Banking markets in Asia are roaring to life as economic growth in the region accelerates.

"Capital needs throughout Asia are increasing dramatically, especially for infrastructure development," says John Gray, chairman of Hongkong Bank, the main commercial banking unit in Asia for HSBC Holdings PLC.

Throughout southeast Asia and China, banks are striving to meet increased demand for credit by modernizing antiquated bureaucracies, expanding their networks, adding technology, and supplying a bigger array of banking services.

Foreigners Intrigued

Big French, British, and U.S. banks also see countries like China, Vietnam, Thailand, Indonesia, and India as among the most promising markets for trade finance, private banking, institutional asset management, securities trading, and even consumer services such as credit cards and mortgage lending.

New bank lending to lesser-developed countries in Asia that are not members of OPEC was $10.9 billion for the second half of last year - a greater expansion than in any other region, according to the Bank for International Settlements.

The boom in economic activity is reshaping the region, creating new offshore financial centers like Bangkok and turning a manufacturing center like Hong Kong into a financial springboard for doing business in China.

Hong Kong, which has offices of more than 500 banks, including 19 of the top 20 in the world, is expected to be among the banking centers that will benefit most from economic growth, especially in China.

According to surveys by Credit Lyonnais Securities, companies listed in Hong Kong are involved in 801 projects in China worth at least $67.3 billion.

Hong Kong Seen as Hub

China, in turn, is estimated to have invested at least $12 billion in Hong Kong.

"Banks will flock to Hong Kong to help to finance the rapid expansion of retail and other consumer businesses into China," Mr. Gray predicts.

The vast volume of trade pouring through Hong Kong and other South China ports, he adds, will mean huge growth in trade finance, foreign exchange activity, and asset management for institutional investors.

Still, the massive global lending binge of the 1980s has left its scars.

Japanese banks have been hit hardest and will probably spend the rest of the decade sorting out and restructuring billions of dollars of bad assets, both at home and abroad.

|Unlikely to Improve'

According to estimates by Japan's Ministry of Finance, gross nonperforming loans as of March 31 for Japan's 21 major banks totaled nearly $120 billion.

"Asset quality problems are unlikely to improve in the near term as it will take the banks several years to complete the work-out process, and a significant number of restructurings that have been put together will undoubtedly be unsuccessful," Standard & Poor's ratings group warned in a recent report.

Japanese Banks in Position

Nonetheless, analysts believe Japanese banks and regional powerhouses like HSBC Holdings are best positioned to Profit from Asia's booming economy.

"Within Asia, Japanese banks are still the strongest and most competitive players despite capital constraints, poor earnings, loan problems, and a real estate crisis at home," says Ricardo Kleinbaum, an international banking analyst with Fitch Investors Service.

|Own Finance Culture'

The analyst adds that Japanese banks and other local players in Asia may also have an edge over Western banks because of cultural factors.

"The ways of doing business in Asia are different from U.S. and Europe," Mr. Kleinbaum says.

"They [Asian banks] have their own financial culture, and contacts are more important than simply offering the lowest price on a specific transaction."

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