(Yicai Global) April 8 -- China's financial institutions will be able to withstand competition that would also benefit companies and individual financial customers, according to the president of US financial services giant State Street.

China's policymakers need to consider the issue of financial sector opening up, Ronald P. O'Hanley said in an exclusive interview with Yicai Global, since it can help introduce advanced management experience and benign competition, while pushing participants to improve service quality and be more agile.

Last month, the China Banking and Insurance Regulatory Commission said it is considering new measures to further open the financial sector, including more easing of market access conditions for foreign banks and insurers.

O'Hanley said the authorities should ensure that fierce competition doesn't harm local players.

"Chinese macro-policymakers have always been aware of the need to strike a balance between local and foreign market players," O'Hanley said. "Decision-makers need to examine and evaluate the entire industry to determine the schedule and speed at which competition is introduced."

"Competition can benefit China's state-owned and private financial services firms, as well as their customers," he added. "China's financial services have some room for improvement in their servicing of small- and medium-sized enterprises, as well as private firms. To this end, more competition can also benefit SMEs and private enterprises."

O'Hanley believes the biggest difference between the Chinese financial market and others around the world is China's economic scale, size and potential.

"China's equity financing is still relatively small, so debt financing through banks is still the main type of lending that Chinese companies, especially banks, rely on," he said. "When compared to China's economy, its capital market and public debt markets are extremely small."

"China hopes that the public debt market can grow in an organized manner, providing funding for the economy and not only improving the growth of larger companies but, more importantly, also supporting the growth of SMEs," O'Hanley said.

On the company's positioning in China and future plans, he said that State Street will probably base its wholly foreign-owned company's investment managers in Beijing or Shanghai.