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Overseas banks losing to domestic rivals

OVERSEAS banks are expecting a shrinking market share in China this year because of the rapid credit growth of domestic rivals and the impact of the global financial fallout, a research survey said yesterday.

Unlike previous optimistic predictions, about 25 percent of respondents this year said they expect a drop in market share, PricewaterhouseCoopers said yesterday in its survey of senior management of 41 overseas banks in China. In a 2008 survey, no respondents said they expected such a drop.

This year's survey was conducted in April and May, covering the majority of overseas banks in Chinese mainland. The accounting firm has made the yearly survey since 2005.

This year, about half of respondents said they expect there will be fewer than 40 overseas banks which have local incorporation in the mainland. In 2008, about two-thirds of respondents said they expected the figure to be more than 40.

Overseas banks said they find competition with domestic banks more difficult against the backdrop of the rapid new yuan credit growth, the survey said.

Banks in China extended a combined new yuan credit of 7.37 trillion yuan (US$1.08 trillion) in the first half, up 4.92 trillion yuan than a year ago. The majority of the new yuan credit is generated by domestic banks which follow the central government's call to support the economy growth.

More respondents said they had no merger and acquisition plans in China this year. About 40 percent said they had no plans while the figure in 2008 was below 25 percent.

"Overseas banks are slowing down their business in China due to the financial fallout," said Jimmy Leung, finance service leader for PwC Central China. "However, the long-term picture is still rosy."


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