The Shanghai-based Bank of Communications announced the launch of a new credit card unit together with the Hong Kong and Shanghai Banking Corp. (HSBC) on Wednesday.
It marks a new and concrete phrase of the two banks' joint working, according to a news release by the Chinese lender.
HSBC did not go to further details of its future plans, but the unit is expected to provide the UK-based giant the opportunity to put its brand on another mainland-issued credit card.
Early this year, HSBC made a similar deal for a co-branded credit card issue with the Shanghai Bank, in which it holds an 8 percent stake.
HSBC's investment in the Bank of Communications is so far the biggest by an overseas bank in a Chinese bank. It signed a deal in August to acquire a 19.9 percent stake, which cost it US$1.75 billion but enabled it to take part directly in Bank of Communications' management.
Since then, HSBC has nominated two board directors to the Chinese bank. It will also send a senior executive to join its top management.
Ron Logan, an executive from HSBC, will be the CEO of the new credit card unit, called the Pacific Credit Card Center.
The center, not a joint venture or corporation but a subordinated unit to the Bank of Communications, will be financially independent whilst HSBC will be in charge of day-to-day management.
China's fast growing credit card sector and its big savings pool have drawn attention from overseas institutions for years.
US-based Citibank also bought into Shanghai Pudong Development Bank last year and launched a co-branded credit card in February.
So far no foreign banks have been able to issue their own cards on the mainland independently due to regulatory restraints. Both HSBC and Citibank have been lobbying for such a license.
However, as strategic investors, foreign banks are still eyeing more business opportunities on the mainland through local partnerships.
HSBC and the Bank of Communications will also seek cooperation in fields of fund and risk management, in which both sides have shown interest, a spokesman with the Bank of Communications said.
HSBC will continue to provide technological support to help the bank upgrade expertise in risk management, corporate governance, strategic development planning and capital operation, he said.
The fifth largest lender in China, the Bank of Communications is also preparing for an initial public offering in Hong Kong. Senior bank executives said earlier that they are hopeful for the H share offer to kick off in the first half of 2005.
(China Daily November 5, 2004)
