From new high-rise offices overlooking the waterfronts of Beijing and Shanghai, U.S. banks are expanding their networks in China barely five decades after they were abruptly forced out by the Communist takeover.

The country with the world's largest population-1.2 billion-is experiencing strong economic growth and has a voracious need for outside capital and a Communist government more willing to work with western capitalists.

Even the recent economic crises affecting nearby Asian countries are not deterring U.S. bankers from pursuing corporate business in what many view as the last great frontier for capitalism.

"There will be some negative impact, but the Chinese economy is robust enough and strong enough to sustain any further downturns in the stock markets," said Min-Hwa Hu, first vice president and country manager at First Chicago NBD Corp.'s Beijing branch.

Rowena W Chu, managing director at J.P. Morgan Securities Asia Ltd. in Hong Kong, said, "The market in China is big, and everyone wants to be in."

Since First Chicago led the charge back into China in 1980 by opening an office in Beijing, seven U.S. banks have followed suit in recent years: Citicorp, Chase Manhattan Corp., Republic New York Corp., BankBoston Corp., BankAmerica Corp., J.P. Morgan & Co., and CoreStates Financial Corp.

For banks like Citicorp, which has branches in Beijing, Shanghai, Shenzhen, and Pudong and has applied to open a fifth branch in Guangzhou, the return is something of a homecoming.

At the time of the Communist takeover in 1949, Citicorp had branches in virtually every major Chinese city, including Shanghai, Guangzhou, Hangzhou, Beijing, Tianjin, Harbin, Dalien, Mukden, and Qingdao.

China's enormous attraction is easy to understand. Since the early 1990s, China's economy has been growing at about 10% annually, and inflation has been brought down from over 25% a few years ago to less than 10%. Bankers believe this growth rate will continue.

"China is on track to become a major economic power in the next century," Citicorp vice chairman William Rhodes said in an address to Chinese business leaders in Shanghai early last month.

Though banks are excited to be back, concerns remain.

Bankers point to Chinese regulations that severely curtail the extent to which U.S. banks can expand in China. However, they also believe the day is coming when they will be given much broader leeway in a country that is expected to only grow in importance to Western businesses.

"I think China is prepared over time to allow us to handle a fuller array of services," predicted Stephen H. Long, country corporate officer and head of North Asian operations at Citicorp.

"The probability for more relaxation is greater than for more tightening," added Paul S. Muther, managing director of CCIC Finance Ltd., a joint venture merchant banking unit of First Chicago NBD Corp., Bank of China, Industrial Bank of Japan Ltd., and China Resources (Holdings) Co. Ltd.

Others are not so sure. Philippe Delhaise, a bank analyst in Hong Kong with the rating agency Thomson BankWatch, an American Banker affiliate, said further concessions "will be limited to what China can get away with."

China's main objective, he adds, "is to get foreign money on easy terms" and, further down the line, to have Shanghai replace Hong Kong as the main source of foreign funding.

"The Chinese know they are sitting on a huge domestic market, and they know they can pretty much dictate the terms," Mr. Delhaise said.

Overall, however, U.S. banks' exposure to China is still small. As of June 30 it totaled only $3 billion of assets, of which $2.4 billion was held by money-center banks. Seventeen years after the return to China, U.S. and other foreign banks are also still barred from retail banking. On the corporate side they are also restricted to providing services such as trade finance, cash management, and hard currency funding for foreign companies and joint ventures between Chinese and foreign companies.

So far, China has loosened restrictions only gradually, fearing that foreign banks' expertise and technological infrastructure give them an unfair advantage over local institutions. This year, for example, China authorized foreign banks in the new Shanghai financial district in Pudong to engage in limited local currency lending.

Citicorp was one of the first banks to obtain such a license. Chase has applied for one, as has BankAmerica, which provides cash management, trade finance, credit facilities, and project finance and helps Chinese companies issue debt and equity outside China.

Bankers predict that any further loosening in restrictions will be gradual, especially after the recent dramatic fall in currency values and stock markets in neighboring Asian countries.

"This is still a transitionary economy that is moving from state-run to market-driven," Ms. Hu said. "You don't make that kind of change overnight."

Still, even Chinese bankers acknowledge that increased foreign banking presence could be a good thing.

"Foreign banks bring sophisticated and advanced management techniques," said Zhao An Ge, managing director and executive vice president at Bank of China, the country's second biggest bank in deposits and third biggest in assets.

"We believe this could help adjusting to a market oriented economy and will be good for the economic development of China."

Despite the restrictions, U.S. banks with international ambitions do not believe they can afford to ignore China.

"China is a place of striking importance due to the size and scope of its economy and population," said Robert P. Morrow 3d, group executive vice president for Asia wholesale banking at BankAmerica. Others sound a similar note.

Morgan, which like other banks handles much of its China business from Hong Kong, has been steadily building long-term relationships that it hopes will bring in a steady flow of transactions. The bank, Ms. Chu adds, is also positioning itself to handle an increasing flow of funds from investors in Hong Kong and Taiwan into China.

"When we think about China, we think about the entire region," Ms. Chu said.

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