Foreigners could wait 5-yrs for profits to emerge in China banks:S

Mumbai, Nov 30 (UNI) Foreign banks lining up to enter China's local-currency retail banking sector when WTO-mandated reforms are implemented in December could be in for a long wait before strong profits emerge, according to an article released today by Standard&Poor's Ratings Services.

The article titled ''As China Loosens The Leash On Foreign Banks, How Far Can They Run?'', highlights the continued risks of operating in this emerging market and predicts that stiff competition from other foreign players may lead to a five- to six-year delay in profitability for new entrants.

In a series of frequently asked questions and answers, the article examines the likely impact of the reforms that will take effect onDecember 11, 2006, the fifth anniversary of China's accession to the WTO. While strong opportunities could open up for foreign players and speed up the pace of reforms over the long run, the immediate credit impact on banks should be largely neutral.

''Over the near term, the reforms are unlikely to have any major impact on Chinese banks that we already rate,'' said Standard&Poor's credit analyst Ryan Tsang. ''Chinese city commercial banks in major cities, which are not rated by Standard&Poor's, are likely to be affected more than state-owned commercial banks and joint-stock commercial banks because of their lack of geographic diversification.'' Standard&Poor's credit analyst Qiang Liao added: ''While foreign banks with established branch networks in China may be able to consolidate their existing networks to reduce their incremental investments in the country, newcomers or foreign banks with less-established networks will have to inject substantial funds.'' UNI SN OBB NV2023