The 17-page document provides specific regulations on establishing and registering a branch in China, dealing in foreign and local currencies, working capital and the penalties for violating the law, said a central bank spokesman.

The rules, which go into effect on Friday, replace five existing stipulations governing overseas financial institutions' operations on China's mainland.

The new regulations come along as China works to open its financial sector following the country's entry into the World Trade Organization. Currently, overseas banks can set up branches in four of the large cities on China's mainland, including Shanghai, Shenzhen, Dalian and Tianjin, but they will be allowed to set up offices throughout the country within five years.

Wang Jinjia, deputy general manager of the Shanghai branch of South Korea's Hana Bank, said the new rules are not a surprise.

"We have already got some information about the ordinance before its official announcement today," Wang told Shanghai Daily last night.

The central bank talked with representatives from more than 10 overseas banks in China before drawing up the final ordinance governing their future business expansion on the mainland, according to Wang.

Wang said the new rules won't change the way local residents deal with overseas banks in the immediate future. Residents will eventually be allowed to set up local-currency or foreign-currency savings accounts with overseas institution, but not before the banks earn approval from government regulators.

"Overseas banks still have to submit required materials to the central bank and wait for its final go-ahead, before they can start conducting the yuan-related business," said Wang.

Foreign banks will also be allowed to give out loans in local currency in the future.

(eastday.com January 30, 2002)