The liberalization of China's financial sector after it joins the World Trade Organization (WTO) must remain within the bounds of its regulatory ability and economic situation, said a top official with the central bank.
China must lay out an appropriate and efficient financial development strategy to prepare for fierce competition that will come with its entry into the WTO, said Tang Shuangning, director general with the No 1 Regulatory Bureau under the central bank, People's Bank of China.
After China's WTO entry, it will open further to foreign banks in the aspects of market admission and national treatment, he said.
Foreign banks will be gradually allowed to provide foreign exchange and Renminbi services to Chinese enterprises and individuals.
The Chinese Government will also gradually grant equal treatment to foreign banks in taxes, services and supervision, he said.
As Chinese banks are still in a transitional period from the policy economy to the market economy, they stand inferior to foreign counterparts in terms of management mechanisms, infrastructure and historical performance.
"WTO entry is a challenge to both Chinese banks and regulatory authorities," Tang said at last week's forum on foreign banks' major projects in China, which was organized by the United Nation's Industrial Development Organization (UNIDO).
After its WTO entry, China will revise existing financial laws and regulations, and lay out new ones that fit with the operational mechanism of the WTO, so to consolidate the basis of supervision, Tang said.
"Our major task is to revise the China Commercial Bank Law, China Foreign-funded Financial Institution Management Provision, Foreign Exchange Management Provision, and the Temporary Regulation on Foreign Debt Monitoring and Measurement."
The central bank will further reform its supervision system to strengthen regulation of both domestic and foreign banks.
"The key point in appraising the qualifications of foreign banks for operating licenses will be their sufficiency of capital funds, non-performing assets ratios, circulating funds ratios, profitability and credit ratings."
Regulators will adopt active measures to improve the management and operational mechanisms of domestic banks to help them survive competition, he said.
(China Daily May 14, 2000)
