BEIJING, March 8 (Xinhuanet) -- China's banking watchdog said Monday it will tighten monitoring of foreign banks by following the financial performances of both the parent company and its branches and smaller outlets.

    For corporations established in China by overseas banks, the China Banking Regulatory Commission (CBRC) said supervision would extend to their global business.

    A spokesman for the commission said the move, complying with an international practice, is intended to make foreign banking regulation in China more "standardized and efficient".

    China is honoring a commitment to the World Trade Organization to open its financial markets -- in all places and currencies -- to foreign competitors by 2006, while foreign banks have been bolstering their presence in the country.

    Outstanding foreign currency loans from foreign banks had soared to 13 percent of the total of financial institutions in China by the end of last October, but foreign banks hold a mere 1.4 percent of the combined banking assets.

    Each foreign bank opens almost three subsidiary institutions onaverage and one has set up a record nine branches and two sub-outlets in China, said the CBRC spokesman. "New applications are still being submitted (to the CBRC)," he said.

    "This requires us to have a better understanding of and help guard against, with a stronger ability, foreign bank's operating risks," he said.

    The CBRC gave the green light last month to four banks -- the UK-based Hong Kong and Shanghai Banking Corporation (HSBC), New York-based Citibank, Hong Kong's Bank of East Asia and Japan's Mizuho Bank -- to offer yuan, or Renminbi (RMB), services for domestic enterprises in 13 designated cities, including Shanghai, Shenzhen and Dalian, as well as the eastern provinces of Jiangsu and Zhejiang.

    The HSBC's Shanghai branch has already taken the lead to extend yuan loans and issue letters of credit to Chinese businesses. Chief executive Dicky Yip, of its China business, said similar services would be provided in Beijing when the Chinese capital is opened to foreign banks in the yuan business next December.

    China allows all kinds of foreign exchange services of any foreign bank.

    It has been opening yuan business to foreign banks around the country -- from barely four cities when China joined the WTO at the end of 2001.

    The CBRC said applicants for RMB business, however, had to be profitable for two years running with sound corporate governance, strong abilities in mitigating business risks and a complete internal control system.

    On the other hand, China was in the midst of overhauling its four state-owned commercial banks that have the lion's share -- estimated at more than 60 percent by some economists -- of the domestic market to compete with foreign rivals.

    The State Council has pumped 22.5 billion US dollars in foreign exchange reserves into both the Bank of China and China Construction Bank to increase their capital in cash and help turn them form joint-stock companies, a prerequisite for an initial public offering. Enditem