CHINA encouraged foreign help in developing its city commercial banks and would allow foreign investment of up to 15 percent of registered capital, State newspapers quoted a central bank official as saying Tuesday.

　　Since the second half of last year, one-third of China’s city banks had launched initiatives to expand share capital and improve services in an opening market, said Lai Xiaomin, the deputy head of the central bank’s supervisory department.

　　“The central bank encourages city commercial banks to attract private business investment and sell stakes to international financial institutions or foreign banks,” Lai was quoted saying by the Shanghai Securities News.

　　“We are pushing these banks to deepen efforts to strengthen their capital structure through share capital expansion.”

　　Domestic institutions are allowed to take a maximum of 15 percent of a city bank’s share capital and individuals can take no more than 5 percent, Lai was quoted as saying.

　　Lai also said domestic companies or “suitable individuals” were free to set up commercial banks in any of 222 regions that did not yet host such a lender, so long as the bank’s capital exceeded 100 million yuan (US$12.0 million).

　　China has been encouraging city commercial banks to forge strategic or capital alliances to boost competitiveness, both internally as well as against foreign rivals after the country’s WTO entry set a five-year timeframe for full market opening.

　　An expected influx of stronger foreign competitors after China’s accession to the World Trade Organization in December has sparked a flurry of merger and acquisition talks between State-owned lenders and foreign investors.

　　Emerging markets giant HSBC and Hong Kong’s Shanghai Commercial Bank became the first foreign commercial banks to invest in a mainland bank by buying minority stakes in the Bank of Shanghai last year.

　　Canada’s Bank of Nova Scotia and the International Finance Corporation also signed a framework deal in early September to invest in Xian City Commercial Bank, based in the central city of Xian. (SD-Agencies)