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China may raise cap on foreign investment
(AP)
Updated: 2005-09-14 17:10

China's banking regulator is considering raising the limits on foreign stakes in state-run commercial banks, a change that potentially could bring billions of dollars in new investments into the industry, an official said Wednesday.


Pedestrians walk past sign boards of foreign banks in the Lujiazui financial area in Shanghai's Pudong new area in this April 23, 2005 photo. China is considering raising the limits on foreign stakes in state-run commercial banks. [newsphoto]
However, Fu Weiyi, spokesman for the China Banking Regulatory Commission, sought to downplay a report on the issue, stressing that the agency was only considering adjusting the limits. Those cap an equity stake in a Chinese bank by any one foreign institution at 20 percent, with the total foreign holdings limited to a maximum of 25 percent.

"The CBRC has not yet issued any official announcements and we don't have any concrete plan for that. This is just an idea," Fu said.

Foreign banks, including Royal Bank of Scotland Group PLC and Goldman Sachs Group. Inc., have been staking out strategic alliances in China, hoping to be well-positioned for the eventual full opening of the banking industry to foreign competition in late 2006. Chinese banks are being encouraged to seek such partnerships to help build up their capital and improve management.

The limits on foreign investments apparently are aimed at preserving state control of major lenders, which are still all state-owned. However, some foreign investors have chafed at those limits, saying they prevent investors from exerting enough influence to improve bank management.
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