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Rural banks are long-term investments, says firm

STANDARD Chartered Bank sees rural banking in China as a long-term business and doesn't expect to make quick money in the area, its China chief executive said yesterday in Shanghai.

The United Kingdom-based firm's first village bank in China has been running "better than expected" since opening in November in the Inner Mongolia Autonomous Region, Katherine Tsang, chief executive officer of Standard Chartered Bank (China) Ltd, said yesterday in Shanghai.

"Of course we want to make money in the business. However, rural banking is a long-term commitment and we are not in a rush to make quick money," she said. "We will set up more village banks if the first one proves to be a role model."

The Inner Mongolia Helingeer Standard Chartered Village Bank Ltd is the first foreign-invested village bank to open in Inner Mongolia. The village bank is a wholly-owned subsidiary of Standard Chartered, with a registered capital of 10 million yuan (US$1.46 million).

The village bank has a 14-member team and offers lending and deposits to farmers, livestock breeders and ancillary enterprises.

Tsang said the effort and cost it took to establish the bank will be worth it because once rural banking becomes profitable, profit growth will be stable and sustainable.

"You need to be somewhat romantic and have real passion to do it," Tsang said. "We are not a fair-weather friend of China."

Chinese banks are retreating from the rural banking market due to the slow growth and high risk exposure. However, overseas banks such as HSBC and Standard Chartered have been keen to tap the market, seeking "profitability in the long haul."

There is wide speculation that overseas banks are keen to provide village banking services - a move encouraged by the central government - in order to enjoy possible subsequent preferential policies in opening outlets in mainland cities.

Tsang denied this was the case. "If there was such a policy, lots of players would have already flooded the market," she said. "It's natural, from the purest commercial point of view, to do business in the area that contains two-thirds of China's population." The countryside is home to two-thirds of China's 1.3 billion people.

China has been restructuring the financial industry in rural areas since 2003 by closing unprofitable cooperatives and injecting capital into others to balance the development between cities and villages.

HSBC has already opened five village banks in China.


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