U.S. bankers expressed broad satisfaction Tuesday in the wake of China's agreement to widen access to its market for foreign financial institutions.
But some advised caution until details of the pact became available.
The deal, signed Monday by the United States and China and hailed as a historic achievement, followed several years of talks between both governments and constituted a precondition for allowing China to apply for membership in the World Trade Organization.
"This is a good deal for U.S. banks and a good deal for the United States,'' said Robert E. Fallon, head of Chase Manhattan Corp.'s Asia Pacific operations. "This will give us full market access within five years after China joins the World Trade Organization."
Mr. Fallon said Chase now plans to expand several of its business lines in China, including foreign exchange, hedging, local-currency-based project finance and interbank transactions, syndicated corporate lending, and cash management for large multinational corporations.
A spokesman for Citigroup Inc. said the pact "promises significant liberalization in China's financial services market."
Citigroup, Chase, and a host of the country's other large banks have been seeking to develop business in China since that country began opening its financial markets in the early 1990s.
Insurance giants, such as American International Group, have also made long-term investments in China.
Citigroup has been trying to build a retail banking business there, while other U.S. banks have focused mainly on corporate banking and capital markets.
Banking sources said the agreement would boost U.S.-Chinese trade and allow U.S. companies to make broader investments in China, which would pave the way for American banks to offer additional financial services. Bankers also predicted the deal would accelerate modernization of China's financial markets and the country's big state-owned banks.
"This will intensify competition between Chinese and foreign banks and spur Chinese banks to restructure themselves," Mr. Fallon said.
At a press conference Monday in Beijing, U.S. Trade Representative Charlene Barshefsky said the agreement offers significant opportunities for banks, insurers, automobile finance companies and investment management funds.
Foreign banks would be allowed to engage in local-currency transactions with Chinese companies within two years after China joins the WTO and to handle retail banking transactions with Chinese consumers within five years.
U.S. and other foreign banks would also be allowed to engage in all transactions that Chinese banks currently handle. All restrictions or limitations on geographic expansion by U.S. and other foreign bank branches within China would be lifted within five years.
Foreign financial institutions would be able to acquire 33% minority stakes in Chinese fund management companies, with an option to increase those positions to 49%.
Foreign auto finance companies would be allowed to operate in China, and nondomestic insurance companies would be able to sell property and casualty policies and increase the number of their local offices.
The pact also calls for the beginning of talks to allow foreign investment banks to acquire 33% stakes in ventures to underwrite domestic securities issues, including debt, equity, and foreign-currency-denominated securities.