BNP Paribas opens
first China bank
SHANGHAI, China >> A French bank has created China's first wholly foreign-owned bank, marking a key turning point as the communist government starts to open its isolated financial industries to foreign competitors.
BNP Paribas SA, owner of First Hawaiian Bank, formed the new institution, which so far consists of a single office, by taking over the share of its Chinese partner in a Shanghai bank set up as a joint venture in 1992.
Foreign banks are eager to get into China, where the economy is growing by 8 percent a year, households have $1.2 trillion in savings and demand for credit cards and other services is booming. Dozens have representative offices here, and some -- including Britain's HSBC and Citigroup of the United States -- have bought minority stakes in Chinese banks.
"Overseas investors are showing increasing interest in China's financial sector, particularly the banking sector," said Ryan Tsang, director of financial services ratings for Standard & Poor's.
China has promised as part of commitments to the World Trade Organization that by 2006, it will give foreign banks the same treatment as local institutions.
China's private businesses, long poorly served by state banks that focus largely on financing government industry, also stand to benefit from the creation of more private banks.
But the transformation of the industry also is expected to lead to wrenching changes for Chinese banks.
They lag decades behind foreign competitors and are sitting on nonperforming loans to state companies that are believed to total at least $500 billion. The figure is equal to just under half of China's entire annual economic output.
