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Expert warns of negative effects of foreign financial firms

(Xinhua)
Updated: 2006-09-16 14:32

The entry of foreign financial firms into China will bring huge risks to the country's financial market, said Deputy Director Zheng Xinli of the Policy Research Office of the Communist Party of China Central Committee.

Speaking at an ongoing international financial symposium in Beijing, Zheng said, "Foreign firms will have opportunities to control China's financial markets when they are allowed to increase their shareholdings in Chinese banks in 2007."

He expressed his concerns over the profitability of Chinese commercial banks when they push forward with restructuring and reform. He pointed out that foreign firms could take advantage of Chinese firms' lesser managerial experience and cash in on China's burgeoning economy.

Foreign-funded banks will become formidable competitors with Chinese banks for high-quality clients and core services such as credit cards, mortgage loans and private banking, he said.

According to China's commitment to the World Trade Organization, the country will open its financial market by the end of 2006.

Through establishing more branches across China, foreign banks will be able to quickly increase their market share in China, he said.

He suggested that China should maintain absolute control of shareholdings in State-owned commercial banks and encourage foreign enterprises as well as domestic enterprises listed on overseas markets to go public on the Chinese mainland to expand the country's capital market.