KARACHI, Feb 21: National Bank of Pakistan and China Development Bank (CDB), the largest Chinese state-owned bank, have signed a memorandum of understanding for enhancing cooperation in banking and finance.

The Pakistani banking industry has been showing keen interest for exploring new possibilities in the banking sector of China. Habib Bank has announced plans for acquiring 20 per cent stake in another Chinese bank.

Despite a history of very cordial political relations between the two countries, the economic cooperation was restricted to a few sectors. Now, however, there seems to be a lot more interest in several other sectors.

The MoU between NBP and CDB was singed in Beijing on Tuesday in the presence of President Pervez Musharraf, who is currently on official visit to China.

Under the MoU, financing support would be provided for the relevant projects in Pakistan and China by way of an arrangement to be concurred by the two banks.

The cooperation would bring investment in the projects being designed by Pakistan for post-earthquake construction programme. Pakistan needs huge investment for the reconstruction of quake-hit areas.

Key industrial and infrastructure projects in Pakistan would also get benefit from this cooperation.

The two banks would cooperate in channelling foreign direct investment through their network and provide training to their employees in the respective countries.

“The cooperation will ensure the policies of the governments of China and Pakistan. CDB and NBP will jointly develop the strategy for business scope, terms and conditions and other related issues,” said a press release issued by the NBP.

Habib Bank on Monday said that it would sign an MoU with the Urumqi City Commercial Bank (UCCB) to acquire 20 per cent stake in the bank.

The UCCB is one of the premier banks in Xinjiang autonomous region and is headquartered in Urumqi. The bank has a capital of $100 million and has an asset base of over $2.1 billion.

HBL said that it would use its trade finance expertise to facilitate the growth of trade between Pakistan and China, which reached $2.2billion in FY05.

The recent increased economic cooperation between Pakistan and China created a need for banking relation to facilitate the trading.

The banks would also provide financial advisory and project finance services to Pakistani and Chinese companies, seeking to invest in each other’s markets

Pakistani banks have also shown interest to establish banking relations with India as the trade has increased significantly in the last couple of years. The business community of the two countries believes that the trading volume could reach up to $10 billion in next five years. This huge business requires banking relation. Both State Bank of Pakistan and Reserve Bank of India had already agreed to open bank branches in each country. However, still no firm action has been taken.

Bankers said that after incident of 9/11 Pakistani banking had lost its business in European countries mainly because of enormous pressure from the US to keep strong check on transactions fearing money-laundering. They said expanding banking in Europe or America is out of question while opening of new branch in those countries is practically impossible.

“China is the best option as it has vast opportunity for banking industry and is free of unnecessary pressure,” they added.