HSBC First Foreign Bank To Launch China Rural Bank

Aug 2007
Beijing, China, August, 09 2007 - HSBC Holdings PLC (HBC) became the first foreign lender to launch a rural bank in China Thursday, pursuing a new rural banking strategy that is being promoted by regulators.

Hongkong & Shanghai Banking Corp., HSBC's primary Asian unit, received approval from China's banking regulator to launch a small rural bank and plans to begin operations by the end of this year, the bank said in a statement.

The new wholly owned HSBC venture is part of a rural banking program that fits into Beijing's broader plan of modernizing the countryside to narrow the gulf between the country's poor inland farmers and wealthier coastal residents.The China Banking Regulatory Commission is experimenting with a mix of reform measures to improve financial services in rural areas. The measures include beefing up existing rural credit cooperatives by merging them into larger rural commercial banks, encouraging micro-finance programs, and asking commercial banks to set up new rural banks like HSBC's.

Several domestic Chinese banks are also pursuing rural banks under rules issued by the CBRC for new rural banks late last year.

Beijing's efforts to strengthen rural banking comes after China's biggest state banks have shed rural branches and employees in recent years ahead of initial public offerings to boost their profitability and efficiency.

HSBC's new rural bank, to be called HSBC Rural Bank Co., will be based in Cengdu county of Suizhou city in central China's Hubei province. The county has a population of 2 million people, HSBC said."This presents an excellent opportunity for HSBC to connect our considerable experience in rural finance with a wide range of models developed in a number of our other markets,"

Stephen Green, chairman of HSBC Holdings, said in the statement.The new rural bank will have registered capital of CNY10 million, an HSBC spokeswoman in Shanghai said. It will initially employ up to 25 staff.

HSBC's locally incorporated China unit, separate from the new rural bank, operates 40 outlets and employs around 4,000 people.

Source : Morning Star

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