Northern Trust is in the process of opening a representative office in Beijing, says Lawrence Au, senior vice president and regional managing director in Singapore. The custody bank has identified a Mandarin-speaking executive now at its headquarters in Chicago who will run the office, but does not want to identify this person until the regulators give a formal go-ahead.

"A rep office can't conduct real business, but we need to have one for two years before we can apply for branch status," says Au. "Under China's agreement with the World Trade Organization, it must open its market to banks by the end of 2007. So now is the right time for us."

Northern Trust is also eager to establish a presence now that the domestic fund management industry is developing and local institutions are expected to invest overseas in the near future. The custodian already markets to potential clients from overseas, but a rep office can help cement relationships on the ground.

The bank is behind other US rivals such as Bank of New York, Citibank and JPMorgan Chase, which have branches in China, but these organizations do other types of business, such as lending or letters of credit, that Northern Trust does not engage in. "We just focus on custody," Au says.

Northern Trust has been active from the outside - training staff from the National Council for Social Security Fund for example. And it has a cooperative relationship with Shanghai-based Bank of Communications.

Six months ago it surveyed the market, decided it was the right time to establish a local presence, and started the application process in the autumn. Northern Trust hopes it can get regulatory approval quickly enough to open its doors in the first quarter of 2005, although it realizes other banks are also applying for the same thing. Au says the bank will need to hire one or two staff to assist the representative officer once the office is open.