The time is ripe for Chinese commercial banks to vigourously develop their personal financing business, experts have said.

With the rapid development of the country's economy over the past decades, Chinese people have been tucking more money into their wallets.

By the end of June this year, the renminbi bank deposits of Chinese residents had reached 9.8 trillion yuan (US$1.2 trillion).

The number of people who earn a yearly income of more than 500,000 yuan (US$60,240) also increased significantly.

Before 1996, people usually deposited their money in banks, because the interest rate at that time was much higher and there were not many personal financing products, such as stocks, available, said Zhang Houqi, chief economist with China Asset Management Co Ltd.

But the central bank has cut interest rates eight times since 1996 to stimulate domestic demand, and the interest rate on one-year deposits has dropped to 1.98 per cent.

And now some people have been turning to personal financing products such as the stock market, equity funds and insurance to try to get a better return on their money, Zhang said.

Huang Jinlao, a senior researcher with Bank of China's International Financial Institute, said Chinese commercial banks must develop their personal financing business now, because competition will become fierce after foreign banks access the business.

"The business is one of the most profitable segments,'' Huang said.

Foreign banks are now busy preparing to enter China's bank card market -- the first area in which they will be permitted to conduct personal financing business.

Guo Ye, China corporate communications officer of Citibank, said her bank is eagerly waiting for the revised bank card management regulation, which will allow foreign banks to issue bank cards to domestic individuals.

"We are trying to be the first foreign bank group to be approved by banking authorities to conduct such business,'' she said.

Other banks such as Hong Kong and Shanghai Banking Corporation Ltd and Standard Chartered are also preparing to apply for the business.

Huang said foreign banks, which enjoy global networks and technological advantages, could pose a considerable threat to domestic banks in personal banking.

Foreign banks are likely to target white-collar workers and the rich first, he said.

Over the past few years, major commercial banks in China have already started to give special attention to development of the personal financing business, he said.

A number of personal financing products such as "Happy Home'' offered by China Construction Bank and "Golden Key'' by the Agricultural Bank of China have become widely known.

However, the business is still in an initial stage, an economist surnamed Hu with the State Information Centre said.

"There are no real personal financing client managers in China.''

Also, the personal financing products at different banks are almost the same. "The banks usually act as agents for clients to buy insurance, trade bonds, ... or to make financing proposals,'' Hu said.

Some banks set very high thresholds for entrance into the VIP (very important people) personal financing business, he said.

And the products offered have all been designed by the banks, without the involvement of potential clients, Hu said.

"Clients should have a say in the structure of products,'' he said.

Han Chunhua, an official with the Beijing branch of the Agricultural Bank of China, said domestic banks have not been able to provide specialized personal financing service, in part, because of the structure of the management system of the financial sector.

Presently, banks are not allowed to engage in securities, insurance and equity funds.

Aside from their traditional services of accepting deposits and offering loans, banks are only allowed to act as agents to sell products provided by fund companies and insurance companies, Han said.

People are also unfamiliar with the business.

Huang Jinlao said that with the development of the market-orientated reform of interest rates and an improvement in the financial products, the content of personal financing will become more colourful.

The personal financing business should have a bright future, he said.

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