Foreign banks in China: lots of expenditure for little revenue?

In 2007 the Chinese banking market will be open to foreign competition. So why are foreign banks buying up local banks? Because despite WTO, penetrating the China market will not be easy and they are going to need all the help they can get.

On September 11, domestically listed Shenzhen Development Bank announced it was in talks with a foreign strategic investor. The candidates are fairly numerous these days, following the pick-up in activity involving foreign banks acquiring, or trying to acquire, stakes in Chinese banks this year.

US-based Newbridge Capital is rumoured to be interested in acquiring 15% of the Shenzhen Development Bank, majority owned by the Shenzhen municipal government. Citibank, which has one of the largest branch networks amongst the foreign banks in China, is said to be interested in buying an 8% -10% stake in Pudong Development Bank. Neither company has made any official comment.

The choice of SDB is interesting. Shenzhen is keen to...

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