China is considering further financial market reform by allowing qualified foreign banks to participate in the country's 2.37 trillion-yuan (US$377 billion) securities investment fund business.

 

"In order to promote competition in the fund custody market, China plans to open the public fund custody business to foreign banks in China by granting them equal right with the domestic banks under custodianship application," the China Securities Regulatory Commission said in a statement on its website.

 

There were 18 custodian banks managing 1,100 funds worth 2.37 trillion yuan by the end of September, according to the CSRC.

 

The regulator said it is currently seeking public opinion to revise the existing measures governing the securities investment fund custodian sector.

 

"Allowing foreign players to participate in the market will help us learn from the experience of the developed markets, which will promote market competition and optimize the fund custody system," a CSRC official told People's Daily yesterday.

 

Although welcoming the move as a further boost to financial market reform, analysts don't see foreign banks posing a threat to domestic lenders at this stage because the former have a relatively small network to woo customers.

 

The top five foreign players in China by network - HSBC, Bank of East Asia, Standard Chartered Bank, Citigroup and Hang Seng Bank - have a total of 451 outlets, only about half of China Merchants Bank's and 3 percent of the Industrial and Commercial Bank of China's. 
 

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