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Despite China's constraints on its banking and financial industry, foreign banks reported robust profits from its business coming from the mainland; providing a respite from troubled U.S. markets.

For HSBC Holdings PLC, mainland China was its fourth most profitable market last year at US$353 million in pretax profits an increase of 137 percent mainly dealing with trades local currencies, bonds and derivatives for major corporate clients.

Profits from China were also good for Citigroup Inc. as its net income for 2008 in the country increased by 95 percent amounting to US$191 million, buoyed by a 20 percent jump in commercial foreign-exchange transactions. This is stark compared to Citibank's global net loss of US$27.68 billion last year.

The earnings highlight the importance of developing markets like China in the global banking industry.

In spite of conservative restrictions on its financial markets, Beijing has been open-minded in giving foreign banks and fund managers more opportunities to pursue business in China. J.P. Morgan Chase & Co. is doing well in China by managing 25 percent of China's U.S.-bound dollar transfers.

"Having a controlled currency doesn't mean there are no opportunities to make money," says Lisa Robins, head of China treasury services for J.P. Morgan in Beijing told WSJ. "Our China business is growing and profitable."

Restrictions on direct stock-market investment in China have not hampered business for foreign money-management firms. Last year, foreign players in the industry managed 32 joint ventures that subway runner controlled close to half the local mutual-fund industry's US$290 billion in assets. According to Shanghai market-research firm Z-Ben Advisors these activities led to management fees averaging US$52 million each.

Foreign companies are also finding ways to get into China's trade commodity futures in China by working with local brokers. "They are trading large volumes," a bank analyst told WSJ.

If anything, the global economic slowdown and increasing importance of the Chinese market has revived plans of making Shanghai an international finance and shipping hub. In the recent weeks, local government has announced reforms, merged economic trade zones, offered new products and lowered taxes for foreign investors.

The local government wants to attract more foreign banks and brokerages in an effort to turn Shanghai into a financial hub rivaling Hong Kong, London and New York. Currently, financial services only account 7 percent of Shanghai's gross domestic product.