• Foreign banks still plan to set up onshore investments in China.

Foreign banks still plan to set up onshore investments in China. (Photo : Getty Images)

The Bank of Singapore recently revealed that they are planning to set up onshore businesses in China, particularly in Shanghai.

Bahren Shaari, the bank's chief executive, said that they are in no rush but are already studying the market.

"Shanghai is something we have in mind," said Shaari. "There is no fixed location. You set up in a location where the money is. Client acquisition is still going to be a challenge even if you have an onshore setup."

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The plans of the Bank of Singapore to engage in on-site investments are now in a time when private banks in China are facing rising costs to operate.

Many banks, such as Citi and RBS, are closing its branches because they are spending too much for too little profit. They are having a hard time finding new clients.

Shaari said that he is very aware of the challenges that they are facing.

He said, "The consolidation will continue. Each bank will need to find a unique business model. Whatever model you run, the cost base must be manageable to support the top-line revenue. The top-line revenue is not growing as much as in the past, especially this year."

The chief executive also said that their competitors are finding it difficult to find a profitable approach to business. In the past decade, nobody has gotten the successful formula for onshore banking.

"People started to look into the onshore model more than 10 years ago, which was when other competitors started," Shaari said. "But no one has got it right. A wall of investments went in. People have now lost money, closed branches and have changed their business models."