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Overseas banks have been cherishing the Closer Economic Partnership Arrangement (CEPA) as a golden opportunity to expand their business in Shenzhen, the Shenzhen Banking Regulatory Bureau (SBRB) said Friday (Nov. 12).

This followed reports that Hong Kong-based Bank of East Asia (BEA) opened its first Shenzhen sub-branch Thursday, making it the first overseas bank to open a sub-branch in the city.

According to the latest statistics from the SBRB, a branch of the China Banking Regulatory Commission, a total of 26 overseas banks are offering services in the city and another five have set up representative offices mulling over formal entry.

Being close to the Asian financial hub Hong Kong, Shenzhen had become the top choice for overseas banks as a foothold to expand their business on the Chinese mainland, especially after the CEPA took effect, the SBRB said.

The bureau noted most of the overseas banks operating in Shenzhen were based in Hong Kong, apparently lured by a CEPA provision that sharply reduced the minimum capital for opening a branch on the Chinese mainland to US$6 billion, down from the previous US$20 billion.

In February, CITIC Ka Wah Bank, a unit of CITIC International, bought China International Finance Co. (Shenzhen) for about US$900,000.

A month later, Wing Lung Bank opened its branch in the city, making it the fist Hong Kong-based bank to set up a branch on the Chinese mainland. The move was soon followed by two other Hong Kong-based banks: Dah Sing Bank and Shanghai Commercial Bank.

On Thursday, BEA opened its first Shenzhen sub-branch in Luohu District and moved its branch to the city's CBD (Central Business District) in Futian District.

"We have to prepare ourselves in locating branches before China fully opens its RMB business to foreign competitors (by 2006)," a BEA spokesman said.

In the first 10 months this year, Hong Kong-based banks' business in Shenzhen had grossed a total after-tax profit of more than 209 million yuan (US$25.2 million), accounting for about 58 percent of the total amount of the overseas banks in the city, the SBRB said.

By the end of October, the overseas banks in Shenzhen had total assets of more than 69 billion yuan, up 32.39 percent year on year. Meanwhile, their non-performing loan ratio dropped to 2.69 percent from 5.72 percent a year ago.

Editor: Olivia