To enhance their market positions, Chinese banks are likely to expand their operations as well. To fund their expansion needs, weaker banks may choose to merge into bigger entities while more established Chinese banks may seek to list publicly. As an increasing number of banks successfully convert into publicly listed companies, the need to comply with listing rules and to increase transparency will prompt greater efficiency to avoid deterioration in their share prices. Benefits from the stream of efforts by the government and Chinese banks to gear up for the increasing competition will not be limited to the financial system. As banks improve their products and services, the general business sector will gain access to more efficient funding, paving the way for a better investment environment and facilitating sustained economic development.
Foreign banks look forward to being full market participants.
Recommendations Reduce the tax burden on banks in the process of unifying tax rates for foreign and local banks. Open forward foreign exchange contracts to all banks. Relax the ratio requirement on foreign banks for customer deposits to domestic loans.