not quite the mad rush that some expected, nevertheless eight foreign
banks have so far applied to become the first foreign institutions
licensed to conduct yuan-denominated retail business in China.

To Chinese consumers, this is likely to be most visible
manifestation of the liberalisation of China's financial markets, which
came into force on December 11 and was a requirement of China's
accession to the WTO.

According to AP, at least 71 foreign banks are represented in China
but most were limited to handling foreign currency business. Today, the
restriction is removed although foreign banks still must meet Chinese
regulatory requirements to conduct retail business.

That, along with the cost of operating a branch network, is expected
to discourage many foreigners from setting up local operations. Smaller
foreign banks that do not want to miss out on the China story will
probably opt instead to buy a minority stake in a second-tier local
bank. This is what Australia's ANZ bank did last month, for example —
see this EngagingChina story.

Analysts say the impact of banking deregulation on China's high
streets is not going to be huge, at least initially, although western
IT vendors are no doubt hoping that the threat of foreign competition
will force China's own retail banks to get their act together by
modernising systems and processes.

Interestingly the list of banks that have so far applied for a
retail licence includes just one US bank, Citigroup, and one from
continental Europe, ABN Amro. The other applicants are more predictable
as they are all either based in Asia or have a strong Asian focus:
HSBC, Standard Chartered, Mizuho Corporate Bank of Japan, DBS Bank of
Singapore, Bank of East Asia and Hang Seng Bank — the latter two are
from HK.

The China Economic Review has published an exhaustive article on
foreign banks' plans for China, which you can read in BusinessWeek's website.