Foreign banks and their branches are active in China. Traditionally, they play a prominent role in the Chinese banking system. In the early years of the People's Republic of China, only four branches of foreign banks located in Shanghai were granted legal status, allowing them to maintain an almost symbolic presence in the country.

The history of the formation of the modern structure of foreign financial institutions in China can be divided into three stages.

The first stage was marked by the registration of a Japanese commercial bank in Beijing - Japan Import and Export Bank in 1979. It was from this moment that foreign banks were allowed to establish representative offices in special economic zones. However, bank representative offices could only engage in market research, consulting, economic analysis, assistance in establishing contacts with Chinese authorities, manufacturers and consumers, but not in banking activities.

To further regulate the banking market in a sustainable manner, the Chinese government issued the “Regulations on the Administration of Foreign Funding of Banks and Sino-Foreign Joint Banking Ventures in Special Economic Zones” in 1985 (CBRC, 1985). These rules allow foreign banks to open branches and conduct foreign currency transactions in five special economic zones, namely Shenzhen, Zhuhai, Shantou, Xiamen, and Hainan. Due to strict geographic and client restrictions, foreign banks had to establish representative offices to gather information and identify possible investment prospects in China. The Chinese government has gradually lifted geographic restrictions, allowing foreign banks to have a presence in coastal cities outside special economic zones.

As the presence of foreign banks expanded, the second phase (1994-2001) of banking reforms in China was marked. Foreign banks founded by Hong Kong, Japan, the United States, the Netherlands, Germany, France and Thailand entered the Chinese market in the early 1990s. These developments went along with the growth of foreign investment. For the first time, China has given foreign banks access to the yuan for business purposes. Shenzhen has been selected as a special economic zone for transactions by foreign banks in Chinese national currency (Renminbi). In addition, foreign banks based in Shanghai and Shenzhen have been allowed to conduct RMB transactions in the neighboring provinces of Jiangsu, Zhejiang, Guangdong, Guangxi, and Hunan since 1999. Even despite the financial crisis of 1997-98, foreign capital was attracted by the establishment of 15 new foreign banking institutions in China between 1998 and 2001 (CBRC, 2007).

Accession to the WTO and the subsequent liberal policy of opening up the banking sector to the world marked the third stage (from 2002 to the present) of the development of foreign banks in China. Foreign banks in Shanghai, Shenzhen, Tianjin and Dalian were allowed to conduct business transactions in Chinese domestic currency. Geographically, the foreign banking sector in China expanded to Guangzhou, Zhuhai, Qingdao, Nanjing and Wuhan in 2002, and then to Jinan, Fuzhou, Chengdu and Chongqing in 2003.

In 2004, five more cities - Kunming, Beijing, Xiamen, Shenyang and Xi'an - allowed foreign banks to conduct business transactions. Thus, every year there were more and more cities open to foreign banking. By December 2006, foreign banks were allowed to participate in the provision of certain financial services, including special regulations previously available only to domestic commercial banks. In particular, they began to be listed on a par with Chinese banks in annual banking statistics. The remaining restrictions on market access for foreign banks, which regulate strict requirements regarding ownership, operations and legal forms, have been lifted by the Chinese Banking Regulatory Commission. Since 2007, foreign banking in China has entered a new stage where all geographical and client restrictions for foreign banks have been eliminated. Previously, foreign banks were only allowed to provide services to corporate clients with deposits of more than 1 million yuan. WTO accession opened up the Chinese banking sector to foreign investors, stimulating the emergence of new foreign banking operations in China.

In order to enter the Chinese banking market, a foreign bank needs to register a subsidiary company in China on a shared basis (locally incorporated banks), or create a Chinese company completely controlled by foreign capital (wholly foreign-owned enterprise (WHOE)). Depending on this, as well as on the place of registration of the new bank, the possibilities of providing various banking services, conducting operations on the market, regulatory features, etc. differ.

The national aspect of foreign financial institutions in China is also very important, since its financial activities in the country depend on which country the bank represents in the arena of market services in China. For example, countries such as Hong Kong, the USA, and Japan are more focused on investment projects, while European countries register their representative offices for the convenience of doing business for their national corporations.

Foreign banks in China have their headquarters in more than 47 countries and regions, most of them from Hong Kong, the United States and Japan, which accounted for about 47 percent of the total foreign banking institutions in China in 2006. Cultural and geographical proximity may have contributed to the emergence of branches of banks from Singapore, South Korea, Japan and Hong Kong in China.

Foreign banks in these countries may have followed their investors into China. Although most developed countries have established trade or investment ties with China, the investment and trading companies of these countries are distant from China. Therefore, most likely, it is more profitable and reliable for partner countries to carry out transactions through their national banks.

Foreign banking institutions are highly concentrated in certain Chinese cities. Shanghai and Beijing are the most favorable locations due to various geographic advantages, such as the strategic nature of the banking market, information externalities, and proximity to the central bank. Also, foreign financial institutions are located in Shenzhen and Guangzhou, followed by Xiamen, Tianjin, Dalian, Qingdao and Suzhou. Foreign banks are also targeting some inland cities, including Xi'an, Chengdu, Chongqing, Kunming, as old-established industrial centers (Figure 4).

The territorial structure of representative offices, branches and branches of foreign banks is different. Representative offices, whose task is to collect information and search for business prospects, are largely concentrated in Beijing, Shanghai and Guangzhou. Foreign banks can benefit from information externalities by locating close to the People's Bank of China. A large number of foreign banks are established in areas where enterprises with foreign investment are concentrated. Thus, the share of foreign banks operating in the Shanghai area is 43% of the total assets of foreign banks in China, 45% of loans and 40% of foreign currency deposits. Foreign banking institutions and subsidiaries involved in domestic and foreign currency transactions are scattered along developed coastal cities. Since the opening-up period, the Yangtze River Delta has become a favorite region for foreign banks. Thus, foreign banks located in Shanghai serve both a huge stretch of the coastal zone and more remote areas adjacent to the river.

As for the regional differentiation of subsidiaries of foreign companies, for clarity, a map of “Regional differentiation of foreign banks in China” was constructed (Fig. 5). The data used were selected from 42 national banks of countries with the greatest influence and distribution in China. In particular, many of these locally incorporated banks have the right to transact in Chinese national currency. As can be seen, it is quite difficult to determine the trend of regional differentiation, since the founding countries are not particularly concentrated in any region of the world. However, it is worth noting the strong influence on China's banking sector from its southeastern neighbors, namely Japan, Taiwan, Hong Kong, Singapore and, more recently, Malaysia. Also among the important participants in the Chinese banking sector are Western Europe, especially the UK, which owns the two largest foreign banks in China, as well as France, Switzerland, and Germany. The USA remains the largest in terms of the number of representative offices of its banks in China (5 banks). The largest number of employees employed in foreign banks of its parent country is Great Britain - 12,760 (at the end of 2013).

The rate of economic progress of the People's Republic of China is increasing. The country is one of the world leaders in the level of development of many sectors of the economy, science, and technology. Banks in China are also distinguished by their high achievements. In 2017, the Chinese banking system was recognized as the largest on the planet: the volume of assets held by its banking institutions exceeded the assets of European banks by $2 trillion. Four of the world's largest banks are Chinese state-owned. The country is represented by 18 banking institutions in the top 100 banks in the world.

Specifics of the country's banking system

Back in 1997, a thorough reform of the banking system was carried out in China. Its main goal was to prevent a currency and financial crisis. After reform, the activities of all banks are under state control. Supervisory and control functions are assigned to the All-China Banking Regulatory Commission.

The Chinese banking system in 2019 includes three levels. On the first are the People's Bank of China and three state development banks:

• China Agricultural Development Bank.
• State Development Bank of China.
• Export-Import Bank of China.

The second level is the basis of the Chinese banking system. It includes commercial banking institutions, the leaders among which are the so-called Big Four banks:

• Industrial and Commercial Bank of China.
• Construction Bank of China.
• Agricultural Bank of China.
• Bank of China.

In terms of scope, second-tier state commercial banks are both urban and rural. In addition, leasing financial, trust investment and other financial companies that carry out a range of banking operations belong to this level of the banking system.

When answering the question about how many banks there are in China, it should be noted that their number exceeds 800. Converted per 1 million inhabitants, the average is 0.6 banks.

The third level is occupied by the system of urban and rural cooperation, which finances small and medium-sized businesses in the PRC. It was created to counter the institution of usury. Represented by city credit, agricultural cooperatives, post offices.

Rating of Chinese banks

Many people are interested in the question of which Chinese banks are the best. To give a comprehensive answer to this, below is the rating of Chinese banking institutions.

"Big Four"

The banks that are part of the Big Four control about 60% of the local banking services market.

1. The largest among them is the Industrial and Commercial Bank of China (ICBC). Was founded in 1984. The headquarters is located in the capital - Beijing. This institution is the largest bank on the planet. The amount of his assets as of 2019 exceeds $4 trillion. In China, it accounts for about 1/5 of the banking services market.
2. In second place in the world and in China is the China Construction Bank (CCB). Operating since 1954. The headquarters of the institution is also located in Beijing. The bank's assets are about $3.4 trillion. The institution was created to carry out government mutual settlements, but over time it was repurposed as a commercial one. Today, there are over 14 thousand branches of the China Construction Bank around the world. The largest of them operate in New York, Singapore, Frankfurt, Tokyo, Luxembourg, and Barcelona.
3. Third place in the “Big Four” and in the world belongs to the Agricultural Bank of China (ABC) with its main office in Beijing. It was created in 1951. Its original purpose was to help workers and peasants. Nowadays, the bank's total assets are equal to $3.235 trillion. The institution has about 24 thousand branches around the world, in particular in countries such as Japan, Singapore, South Korea, Australia, USA, Germany, and Great Britain.
4. An honorable fourth place is occupied by the Bank of China. Founded in 1912. This is one of the very first Chinese banking institutions. Today it is a state-owned commercial enterprise and operates in the form of a joint stock company. The total assets are about 2.991 trillion dollars. Bank of China branches successfully operate in about 27 countries, including the Russian Federation. It was in this state that a subsidiary institution was opened, which was named “Bank of China AKB Elos”. There are branches of this institution in Moscow, Khabarovsk and Vladivostok.

List of the largest state and private Chinese banks

State-owned banks are institutions that occupy the first tier of China's modern banking system, described earlier. The functions of the central bank of the People's Republic of China are vested in the People's Bank of China. It was founded in 1948. Initially, the headquarters of the institution was located in the city of Shijiazhuang. In 1949, the main office was moved to Beijing.

The volume of reserves of the People's Bank of China exceeds $3.201 trillion. This is the emission, main payment, settlement and credit center of the state. The key function of the bank is the development and implementation of monetary policy in the country. Its structure includes 9 regional branches and 6 foreign representative offices. More detailed information can be obtained on the information website Bank-China.ru.

State banking institutions, which are development banks, are responsible for the implementation of government programs in three areas:

• Foreign trade: Export-Import Bank of China – Exim Bank of China; Founded in 1994, it has 3 foreign and over 10 regional representative offices and branches.
• Industrial: China Development Bank - State Development Bank of China; year of foundation – 1994; has about 35 branches within the country and in other countries of the world.
• Agricultural: Agricultural Development Bank of China - Agricultural Development Bank of China; year of foundation – 1994.

Among the large private banks in China (after the Big Four) are:

1. Bank of Communications. It is the fifth largest commercial bank in China. The asset size is more than $1 trillion.
2. Ping An Bank. Operates in Shenzhen, Fuzhou, Shanghai. Part of the Ping An Group company. Provides insurance and asset management services.
3. China Merchants Bank. Became the first banking institution owned by corporate legal entities. It has over 500 branches in China.
4. Minsheng Bank. Provides lending services for medium and small businesses. Its structure includes up to 200 branches in China.

Well-known regional commercial banking institutions include Jilin Bank, Dalian Bank, Harbin Bank, and Shengjing Bank.

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What types of activities do Chinese banks engage in?

First, we should list the functions of China's central bank. Thus, the People's Bank is engaged in:

• development and implementation of monetary policy;
• management of the national currency reserve and gold reserves of the PRC;
• emission (issue) of money and control of its circulation;
• trading on the stock market in currencies, as well as government bonds;
• supervision and control over the state of the country's financial market;
• lending to private banking institutions;
• administering the work of all financial institutions in the country in accordance with legal norms;
• formation of the main interest rate;
• determining the rates at which deductions are made to the reserve fund from the money supply received from credit institutions.

Banking services in China are provided to individuals and legal entities by commercial banks. By contacting such institutions, you can:

• take out a loan (for the purchase of real estate, consumer, etc.);
• put money on deposit;
• make payments at the cash desk;
• receive a money transfer;
• pay for goods or services using QR codes;
• sell/buy foreign currency;
• sell/buy precious metals, stones;
• make a contribution in the form of expensive metals;
• use brokerage services;
• open a bank account and get a bank card.

In addition, commercial banks carry out leasing and trust operations (the latter are related to property management and the provision of other services on behalf of the client and in his interests), issue, store, and sell securities, provide guarantees to third parties and act as guarantors for financial transactions.

Account opening procedure for foreigners

Foreign citizens have the right to open accounts in Chinese banks. So, if a citizen of another state works officially in China, he can receive wages on a bank card, and in the currency in which he is comfortable.

If a person plans to receive payment for his work not in yuan, then the contract with the employer must necessarily indicate that wages will be paid in foreign currency.

Chinese banks often open to foreign companies. Acceptable currencies are euros, US dollars, . It is also possible to open an account in Chinese yuan for non-resident companies. Only this procedure is more complex and lengthy than in the case of an offshore account, since the People’s Bank must agree to it.

Package of documents for opening an account

Individuals wishing to open an account in one of the banks in China must provide:

• a completed form with personal data and determining the reason for staying in China.

You will also need to provide a phone number and address in China, and pay 20 yuan in cash per bank card.

To open an account in one of the banks in China, legal entities must have their company in the territory of the PRC. If this is not done, the procedure will be longer and more complicated. The list of documents for legal entities varies from bank to bank.

Money transfer

In banks in China you can receive money transfers from abroad. In addition to direct bank transfer, this can be financial funds sent via:

• Chinese payment system UnionPay;
• international payment systems: MoneyGram, Western Union, Contact and others.

You can also withdraw money from electronic wallets in Chinese banking institutions. These include QIWI, WebMoney and other electronic money systems.

Lending to foreigners

Another pressing issue concerns how banks in China work with foreign borrowers. In order for a representative of another country to take out a loan here, he needs to find a guarantor among Chinese citizens.

In theory, loans from Chinese banks are available to all foreign legal entities and individuals. But in practice, according to reviews from those who applied, it is quite difficult to obtain them.

Banking institutions are cautious about issuing funds to everyone. This is due to the fact that if the borrower fails to repay the debt, the dispute will be resolved in the court of the country of which the borrower is a citizen.

Chinese banks will be more willing to issue loans to foreigners if they provide guarantees that 60% or more of the amount received will be used to purchase products or pay for services in China.

Registration of a mortgage

To apply for a real estate loan from a Chinese bank, a foreigner needs at least 12 months on the basis of a work visa and find a guarantor with Chinese citizenship (this can be an employer).

The package of official papers required to obtain a mortgage consists of:

• passports;
• residence permit (residence permit);
• labor contract;
• salary certificates from the place of work;
• copies of the license of the company that provides the applicant with a workplace;
• certificates for the last 12 months;
• a certificate confirming the applicant’s solvency;
• marriage/divorce certificate translated into Chinese.

Chinese banks are more favorable to those foreign borrowers who plan to purchase real estate in the locality in which they operate.

Offshores

Many owners of companies located on the Chinese mainland seek to open an offshore company in Hong Kong. The fact is that in this administrative region of China there is no need to pay income tax on business conducted outside its borders.

To open an offshore account, the company must have been in existence for more than 12 months and its capital must be at least $10 thousand. The bank will need to present a certificate confirming that the business owner has paid all taxes and mandatory fees. You will also need a letter confirming the solvency of the company from the banking institution where it is serviced.

Are there representative offices of foreign banks in China?

Back in 1985, the PRC passed a law according to which foreign banking institutions received the right to open their branches on the territory of the state.

A foreign bank wishing to establish a representative office in China must exist for at least 24 months. Moreover, the total amount of his assets cannot be less than $20 billion.

Foreign banks are represented quite widely in China. This is primarily due to the rapid development of international relations between the PRC and other countries of the world.

Banking institutions of the European Union countries

Many large European banks have branches in China. Representative offices of French, Dutch, Swiss, English, Belgian, and Italian banking institutions operate successfully here. Among the most famous are the branches of Credit Suisse First Boston (Switzerland), Deutsche Bank (Germany), Amsterdam-Rotterdam Bank, Algemene Bank Nederland (Netherlands).

Banks of CIS countries

As of 2019, only Russian banks in China opened their representative offices and branches. Thus, in 2008, a branch of VTB Bank opened in Shanghai. It services trade turnover between the Russian Federation and the People's Republic of China. In addition to it, there are 8 more VTB representative offices in China.

There is one representative office of Promsvyazbank in China. The purpose of its founding was to serve two Russian-owned companies - LOMO and Rostvertol. Representative offices and branches of the Central Bank of Russia, Gazprombank and Sberbank serve Chinese clients, but are not authorized to provide banking services to a wide range of citizens.

To summarize the above

China has an extensive banking system consisting of three levels. The idea that all banking institutions in this country are state-owned is erroneous. A large number of private commercial banks operate here. The main feature of the Chinese banking system is that the activities of all financial institutions are strictly controlled by the state.

Chinese banks provide services to foreigners. Thus, non-residents can open an account in a Chinese bank, receive an international money transfer, or take out a loan or mortgage. Foreigners working in China under an employment contract are entitled to receive a Chinese bank card. And not only in yuan, but also in foreign currency.

Chinese banks: Video

"International banking operations", 2012, N 1

The country, where an average of 6.5 dollar millionaires emerge every hour, is considered perhaps the most attractive market in the world, where many foreign banks would like to operate. But entering this market is fraught with difficulties due to various administrative barriers. How can a non-resident bank register its branch or subsidiary credit institution in China? How profitable is banking business in this country?

Opening up the Celestial Empire to the world

According to the PricewaterhouseCoopers forecast, by 2023, Chinese banks should overtake the United States in terms of domestic assets, and by 2050 they will account for almost 23% of all assets of the global banking industry. However, ten years ago, entry into this rapidly developing and rapidly growing rich market was very difficult for non-resident banks.

At the beginning of 2000, only 25 foreign banks with a license to transact in the yuan operated in China. At the same time, there were many restrictions on free competition between foreign and Chinese banks. First, transactions for foreign banks were only allowed within the developed eastern regions of Shanghai, Beijing and Shenzhen. Secondly, these banks could only offer their services to foreign-owned enterprises and foreign nationals, including citizens of Hong Kong and Macau. Thirdly, the liabilities of foreign credit institutions in yuan could not exceed 35% of their liabilities in foreign currency, that is, the growth of transactions with the yuan had to be accompanied by a proportional increase in transactions in foreign currency. Fourth, all foreign banks were prohibited from accepting deposits from Chinese companies and individuals. Fifth, they were not allowed to subscribe for shares of blue-chip companies or trade in government bonds. In addition, a non-resident bank could then obtain a license to open a branch in China only five years after opening its representative office in this country. Moreover, the license obtained gave the foreign bank the right to open no more than one new branch per year.

How to open a bank in China

Only after China became a full member of the WTO on December 11, 2001, did the government of this country undertake a number of obligations, including opening the banking sector to foreign competitors in five years. It should be noted that the Chinese government fulfilled this obligation within the established deadline of December 11, 2006, although not in full. Restrictions on the activities of foreign banks still remain, although the opportunities for their subsidiaries to operate in China have expanded significantly. At the same time, the Celestial Empire in 2001 - 2006. opened to the outside world gradually: every year the Chinese opened 5-6 large cities to foreign banks. In addition, at the end of 2002, foreign banks received the right to engage in wholesale operations in foreign currency in China, and at the end of 2006 - retail operations in Chinese yuan.

The Regulations of the People's Republic of China on the regulation of the activities of banks with foreign capital (The Provisions of the People's Republic of China on the Administration of Foreign-Funded Banks), approved by the State Council of the People's Republic of China, came into force on December 11, 2006. At the same time, another regulatory act came into force - The Implementing Rules of the Provisions on the Administration of Foreign-Funded Banks issued by the China Banking Regulatory Commission (CBRC).

The fact is that in accordance with the Law of the People's Republic of China "On the People's Bank of China", the People's Bank of China is now entrusted with the functions of regulating money circulation and credit, while in accordance with the Decision "On the performance of regulatory and supervisory functions by the Banking Regulatory Commission of China instead of the People's Bank of China", adopted by the Standing Committee of the National People's Congress, the China Banking Regulatory Commission was established in April 2003. In accordance with the Banking Regulation and Supervision Law of the People's Republic of China, adopted in December 2003, the CBRC is responsible for regulating and supervising financial institutions that accept deposits, issue loans, clear accounts and carry out other activities in accordance with the Laws of the People's Republic of China." About commercial banking" and "About the company".

According to the Regulations of the People's Republic of China on the Regulation of the Activities of Banks with Foreign Capital, subsidiary banks with foreign capital received the right to carry out almost all transactions in yuan and all transactions in foreign currency if they are legal entities registered in the People's Republic of China, while branches and representative offices of foreign banks operating in The PRC, but not registered here as a legal entity, has restrictions on conducting a number of transactions. Thus, foreign banks (including branches and subsidiaries) are prohibited in the PRC from issuing financial bonds, acting as an agent when placing government bonds, or acting as an intermediary in accepting and disbursing funds in favor of third parties, including in favor of companies and government agencies .

According to the above provision, the minimum authorized capital for registering a subsidiary bank with foreign capital must be 1 billion yuan or the equivalent of this amount in freely convertible currency ($158.42 million - hereinafter at the cross rate calculated on the basis of official rates of the Bank of Russia on March 8 this year). By the way, a similar requirement is imposed for registering a Chinese bank. It should also be borne in mind that when calculating the minimum authorized capital, only the funds actually contributed are taken into account, and not promised or planned contributions.

In this case, the operating assets for each branch of a subsidiary bank must be at least 100 million yuan or equal to the equivalent of this amount in freely convertible currency ($15.84 million). At the same time, the operating assets of all branches must not exceed 60% of the total capital of a subsidiary bank, while foreign banks, when opening a branch in the PRC, must provide it as operating assets of at least 200 million yuan or the equivalent of this amount in freely convertible currency ($31.68 million).

Non-resident shareholders and major Chinese shareholders of a foreign-invested subsidiary bank can only be financial institutions. In this case, the owner of 100% or a controlling stake must meet the following requirements: firstly, it must be a commercial bank; secondly, it must have at least one representative office that has worked in China for at least two years; thirdly, the assets of this bank must be at least 10 billion US dollars based on the results of the previous year; fourthly, the level of capital adequacy of this bank must meet both the requirements of the country where it is resident and the requirements of the PRC. New shareholders of an already established subsidiary bank may be exempted by the Banking Regulatory Commission from the need to establish a representative office in China.

Note. The main shareholder of a subsidiary bank with foreign capital in China can only be a commercial bank.

The implementing rules of the Regulation on the Regulation of Banks with Foreign Capital define the procedure for registering a branch of a bank with foreign capital in the PRC and the procedure for converting a Chinese branch of a foreign bank into a subsidiary bank as follows. First, you must submit an initial application to the China Banking Regulatory Commission and obtain prior approval to open a bank. Secondly, write a second application to the CRDB for approval to open a bank after the initial application has been reviewed and approved by the relevant provincial branch of this commission. Thirdly, obtain a license (Finance Permit) to open a bank. Fourth, register the bank with the provincial department of industry and commerce.

The entire process of converting a Chinese branch of a foreign bank into a subsidiary bank may take at least 10 months, and opening a new subsidiary bank will require 15 months. If a foreign bank decides to maintain an existing branch in China in order to provide foreign currency banking services, then it will also need to deal with the distribution of existing assets between this branch and the subsidiary bank being created, which may require at least three months .

According to the Rules for the Implementation of the Regulation on the Regulation of Banks with Foreign Capital, a subsidiary bank that intends to obtain the right to engage in all types of RMB banking operations must apply for permission to do so from the CBDC, which will take at least seven months. First, the bank must obtain initial approval from the CBDC, prepare a business plan, and then the provincial branch of this commission conducts an assessment of its readiness for such operations, as a result of which a permit is issued.

A subsidiary bank with foreign capital receives the right to engage in all types of banking operations with the yuan, including accepting deposits from individuals and servicing bank cards. In addition, with the permission of the People's Bank of China, a subsidiary bank with foreign capital can engage in foreign exchange transactions, as well as sell foreign currency to clients. Branches of subsidiary banks with foreign capital can carry out all types of banking activities with the permission of the management of their bank, approved by the CBDC, while Chinese branches of foreign banks are not allowed to service bank cards, and they can only accept deposits from Chinese citizens in the amount of 1 million yuan and higher.

The PRC Regulation on the Regulation of Banks with Foreign Capital also establishes additional requirements for foreign banks wishing to conduct transactions in yuan. The CRBD issues permission for these operations only to those foreign banks that have already worked in China for at least three years and managed to earn a profit during the previous two years.

Quite high demands are placed on top managers of subsidiary banks with foreign capital and branches of foreign banks in China. According to the rules, nominations of senior level managers (including presidents, vice presidents, directors, chief executive officers, heads of operations control departments, heads of internal audit departments, etc.) must be approved by the Banking Regulatory Commission or (depending on position level) by its provincial branch. At the same time, the CRBD puts forward a requirement that top managers of banks be familiar with Chinese legislation and not be found to have violated it. In addition, candidates who have a bad credit history due to failure to pay large personal debts cannot apply for top manager positions. Future directors and top managers of banks, when approved for a new position, are required to make a statement that they have not been subject to criminal liability, have never refused to pay their debts, and have not violated Chinese laws or other regulations.

The work of foreign banks in modern China

Thanks to the gradual opening of the Chinese market to non-residents in the period from 2003 to 2007, the volume of assets of foreign banks and subsidiaries of banks with foreign capital operating in China increased from 416 to 1253 billion yuan. At the same time, the growth rate of assets of banks with foreign capital was higher than that of local ones, and therefore their share in the total volume of banking assets during this period increased from 1.50 to 2.36%.

But in 2008 - 2009. The growth of the foreign banking sector has slowed sharply. This is due to the fact that at the end of 2008, the Chinese government, in the context of the global crisis, announced a plan to stimulate the Chinese economy, within the framework of which cheap loans in the amount of 4 trillion yuan (633.7 billion US dollars) were allocated to the real sector through local banks. . As a result, the volume of loans issued by local banks increased sharply, while the funding of banks with foreign capital during this period deteriorated due to the crisis. 2009 turned out to be especially unsuccessful for the latter, when the volume of their assets increased by only 0.3%, while for all banks it increased by 26.3% (table).

Share of banks with foreign capital in the total assets of the Chinese banking system

Year	All banks billion yuan	Rates of growth all banks %	Banks with foreign capital, billion yuan	Rates of growth banks with foreign capital, %	Share of banks with foreign capital, %
2003	27 659	-	416	-	1,50
2004	31 599	14,2	582	39,9	1,84
2005	37 470	18,6	716	23,0	1,91
2006	43 946	17,3	928	29,6	2,11
2007	53 116	20,9	1253	35,0	2,36
2008	62 388	17,5	1345	7,34	2,16
2009	78 805	26,3	1349	0,3	1,71
2010	95 215	20,8	1742	29,1	1,83

Source: China Banking Regulatory Commission Report 2010

The situation improved in 2010, when the Chinese monetary authorities, fearing overheating of the economy, began to increase the refinancing rate and reduce the amount of liquidity provided to the banking sector. As a result, in 2010, the growth rate of assets of credit institutions with foreign capital was higher than that of all banks (29.1% compared to 20.8%).

Unfortunately, there were no official data for 2011 at the time when this material was being prepared. But according to a survey of 39 foreign banks and subsidiaries of banks with foreign capital conducted by PricewaterhouseCoopers, only two banks expected to earn zero profit last year, six banks - profit below 20%, 22 banks - from 20 to 50%, three banks - from 50 up to 100% and three more banks - more than 100%.

At the beginning of 2011, there were 127 credit institutions with foreign capital operating in China, of which 40 were subsidiary banks with foreign capital. Moreover, according to the KRBD data, the last group of banks accounted for about 87% of all assets of foreign banks in this country. In addition, subsidiary banks with foreign capital had 223 branches in China, while foreign banks had only 90 branches.

Thus, for more successful business development in China, foreign banks should create their subsidiaries here. According to a PricewaterhouseCoopers survey last year, 11 foreign banks that registered as a legal entity in China said their expectations for obtaining this status were met, two banks believed that their expectations were not met, and seven banks were neutral about the event. At the same time, 12 surveyed banks predict the emergence of five new subsidiary banks with foreign capital in China by 2014, 13 respondents predict 10 or more subsidiary banks, and four survey participants believe that there will be no more of them.

Why don't Russian banks go to China?

The first and so far the only Russian bank to open its own branch in Shanghai at the beginning of 2008 was the VTB Group, whose Beijing representative office has been operating since 1989. The main task of the VTB Shanghai branch is to service Russian-Chinese trade turnover and foreign trade operations of Russian companies operating in China , and Chinese companies operating in Russia. As the bank's president Andrei Kostin said in an interview with Xinhua, despite the crisis, VTB has achieved significant success in China: “Through VTB, one of the largest contracts in the history of Russian-Chinese relations was concluded for $25 billion for the supply of Russian oil, We took part in the placement of shares of the large Russian company RUSAL in Hong Kong"<1>. VTB cooperates in China with such large companies as Rosneft and Transneft, and participated in financing the construction of nuclear energy facilities in China.

<1>http://russian.news.cn/economic/2010-09/23/c_13526556_2.htm.

VTB signed a memorandum of understanding with a number of leading financial institutions in China: Construction Bank of China, Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China and the national payment system China UnionPay Co. One of the important areas of cooperation between VTB and Chinese banks is the transition to national currencies in mutual settlements. Direct conversion of the two currencies contributes to the growth of trade turnover between China and Russia, and also gradually reduces the dependence of both countries on the US dollar.

Today, the Shanghai branch of VTB is the only Russian bank licensed to conduct banking operations in China. In November 2011, the branch received the status of a market maker to conduct transactions on the ruble/yuan pair on the Chinese Currency Exchange.

Even before the crisis, Russian banks such as Gazprombank and Promsvyazbank showed interest in the Chinese market and opened their representative offices here. But, except for VTB, not a single Russian bank has yet opened a branch in China.

Why are Russian banks in no hurry to enter the Chinese market? Firstly, this was partly prevented by the global crisis of 2008-2009. and the worsening of the debt crisis in the eurozone in 2011. Secondly, unlike American and European banks, which are more actively promoting their services in China, Russian banks operate in a rapidly developing market, and therefore have less incentive to enter a similar market. Thirdly, and this is perhaps the most important thing, administrative barriers hinder entry into the Chinese market.

For example, only foreign banks with assets of $20 billion or more can register their branches in China, while at the end of 2011 only the eight largest banks in the Russian Federation met this requirement. Even opening a regular representative office in China takes a lot of time: in particular, it took Promsvyazbank more than a year to do this. It is also impossible to buy a bank in China, because mainly large state-owned credit organizations operate here, which are not entirely transparent to non-residents and have a significant share of problem assets.

The fact that access to the Chinese market for foreign banks remains seriously difficult is stated in the White Paper published in 2011 by the American Chamber of Commerce in China. For example, American bankers are unhappy that the electronic payment market is practically closed to foreign participation, since the China UnionPay Co. payment system occupies a monopoly position here.

Another drawback that reduces the attractiveness of this market: in China, there are several agencies that regulate various aspects of the banking business, the requirements of which often contradict each other, which makes their implementation difficult. Therefore, in China it is not easy to bring complex banking products and services to the market, since this requires approval from several regulators at once. In addition, one must keep in mind that in China, the requirements of different regulators may be interpreted differently at the local level, and in some regions, some banking products are generally prohibited.

In accordance with the banking legislation of the PRC, subsidiary banks with foreign capital are allowed to create not only branches, but also branches. But so far, permits are only given for opening branches, the registration of which takes a lot of time. At the same time, the American White Paper states that in the PRC there is an unspoken rule according to which foreign banks are required to open one branch in undeveloped regions in exchange for a branch opened in developed regions.

The Prospect of the Yuan as a Global Currency

Big problems arise for foreign banks operating in China due to many restrictions associated with the conversion of the yuan. True, the Chinese authorities have already managed to do a lot in this direction. Thus, in June 2009, the People's Bank of China and the monetary authorities of Hong Kong signed a memorandum on the launch, from July 1, 2009, of a pilot project for the use of the Chinese yuan in cross-border settlements between Hong Kong and mainland China. According to this document, Hong Kong enterprises received the right to use the yuan in trade settlements with Chinese enterprises operating in cities such as Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan. Accordingly, Hong Kong banks can now provide services to businesses from these cities to accept deposits denominated in yuan, exchange currency and trade finance in Chinese currency.

Two years after the start of this experiment, the People's Bank of China announced that settlements in yuan in transnational trade were already being carried out with 144 countries. Additionally, in 2011, the People's Bank of China announced the launch of an experiment in transnational investment and financing in RMB. As a result, a decision was made to invest RMB in China for foreign enterprises. According to preliminary statistics, in 2011, the volume of cross-border payments in yuan amounted to 2.08 trillion, and direct investment in yuan - 110.9 billion.

At the II Forum of Global Consulting Companies, held in China in 2011, Chairman of the Council of the All-China Social Security Fund Dai Xianglong said that the share of the PRC economy is 10% of the world, and the share of foreign exchange reserves is one third, therefore China is the largest in the world creditor. According to Dai Xianglong, the transformation of the yuan into a world currency should take place in three stages. The first step, based on current account convertibility, is to transform the renminbi into a currency of account in international trade. The second stage is to expand interaction between Chinese and foreign investors and develop the yuan into an important global investment currency. The third stage is to achieve the internationalization of the yuan and turn it into an international reserve currency.

V.G.Bryukov

Independent Analyst

It's hard to keep money under your pillow if the equivalent of 1000 euros weighs half a kilo. These are the physical characteristics of the money converted into beautiful but inconvenient banknotes with a maximum denomination of 100 yuan.

Moreover, cashless payments in China have long ceased to be a tribute to fashion or a “comfortable” innovation. Electronic payments here - it is a necessity for survival. Is it worth mentioning the wide range of possibilities of plastic cards: from the safe storage of financial savings to the disposal of funds that we do not possess at all. And the most important thing,- the ability to pay for purchases on Taobao without intermediaries. The extremely rapid growth of the Chinese economy poured rain through the country's banking system: bank branches began to appear on every street literally a few meters from each other. This is not surprising for a country that has at its disposal more than half of the entire planet’s foreign exchange reserves. But, unfortunately, this did not make it any easier for foreign clients of Chinese banks. According to statistics, every second visit of a foreigner to the bank ends in failure. Maybe we just go to the “wrong banks”? We have prepared a review of the best Chinese banks for Laowai needs.

ICBC - innovative bank. This is the first bank in the world to issue a multi-currency MasterCard credit card for 10 currency wallets. This card is ideal for foreigners living and working in China, as it avoids double conversion of currencies and, consequently, double debiting of commissions. When paying with it in Russia or Ukraine, the money will be debited from your dollar wallet. If you do not have dollars in your account, then subsequently the negative balance on the foreign currency account can be replenished from the CNY wallet on the bank’s website in the user’s personal account. English version of ICBC Internet banking- another advantage of it. By connecting your debit account to online control, you can independently carry out SWIFT transfers abroad.

HSBC - a financial conglomerate with a worldwide reputation. In the 2000s, Russian, Ukrainian and even English international crime stars hid money in its Swiss branch. Today, the Banking Corporation of Hong Kong and Shanghai is the leader among banks in mainland China in terms of linguistic tolerance with foreign clients. In addition to international accreditation, the bank has a high-quality English version of the official website, where you can find all the answers you need and even apply for a credit card. If you manage to open an account at an HSBC branch in Hong Kong, you will have access to online currency exchange.

3. BANK OF CHINA

In addition to the fact that the Bank of China- the founder of the Chinese banking system as a whole, it also holds the most foreign currency, which is due to the bank’s specialization in serving the “international needs” of the ruling party. It is also noteworthy that by opening a current, non-fixed foreign currency account with the Bank of China, you receive an annual accrual of 0.03 percent of the amount in your account simply as a thank you for your trust in the bank. There's no reason not to trust him- the majority stake is owned by the Chinese Communist Party.

In the PRC there are 5 largest state banks in terms of assets, which are called the Big Five, the first 4 of which are state-owned banks:

1. ICBC- Industrial & Commercial Bank of China (Industrial and Commercial Bank of China);
2. ABC- Agricultural Bank of China (Agricultural Bank)
3. BOC- Bank of China (Bank of China).
4. CCB- China Construction Bank - (Construction Bank of the People's Republic of China).
5. BoCom- Bank of Communication (Bank of Communications of the People's Republic of China).

These banks are ranked first in both Chinese and world ratings.

The top 12 largest banks in China also include the following commercial banks:

• Merchant's Bank- Trade Bank;
• Citic Bank- Citik Bank;
• Shanghai Pudong Development Bank- Pudong Development Bank;
• Industrial Bank- Industrial Bank of China;
• People's Bank of China(MinSheng) - People's Bank of China;
• China Everbright Bank(Guangda) - Bank of Guanda;
• Ping An Bank- Ping'an Bank.

Banking institutions, taking advantage of their significant financial capabilities, are engaged in investing and lending to the population, which increases their capital.
These banks have branches and subsidiaries in many foreign countries. In Russia, only the Bank of China operates, whose branch is the Bank of China, ELOS (中国银行俄罗斯分行). The activities of the ELOS branch are concentrated on conducting trade transactions of Chinese enterprises, so in Russia few ordinary citizens know about it.

Representative offices of foreign banks and their branches in China

Almost all the largest banks in the world have their representative offices in China, some of which have been open for more than 100 years, the largest of which can be noted:

• HSBC - open since 1865
• Standard Chartered Bank since 1858.
• BEA - Bank of east Asia since 1920
• Citibank since 1902.
• DBS Singapore - since 1995.
• Hang Seng Bank - since 2007
• OCBC - since 1927.
• Bank of America - since 1981.

Branches of some banks have been operating in China for more than 30 years. Following the country's accession to the WTO, the development of foreign affiliates peaked in the 1990s and 2000s.
According to information from the China Banking Regulatory Commission, in 2004-2007 the number of representative offices increased especially rapidly, which in those years amounted to 274 institutions. The same was observed in the total volume of assets and foreign capital in the Chinese banking sector in accordance with the percentage ratio: in 2004, this figure was 1.8%, and three years later - 2.38%.

The Chinese government has developed strict requirements, prohibitions and restrictions in order to control competition in the industry. As a result, there was a slowdown in the pace of development, which, however, was expected. In 2012, the assets of foreign branches in the economy again reached 1.82% of the total. At the moment, after strengthening the positions of national financial institutions, experts assume that a liberalization policy will come into play, when prohibitions and restrictions for representatives of foreign countries will be gradually lifted.

European banks in China

There are also many European banks operating in China, for example from Germany, Italy, Belgium or France. The most famous and largest of them include the following:

• ABN AMRO Bank N.V.;
• Standard Chartered PLC;
• Societe Generale S.A;
• Raiffeisen Bank International A.G.

There are also representative offices of the following Russian banks in China - for example: Central Bank, Sberbank, VTB, Gazprombank. Russian banks are focused on servicing representative offices of companies from the Russian Federation and ensuring trade turnover between Russia and China. The Chinese domestic market is not served by Russian banks.

Some of the Russian banks do not have the license required to conduct banking operations. There are also some financial institutions of the Russian Federation that carry out operations on financial export and import obligations.

Banks from other CIS countries have not opened their branches in China.

State banks of China

The Chinese government only recently allowed the opening of private banking organizations. Before this, banks were divided into two categories – joint-stock and state-owned.
State commercial banks include only those institutions that are classified as members of the Big Four. They are not so influential and provide a low percentage of China's financial transactions. There are about 10 of them in total. Usually the PRC state is the owner of a controlling stake.

ABC/Agricultural Bank of China

Mao Zedong became the founder of the Agricultural Bank of China. This is the first financial institution that was founded after the communist parties came to power.
The bank was founded in 1951 and is headquartered in Beijing. Revenue is approximately $30 billion, the volume of assets is $2.5 billion. The heads of the bank's board are Zhang Yun and Xiang Junbo.

Construction bank / Construction Bank of China

This institution was founded under the Ministry of Finance of China, its purpose is to distribute finances to those funds that are responsible for construction and infrastructure. Until 1979, this was the sole purpose of China Construction Bank. However, in 2004, with the release of shares to the stock exchange, it became a commercial bank.
The financial institution was founded in 1954 and is headquartered in Beijing. The revenue is $37 billion, the volume of assets is $2.7 billion. The heads of the bank's board are Wang Zuji and Tian Guoli.

ICBC / Industrial and Commercial Bank of China

Industrial & Commercial Bank of China has occupied a leading position in the Forbs rating for 6 years in a row, as well as 3rd place in the rating of banks in terms of net profit and first place in terms of assets.
The bank was founded in 1954 and is headquartered in Beijing. The institution's capital is $308 billion, revenue is $42 billion, and assets are $4 billion.
Thus, the company occupies a leading position and thereby proves the fact that the Chinese banking sector is at an unusually high level.