China plans to make it easier for foreign banks such as HSBC Holdings Plc to set up rural operations as the government seeks to boost funding for farmers, said two people with knowledge of the matter, Bloomberg reports.
Overseas banks will be allowed to manage operations in different counties through a single unit or a China-incorporated subsidiary, the people said, declining to be identified before an announcement. Banks must now oversee rural businesses through offshore entities with separate teams for each unit.
“This will spare them the trouble of having to either find a management team locally for every rural subsidiary or send experienced bankers from outside China,” says Roy Zhang, a Shanghai-based banking lawyer and partner at King & Wood, one of China’s largest law firms. “It helps contain costs and makes management much easier.”
President Hu Jintao is trying to make loans more accessible for China’s more than 700 million farmers to combat a widening wealth gap and boost output of grain and pork after prices soared. The May 12 earthquake in Sichuan, which cost the lives of more than 65,000 people, also damaged thousands of hectares of crops and killed at least 12 million farm animals, Vice Minister of Agriculture Wei Chaoan said May 17.
The China Banking Regulatory Commission will initially let two or three foreign financial firms operate under the new rules in a pilot program, the people said. Current rules won’t be formally revised until after the program is evaluated, they said.