HSBC Holdings Plc and Bank of East Asia Ltd. won approval to set up a sub-branch in Shanghai’s free-trade zone as China seeks to create a more efficient and open economic system through the 11-square-mile experiment.
HSBC’s outlet in the Shanghai zone will start operations by early next year, Europe’s largest lender said in an e-mailed statement today. Regulators approved Bank of East Asia’s application to open a sub-branch in the zone, Hong Kong’s largest family-run lender said in an e-mailed statement today.
The two banks joined competitors including Citigroup Inc., Bank of China Ltd. and DBS Bank Ltd. in having a presence in the zone where Chinese authorities have pledged to test out important financial policies such as trial convertibility of the yuan under the capital account.
Policy makers will allow “interest-rate liberalization, and cross-border use of the currency, as long as the risk is controlled,” according to a government statement last month.
China inaugurated the free-trade zone in Shanghai last month, echoing moves by paramount leader Deng Xiaoping in the late 1970s, when he set in motion the Shenzhen Special Economic Zone. That allowed foreign investors to set up factories that employed workers to make shoes, toys and electronics for export. Policies tested there were later spread nationwide, sparking a more than 97-fold expansion of China’s economy.
HSBC’s sub-branch will focus on offering international services for corporate clients in the zone at the initial state, according to today’s statement. Bank of East Asia didn’t say when it expects the sub-branch will be opened.