Opening RMB Business

The China Banking Regulatory Commission officially announced on March 20 its approval for the Hong Kong and Shanghai Banking Corp. (HSBC), Citibank, Standard Chartered Bank and Bank of East Asia to establish locally registered branches to operate in China.

The four overseas banks will be allowed to start a full range of forex services and RMB business, including RMB business for Chinese citizens, with the establishment of their locally registered subsidiary banks, though they will be mainly engaged in forex business and RMB business for companies and institutional clients.

Foreign banks were previously prevented from offering foreign-currency services to individuals, although they could provide both local and foreign-currency services to enterprises.

Breakthrough in Car Building

The first China-developed turbo-charged car, produced by Brilliance Auto Group, made its debut on March 18, according to a report from China Securities News.

Turbocharger can increase engine power by 30 percent or more at a given emission compared with normal engines, which gives it the advantage of being small, energy efficient and environmentally friendly.

The group introduced the engine last June and announced it would use it in its new model Galena. The cheapest Galena 1.8T model is priced at 125,800 yuan while imported cars with this type of engine usually cost over 180,000 yuan.

The group plans to produce 50,000 such engines in 2008 and 100,000 in 2010, the report said.

Inflation Worries

Inflation in China is not expected to increase significantly over the medium term even though consumer prices have spiked over the past four months, said Zhou Xiaochuan, Governor of the People's Bank of China.

Speaking at the ongoing annual meeting of the Inter-American Development Bank (IDB) in Guatemala City, Zhou said, "We are concerned about a tendency toward greater inflation, not the current inflation level."

In 2006, China's consumer price index (CPI), a major inflation indicator, rose 1.5 percent throughout the year. However, after hitting a 20-month high in November of 1.9 percent, the index followed in subsequent months with increases of 2.8 percent, 2.2 percent and 2.7 percent, giving rise to public concerns about a higher inflation rate.

Another Giant Bank

The China Postal Savings Bank (CPSB) was inaugurated on March 20, becoming the country's fifth largest bank with total registered capital of 20 billion yuan.

The founding of CPSB is based on the split deposit business from post offices all over China, which was initiated in 1986.

Approved by the China Banking Regulatory Commission to open for business last December, the new bank is expected to focus on retailing and intermediary businesses and will offer basic financial services in both urban and rural areas.

With its head office in Beijing, the bank is preparing to open branches and sub-branches in the first half of this year, a source said.

Brisk Light Industry

Even though it is embroiled in an increasing number of trade disputes, China's light industry, responsible for a huge proportion of the country's exports, is expecting 20-percent growth this year, according to the National Development and Reform Commission.

The commission estimated that in the light industry sector, which covers food, leather, plastics, ceramics, home appliances, furniture, hardware and paper making industries, the growth rate of exports would drop slightly and imports would continue to rise, without giving any specific figures.

Under the pressure of the rising yuan, which in the long run will have a negative influence on exporters' profit margins, industries are trying to cover future losses by increasing exports in the short-term and suspending imports, particularly of electronics and textiles.

An official from the commission said the sector lacked innovation in developing its own brand products and manufactured too many low value-added industrial products such as clothing and shoes.