Minister for Commerce Khurram Dastgir Khan said on Monday that China has allowed Habib Bank Limited to commence operations in Urumqi, which will also help facilitate trade with Central Asian States of Tajikistan and Kyrgyzstan.
Minister for Commerce Khurram Dastgir Khan along with the HBL Chairman Sultan Ali Illana and CEO Nouman Dar told a news briefing that in a major breakthrough in the export of banking services to China, HBL will open its branch in that country this year.
The branch will be opened in the Western Chinese city of Urumqi, capital of Muslim dominated Xinjiang Autonomous Region. HBL will be the first South Asian bank to start operations in the Western Chinese part and the soft launch of the project will be held on August 14 in Beijing this year.
The minister said the establishment of a banking channel in China will greatly facilitate the flow of capital for the mega projects that the government is undertaking with the Chinese support. He highlighted that the Ministry of Commerce has negotiated with China to relax the stringent requirements to for the entry of foreign banks into the Chinese market.
“Opening of an HBL branch in Urumqi will facilitate our trade with Central Asian States, Tajikistan and Kyrgyzstan that are near the Xinjiang region,” the minister said. It is important to mention that Pakistan is looking to establish land link with Tajikistan through the Kasghar region, as Afghanistan is reluctant to give land access to Tajikistan through its territory.
Dastgir said that the opening of Pakistani banks in China is the first step in the larger plan of financial and capital connectivity with the Central Asian States where Pakistan is vigorously pursuing road, trade and transit connectivity.
The minister said that as a result of the successful trade diplomacy of the Commerce Ministry, the minimum asset requirement for a Pakistani bank was reduced by $5 billion which resulted in a Pakistani bank qualifying for entry into the Chinese market.
“This is a landmark event which will pave way for other Pakistani banks to follow suit and fully utilise the concessions offered by the Chinese side”.
China has granted three major concessions to Pakistani banks including asset requirement for establishing a bank branch which has been reduced to $15 billion from $20 billion for all Pakistani banks, at the end of the year prior to the submission of application.
The Pakistani banks can also open their businesses in RMB (Chinese currency) after one year of their business in China. Previously the requirement was three years and the business could only be done in dollars. The condition of being profitable for two consecutive years prior to the submission of the application has also been removed.
In response to a question, the minister said Pakistan has not granted any special concessions to Chinese banks as Pakistani banking regulations are liberal.
“Presently, the inward remittances/LC are routed through foreign banks. Once the Pakistani banks are established in China, the financial transactions will be routed through our own banks.”
This new opening in the financial sector of China promises growth and expansion opportunities for Pakistani banks especially in the wake of the joint Pakistan-China initiatives for development. It is expected that a substantial amount of money will move through Pakistani banks, which will benefit not only the reserves of the country but help in the expansion of the economy, the minister said.
The Chinese investment for economic corridor will be channeled through the Pakistani banks. This will also help lower the current account deficit.
Replying to a question, HBL Chairman Sultan Ali Illana said that the bank plans to be strategically located all along the China-Pakistan Economic Corridor.
“HBL was set up on the instructions of Quaid-e-Azam and we will provide all the strategic support to take Pakistan forward. We will cover the entire CPEC route,” he said.
