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News - Editor, 1 September 2008

Japanese Banks Set Up Shop in China’s Tallest Building



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At a staggering 492 meters in height, the 101-floor Shanghai World Financial Center is the tallest building on mainland China and is reportedly the third tallest building in the world, after the Taipei 101, which was completed in 2004 and the Burj Dubai, which is currently under construction. On Saturday 30 August, members of the public were permitted to enter the observatory near the top of this super-tall building for an awe-inspiring view of the city and surroundings.

At least twenty-five companies have already rented office space in the Shanghai World Financial Center, which Japanese family-owned development company Mori Building Co has 70 percent stake in. Among the new and prospective tenants are a number of high-profile Japanese banks that are expanding their scope in China in an effort to benefit from the country’s booming economy. In June, 600 employees of the Tokyo-based Sumitomo Mitsui Banking Corporation moved into their newly completed office space occupying three-and-a-half floors, with 200 additional staff members to join them in the near future. Moreover, corporate and investment bank Mizuho Corporate Bank, also based in Tokyo, will be moving their existing offices from a nearby building to the Shanghai World Financial Center in October.

Despite the fact that China’s economic growth has slowed down following tighter monetary policies put into place by authorities, the country is still enjoying double-digit annual growth. This continued growth creates a high demand for funds, which Japanese banks seem willing to provide. As of the end of March, China’s outstanding loans from Japanese banks totaled around 23.2 billion dollars, which is more than twice the amount outstanding five years ago.

An added incentive for Japanese banks to do business in China is that there are upper and lower limits placed by authorities on interest rates for loans and deposits. The current interest rate on loans in China is a minimum of 7.47 percent, while the interest rate on deposits is no more than 4.14 percent. This ensures that banks in China have a loan-deposit profit margin that exceeds 3 percent, as opposed to the reported loan-deposit margin of 1.46 percent experienced in Japan during the second quarter of 2008. Some analysts believe, however, that the influence of Japanese banks on the Chinese market is likely to be limited, at least at first, to Japanese companies operating in China. However, the number of Chinese-origin companies that will support the Japanese banks remains to be seen.

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