The openning ceremony of Hubei Suizhou Cengdu HSBC Rural Bank Co Ltd. The mayor of Suizhou, Li Hongyun (middle), the chairman of HSBC Asia-pacific, Zheng Haiquan (Left) [Photo: HSBC]


People wait for the services of the newly opened Hubei Suizhou Cengdu HSBC Rural Bank [Photo: HSBC]

Europe's biggest bank HSBC opened a wholly owned subsidiary in rural China yesterday, the first foreign lender to do so.

Hubei Suizhou Cengdu HSBC Rural Bank Co Ltd, or HSBC Rural Bank, will offer deposit services to local businesses and individuals and provide loans to agricultural companies.

Other foreign players including Citigroup and Standard Chartered Bank have also shown interest in the nation's underdeveloped regions, encouraged by the government as it tries to reduce the growing income gap with cities.

With 22 staff and registered capital of 10 million yuan, the subsidiary plans to provide loans to individual farmers next year.

"This is a very important day in HSBC's 142-year history in China and we are extremely pleased to be the first international bank to enter the country's rural market," Vincent Cheng, HSBC's chairman, said yesterday.

"There is tremendous promise for economic development in the rural areas. We believe that HSBC's global network and expertise will help unlock new opportunities for China's rural population as well as for the bank's business in this fast-growing, but still largely untapped market."

The bank has appointed Peter Wong, HSBC's executive director, as board chairman of the new subsidiary.

"By building a viable, sustainable, and commercially profitable business, HSBC Rural Bank will help release the tremendous economic potential of rural China," Wong said.

Covering an area of about 6,900 sq km, the county-level district of Cengdu in central China has a population of two million and largely relies on export-oriented agriculture.

There has been increased enthusiasm for foreign-funded banks in China's rural market since banking authorities lifted restrictions in October, approving villages and townships for a pilot scheme.

HSBC has also sent experts to Kaixian County in Chongqing Municipality and plans to open another village bank there, according to the county government.

The Chongqing subsidiary will offer tailored lending, payment and settlement services to local individuals and village companies, similar to those to be provided by the Hubei operation, the county government said.

"We are considering adding channels surrounding Cengdu to provide a wider range of services to local farming communities and we are studying the possibility of opening new village banks," HSBC's spokesperson said.

Asia-focused bank Standard Chartered is also reportedly preparing to launch its first rural Chinese bank early next year to tap the country's growing rural economy.