Standard Chartered Bank is making a big push to expand its business on the mainland as many overseas banks, including some of its major Hong Kong competitors, jockey for position in preparation for the opening up of the financial market in 2006.

    Although the full opening in accordance to World Trade Organization (WTO) commitments is two years away, bankers predict that the process of liberalization will gather steam in 2004.

    In a telephone interview with China Daily, Standard Chartered's China Chief Executive Officer (CEO) Martin Fish says his bank, which has already gained a foothold in China's financial market, will seize the opportunities arising from the gradual liberalization process.

    It is hoping to upgrade its Guangzhou representative office into a branch in 2004 and is applying for a licence to do renminbi business with companies in Shanghai and Shenzhen, Fish says.

    It will also apply for a renminbi licence in Beijing, when that is available at the end of 2004 as scheduled.

    Having been in China for over 140 years, Standard Chartered, headquartered in London but focused on Asia, has seven branches, one sub-branch and six representative offices on the mainland, bank sources said.

    The bank will further strengthen and develop its consumer-finance business leading up to 2006, when the retail banking sector fully opens up.

    Standard Chartered is not the only bank keen on gaining a firm foothold in the China market before it is fully opened.

    Among others are some of its fiercest competitors in Hong Kong, particularly HSBC and its subsidiary, Hang Seng.

    So far, most of the foreign banks in China have adopted similar strategies that focus on trade financing and personal banking, which is widely seen as the weakest link in the domestic banks?armour.

    The renminbi business provides new opportunities for foreign banks, Fish says. "A number of our customers also want to do business in local currency instead of only foreign currencies.''

    Last month, China opened up 13 domestic cities for qualified foreign banks to do renminbi business with domestic enterprises. But the banks still have to apply for the licence in each city separately.

    Fish says Standard Chartered is also interested in private businesses, or small- and medium-sized enterprises (SMEs), rather than just the big companies, which often draw more attention.

    "The SMEs want loans,'' says Fish, "But they don't often get financing.'' But the bank will be careful in choosing clients to control risk: It will monitor the business development of potential clients and their understanding of the market, and keep a close eye on their cash flow. The risk can be reflected in the lending rates, he says.

    China allows commercial banks to float lending rates by up to 1.7 times the benchmark rate set by the central bank starting from January 1, 2004, giving them more freedom to set the rates.

    The bank is also eyeing expansion. Though each foreign bank can open only one branch a year in China, Standard Chartered has already been looking for the next location to launch a branch.

    Fish says the Pearl River Delta (PRD) and the Yangtze River Delta (YRD) are the key areas for business development, but he also did not exclude the possibility of increasing presence in western cities and other places.

    Meanwhile, as the bank gathers pace in organic growth, it is also trying to find partners among the Chinese banks, which can strengthen its distribution network and local resources.

    A medium-sized bank itself, Standard Chartered is likely to invest in the smaller regional banks rather than the Big Four State-owned banks, says Fish.

    It wants to find the right partner who shares the same vision and work together with it to develop competitiveness in China, he says.

    "It would be nice if we can do it (buying into in a Chinese bank) in 2004,'' Fish says, "but we are not in any rush.''

    The preferred location of potential partners is the PRD and YRD regions, where many of the bank's overseas customers are.

    A bigger distribution network will enable Standard Chartered to improve services in these areas and also help the Chinese banks get more resources and expertise.

    If the situation comes about, Standard Chartered may invest in more than one bank, says Fish, though that is a more complex issue.

    So far, the highest ratio an overseas bank holds in a mainland bank is 15.98 per cent acquired by Hang Seng Bank in Industrial Bank of East China's Fujian Province in December, shortly after the China Banking Regulatory Commission (CBRC) lifted the ceiling to 20 per cent from the previous 15 per cent.

    Back in September, US-based Citibank was approved to hold a 4.62-per-cent stake in Shanghai Pudong Development Bank (SPDB). Citibank has provided management and technological assistance to SPDB's newly-issued dual currency credit card.

    Fish says Standard Chartered has no fixed view on the investment ratio if it buys into a Chinese bank, which partly depends on the capital needed.

    It is also interested in credit-card business and is waiting for the enactment of the new rule on bank-card business by the CBRC, which would hopefully give foreign banks fresh opportunities in the sector, like issuing cards locally.

    China's credit-card business is still underdeveloped, but would grow into a big market, says Fish.

    In other aspect, Standard Chartered has also acquired the qualified foreign institutional investor (QFII) licence from the China Securities Regulatory Commission in mid-December; and is waiting for the approval of the foreign-exchange authorities on the exact investment quota.