China Daily reports  that the China Banking Regulatory Commission (CBRC) and the Ministry of Commerce are having second thoughts about the tough regulations they set for foreign banks entering the Chinese market. 

According to the terms of the country’s accession to the WTO, China is obliged to open the banking sector to foreign institutions by the end of this year.  But in June, the domestic regulators surprised everyone, none moreso than the foreign banks, by slapping a host of new limitations on foreign financial institutions entering China.  The proposal that caused most upset stipulated that foreign banks could only accept single local deposits of a minimum of a million yuan, which would in effect force them out of most of the market. 

Since then, the overseas banks have been kicking up an almighty ruckus and crying foul and it now appears that the Chinese authorities have been paying attention.  The China Daily article states that bickering between the CBRC - who are more interested in protecting the domestic players than welcoming the outside banks - and the Ministry of Commerce - who are concerned about WTO compliance - may see the idea shelved or changed.

For the reason why there has been such an outcry from the foreign players about this, see this story and this one.  China has the highest rate of personal savings in the world, estimated at almost 50% (compared with 10% in the USA).  Yet, surprisingly, it seems that even as Chinese people get richer, increased interest rates are encouraging them to save more rather than spend more.  China Daily reports on the results of a nationwide survey of 20,000 people, which found that the number of people who believe "saving is a better option than spending" has risen 2.2 percentage points in the last quarter alone. 

The market potential is simply enormous.  No wonder the bankers were so mad.