In negotiations with the World Trade Organization, China agreed to allow foreign banks to deal with currency exchanges by the end of the year. This action was taken in response to the People’s Bank of China’s findings that the most competitive banks are the foreign capital banks in Beijing while the least competitive banks were the four major state-owned commercial banks that retain 70 percent of the Beijing market.

Bank regulators determined competitiveness by measuring five main indices, including external environment, business status and a bank’s ability to financially expand.

Not one investment bank owned by China was among the top 12 most competitive banks in China, according to the report. Standard Chartered Bank ranked first, followed by international banks such as Credit Lyonnais, Hong Kong and Shanghai Banking Corporations, Bank of East Asia, JP Morgan and CitiBank. China Merchants Bank in Beijing ranked number thirteen. Bottom on the list were investment banks owned by China. The four state-owned commercial banks that ranked last were Industrial and Commercial Bank, Bank of China, Construction Bank and Agricultural Bank.

Inadequate administration was found largely responsible for the lack of competitiveness for state-owned investment banks compared to foreign banks. Other problems included poor human resource management, lack of financial innovation, market orientation, fixed prices, and insufficient cooperation among the banks.

Lai Xiaomin, Chief of Beijing Bank Regulatory Bureau, predicted that Beijing will allow foreign banks to handle currency exchanges by the end of the year. He expects that their applications will be approved within one month of filing. He added that of the 23 Hong Kong and foreign banks in Beijing, half will try to become the first batch of banks to deal with currency exchange.