Chinese regulators announced Thursday that overseas banks will be allowed to provide renminbi (RMB) services for Chinese enterprises beginning next month.

The China Banking Regulatory Commission said that effective December 1, foreign financial institutions, subject to the CBRC's approval, may provide RMB services for domestic enterprises.

Overseas banks can apply to conduct the local currency business for Chinese companies in regions where foreign financial institutions have already been permitted to offer RMB banking services, said the CBRC in its statement.

Currently, foreign banks can only provide RMB businesses to foreign-funded enterprises and non-Chinese residents in Shanghai, Shenzhen, Tianjin, Dalian, Guangzhou, Zhuhai, Qingdao, Nanjing and Wuhan.

The CBRC also announced yesterday that it will open four additional mainland cities, namely Jinan, Fuzhou, Chengdu and Chongqing, for overseas banks to conduct RMB businesses.

"Foreign financial institutions that are already authorized to operate RMB businesses may apply to provide RMB services for Chinese enterprises," the CBRC said in a statement.

Only overseas banks which have reported profits for two consecutive years prior to the application and meet other requirements, such as good corporate governance, sound risk management and internal controls and efficient controls on money laundering, are qualified to apply for the RMB business, according to the CBRC.

"Upon entry into the WTO, China was committed to allowing foreign financial institutions to provide RMB services for Chinese enterprises," said the statement.

"The CBRC will continue to push forward China's opening up of its banking industry on a stable pace and remove some geographic and client limits on overseas banks' RMB businesses," said the CBRC.

Yesterday's announcement was not much of a surprise for overseas banks working on China's mainland.

"We knew that China will open the sector to overseas banks at this time, two years after its entry into the WTO, as it promised to the international trade club," said Zhang Dandan, a spokeswoman for the Hong Kong and Shanghai Banking Corp.

(eastday.com November 7, 2003)