment of stricter foreign bank supervision laws in 1991 and because of previous weakness in Chinese banks' balance sheets. The situation has changed "radically" says one Chinese bank executive. U.S. bank license approval is critical to Chinese banks' ability to better service domestic firms' own overseas expansions.

Sources: Wall Street Journal
Commentary: China's Citic Eyes Stake in Bear Stearns • A Bubbly China - Barron's
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