Check Out Our Really Primative Banks

Gosh. I bet this is tempting. Our banks in Shanghai, Beijing and Shenzhen are insolvent and mismanaged, but we'd like to encourage you to move into the less developed banking sector.

Foreign banks, which are expanding rapidly in China, would gain preference if they apply to move into the country's less-developed interior, a banking official said on Tuesday. China fully opened its doors to foreign banks last December, honoring a promise it made when joining the World Trade Organization in 2001. So far, 13 foreign lenders have incorporated locally, a precondition required by the banking regulator for full access to China's retail banking market. "We will keep guiding foreign banks to expand reasonably in China and give preferences to their applications to branch into middle and western regions," Qi Jianming, a senior official from the China Banking Regulatory Commission said in an online interview broadcast on the central government's Web site www.gov.cn.

I was chatting with a long-time China expat at lunch yesterday, and he expressed his surprise that western banks were willing to sink so much cash into Chinese banks. I couldn't agree more. I used to look at large companies and believe they had the inside track on things. If they were investing in an area, it was probably a good deal.

Not any more. China can break things that weren't broken before. There is a mystique about this place that with 1.3 billion consumers you have to get in early. But sometimes early is too early. Sometimes regulations, the inadequate legal system and the primative state of the industry combine to create a large black pit into which companies dump tons of money that is irretrievable.