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The 19th Annual Conference on PBFEAM

Thomas M. F. Yeh Vice Chairman

Polaris Financial GroupTaipei, Taiwan

July 9, 2011

Comparison of bank competitiveness between Taiwan and China

Comparison of bank competitiveness between Taiwan and China

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OutlineI. Overview of Taiwan’s Bank Competitiveness and China’s

Overall Competitiveness Business Efficiency ─ Finance & Management Top 1000 World banks 1~10 Top 1000 World in Taiwan and in China Taiwan’s bank size and China’s The Scale of Asia Countries’ Leading Banks Countries’ Market Share of 5 Largest Banks in

Asia Countries’ State Ownership Banks/Sector in Asia Business Environment

II. SWOT Analysis Taiwan’s Bank SWOT analysis China’s Bank SWOT analysis

III. CONCLUSION

3Data source ： IMD the World Competitiveness Yearbook.

IMD China

2008 2009 2010 2011

Overall Competitiveness

17 20 18 19

Economic Performance

2 2 3 3

Government Efficient 12 15 25 33

Business Efficient 33 37 28 25

Infrastructure 31 32 31 28

Overall Competitiveness Latest ranking ─ China is No.19 ； Taiwan is No.6.

IMD China

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

24 26

22

2728 29

I. Overview of Taiwan’s Bank Competitiveness and China’s

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15 17

20

18 19

IMD Taiwan 68

23

IMD Taiwan

2008 2009 2010 2011

13 23 8 6

21 27 16 8

16 18 6 10

10 22 3 3

17 23 17 16

1318171112

1720

1617

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Ranking

Country Taiwan Hong Kong China

Item/Year 2011 2010 2009 2008 2011 2010 2009 2008 2011 2010 2009 2008

Banking sector assets (Percentage of GDP)

4 4 4 4 2 2 2 3 13 16 13 6

Banking and financial services (do support business activities efficiently)

11 4 17 22 1 1 1 3 36 41 53 48

Finance and Banking regulation (is sufficiently effective)

25 18 34 36 1 2 8 5 36 44 38 37

Financial cards in circulation (Number of cards per capita)

6 6 5 5 5 5 6 3 23 28 28 35

Financial cards transactions (US$ per capita)

28 28 15 27 12 13 14 18 44 48 50 35

Data source：IMD The World Competitiveness Yearbook 2011、2010、2009。

• Business Efficiency ─ Finance ─ Banking efficiency

I. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan is superior to China in banking sector, including the financial cards, the banking regulation and supporting business activities efficiently.

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Ranking

Country Taiwan Hong Kong China

Item/Year 2011 2010 2009 2008 2011 2010 2009 2008 2011 2010 2009 2008

Stock markets (provide adequate financing to companies)

2 3 13 14 1 1 1 2 32 32 33 44

Stock market capitalization (Percentage of GDP)

5 7 8 7 1 1 1 1 15 18 7 24

Value traded on stock markets (US$ per capita)

7 16 13 15 1 4 4 2 26 31 28 38

Listed domestic companies (Number)

11 10 10 10 10 11 12 11 9 9 9 9

Shareholders’ Rights (are sufficiently implemented )

28 16 48 34 24 36 27 30 53 51 54 53

Data source：IMD The World Competitiveness Yearbook 2011、2010、2009。

• Business Efficiency ─ Finance ─ Stock Market Efficiency

I. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan is also superior to China in the stock markets, excepting the listed domestic companies.

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Ranking

Country Taiwan Hong Kong China

Item/Year 2011 2010 2009 2008 2011 2010 2009 2008 2011 2010 2009 2008

Credit (is easily available for businesses)

4 1 12 17 6 4 7 6 37 40 43 52

Venture capital (is easily available for businesses)

4 4 6 4 3 1 2 2 32 39 55 51

Customer Satisfaction (is emphasized in companies)

6 7 7 4 17 18 13 6 36 43 56 47

Financial institutions' transparency (is sufficiently implemented)

15 16 39 39 11 17 5 8 51 56 54 52

Data source：IMD The World Competitiveness Yearbook 2011、2010、2009。

• Business Efficiency ─ Finance ─ Management PracticesI. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan has well developed VC industry, sufficient financial institutions' transparency and consumer protection, but China still has a long way to go.

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Ranking

Country Taiwan Hong Kong China

Item/Year 2011 2010 2009 2008 2011 2010 2009 2008 2011 2010 2009 2008

Finance skills (are already available)

22 28 28 16 10 15 9 6 50 53 53 47

Foreign high-skilled people (are attracted to your country’s business environment)

26 25 32 26 7 4 7 9 16 19 13 18

International experience (of senior managers is generally significant)

15 16 25 21 2 3 2 3 56 58 57 44

Competent senior managers (are readily available)

16 21 26 18 1 10 2 5 34 47 30 44

English Proficiency ─ TOFEL (TOFEL scores)

54 53 51 ─ 46 46 43 ─ 52 50 45 ─

Data source：IMD The World Competitiveness Yearbook 2011、2010、2009。

• Business Efficiency ─ Finance ─ Availability of Skills and Education

Ⅱ.Overview of Taiwan’s Bank Competitiveness and China’s

China has more facilities to attract foreign high-skilled people than Taiwan, though Taiwan has more finance skills available.

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Data source ： July 2005 & July 2010, The Banker

Unit ： U.S. $Trillion

Year 2005 Year 2010Countr

yTop 1~10 banks by tier 1 capital

Assets (Ranking)

Assets (Ranking)

Top 1~10 banks by tier 1 capital Country

US Citigroup 1.48 (2) 2.22 (6) Bank of America Corp US

US JP Morgan Chase 1.16 (7) 2.03 (8) JP Morgan Chase US

UK HSBC Holdings 1.28 (4) 1.86 (10) Citigroup US

US Bank of America Corp 1.11 (10) 2.75 (2) Royal Bank of

Scotland UK

France Credit Agricole Groupe 1.24 (5) 2.36 (4) HSBC Holdings UK

UK Royal Bank of Scotland 1.12 (9) 1.24 (22) Wells Fargo

&Co US

JAPAN Mitsubishi Tokyo Financial Group 0.98 (12) 1.73 (11) ICBC China

JAPAN Mizuho Financial Group 1.30 (3) 2.96 (1) BNP Paribas France

UK HBOS 0.76 (19) 1.60 (14) Banco Santander Spain

France BNP Paribas 1.23 (6) 2.23 (5) Barclays UK

Top 1000 World banks 1~10 In Asia, China has become the most potential country in

banking sector from the view of top 10 world banks.

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單位：百萬美元

Top 1000World banks

Ranking

Taiwan Top 1~10 banks by tier 1

capital

Assets (Ranking)

Assets (Ranking)

China Mainland’s Top 1~10 banks by tier 1 capital

Top 1000World banks

Ranking

151 Bank of Taiwan 0.122(127) 1.73( 11)Industrial

Commercial Bank of China

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174 Mega International Commercial Bank 0.068(174) 1.28( 21) Bank of China 14

202 Chinatrust Commercial Bank 0.054(210) 1.41( 18) China Construction

Bank Corporation 15

228 Taiwan Cooperative Bank 0.080(158) 1.03( 25) Agricultural Bank of

China 28

229 Shanghai Commercial & Savings Bank 0.034(295) 0.48( 46) Bank of

Communications 49

238 Hua Nan Financial Holdings 0.057(203) 0.26( 72) China CITIC Bank 67

264 Land Bank of Taiwan 0.066(181) 0.21( 89) China Minsheng Banking Corp 80

272 Cathy United Bank 0.041(264) 0.30( 63) China Merchants Bank 81

275 First Commercial Bank 0.060(191) 0.20( 93) Industrial Bank 97

278 Taipei Fubon Bank 0.042(258) 0.24( 81) Shanghai Pudong Development Bank 108

Top 1000 World banks in Taiwan and in China

Data source ： July 2010, The Banker

Unit ： U.S. $Trillion

From the view of bank size, Taiwan’ bank is far behind of China.

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The Level of the world’s top 100 bank’s assets

175,397 Unit ： U.S. $ million

•Data source ： THE BANKER, July 2010

•　　　

60,139 56,854 54,05746,180 42,472 41,181

65,71068,785

121,786

80,392

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Bank ofTai wan

Tai wanCooperati ve

Mega Land Bank Fi rst Hua Nan Chi natrust Chang Hwa Tai pei Fubon

Cathy Uni ted

Taiwan’s bank size and China’s

Taiwan’s bank

I. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan’ bank assets is far below the level of the world’s top 100 bank’s.

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The Level of the world’s top 100 bank’s assets

175,397

•Data source ： THE BANKER, July 2010

•　　　

484,628

302,853 259,956 237,649 208,897 195,097 175,397

1,026,021

1,281,183

1,725,938

1,409,355

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

I CBC Chi naConst ruct i on

Bank of Chi na

Agr i cul t ural Bank ofCommuni cat i ons

Chi na Merchant s

CI TI C Shanghai Pudong

Chi na Mi nsheng

I ndust r i al Chi naEverbr i ght

Taiwan’s bank size and China’s

China’s bankUnit ： U.S. $ million

I. Overview of Taiwan’s Bank Competitiveness and China’s

China’s top 10 bank assets is above the level of the world’s top 100 bank’s.

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0

500,000

1,000,000

1,500,000

2,000,000

Asset(unit:U.S.$ million) 2,025,830 1,725,938 219,698 184,351 121,786 80,932 68,785 65,710 60,139 56,854 54,057 46,180 42,472 41,181

Mitsubishi ICBC Kookmin DBSBank ofTaiwan

TaiwanCooperative Bank

MegaInternatio

nal

LandBank ofTaiwan

FirstCommerci

al bank

Hua nanCommerci

al, LtdChinatrust

ChangHua

Commerci

TaipeiFubon

The Level of theworld's Top 100Bank's Assets

The Top 10 Domestic BanksThe Asia Leading Banks

World’s Rank 9 11 83 97 127 158 174 181 191 203 210 239 258 264

The Scale of Asia Countries’ Leading Banks

•Data source ： THE BANKER, July 2010

I. Overview of Taiwan’s Bank Competitiveness and China’s

All of Japan, China, South Korea and Singapore’s leading bank assets are above the level of the world’s top 100 bank’s.

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0.27

0.630.3

0.14 0.16 0.280.58

-0.3-0.48

0.220.48

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Banks Lowest International Standard

Year

%

Domestic Banks’ ROA in Taiwan

•Data source ： http://www.banking.gov.tw

I. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan’s Domestic bank’s ROA is below the level of the lowest international standard.

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3.6

-6.93

3.52

10.3

4.81

-0.432.21 2.47

4.49

9.16.19

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Banks Lowest International Standard

Year

%

Domestic Banks’ ROE in Taiwan

•Data source ： http://www.banking.gov.tw

I. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan’s Domestic bank’s ROE is still below the level of the lowest international standard.

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74

60.754.2 51.6 51.6 49.9

38.9 37.6

0

20

40

60

80

100

Tailand South Korea Maylasia Phillippines China Indoneisia Taiwan India

Data Source: EM Banking System Datawatch,FitchRatings,25 November 2010. All data as at end-H1 10.

%

Emerging-market Countries’ Market Share of 5 Largest Banks in Asia

I. Overview of Taiwan’s Bank Competitiveness and China’s

China and Taiwan’s 5 largest banks’ market share is 51.6% and 38.9% respectively.

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17.7

32.5

47.1

12.9

51.345.3

53.6

73.7

0

20

40

60

80

100

Tailand South Korea Maylasia Phillippines China Indoneisia Taiwan India

%

Emerging-market Countries’ State Ownership Banks/Sector in Asia

Data Source: EM Banking System Datawatch,FitchRatings,25 November 2010. All data as at end-H1 10.

I. Overview of Taiwan’s Bank Competitiveness and China’s

China and Taiwan’s state ownership banks over banking sector is 51.3% and 53.6% respectively.

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Data source ： Business Risk Service, BERI, 2008~2011.

Business Environment Risk Intelligence

2008 2009 2010 2011(f)

Taiwan China Taiwan China Taiwan China Taiwan China

Business Risk Composite rating 5 17 5 16 4 15 4 13

Political Risk Index (ORI) rating 11 17 13 18 11 16 8 13

Operations Risk Index (PRI) rating

3 24 5 22 3 22 3 20

Remittance & Repatriation Factor (R － Factor) rating

5 8 4 9 3 9 3 8

BERI’ rating system, Business Risk Service (BRS), offers comprehensive assessments of operating conditions, political risk, and the foreign exchange/ external accounts position for 50 important countries.

Business EnvironmentI. Overview of Taiwan’s Bank Competitiveness and China’s

Taiwan is still superior to China in BERI’ rating.

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Strengths Weaknesses ‧ Abundant available fund in banking

system. ‧ Well developed VC industry. ‧ More experiences to serve SMEs and

Taiwanese firms.

‧ Fragile market structure. ‧ Financial system not sufficiently

internationalized. ‧ International language abilities are

inadequate. ‧ Small bank size. ‧ Thinning profits of financial

industries.

Opportunities Threats ‧ Ability to integrate ethnic Chinese

resources and put them to work in the financial market.

‧ Making a new role of intermediary for European, American and Japanese businesses entering the China market after signing EFCA.

‧ Financial brain drain presents a threat to Taiwan’s industrial development.

‧ Threatened by foreign banks in China.

‧ US-Taiwan trade platform smaller than US-China.

• Taiwan’s Bank SWOT analysis

II. SWOT Analysis

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Strengths Weaknesses ‧ Large banks. ‧ Large loan spread. ‧ A one-party system and higher

state-owned banks make things get done in a hurry without destructive filibustering.

‧ International financial professionals are still not enough.

‧ Financial regulation and consumers protection still need improving.

‧ SME competitiveness needs to be raised.

Opportunities Threats ‧ Opening financial markets to

foreigners step by step. ‧ Large fund to merge foreign

businesses and financial institutions.

‧ Over–expansion in credit. ‧ Overheated economy resulted from

the shooting price of real estates and loan growth.

• China’s Bank SWOT analysis

II. SWOT Analysis

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• China’s banking system is still larger than other countries in Asia, but banking regulation and corporate governance should be improved in the near future, especially strengthening the financial institutions' transparency.

• Taiwan has suffered a setback in its effort to reform state-owned banks. Despite the setback, we expect the government to continue its financial reform efforts and mergers and acquisitions, albeit at a more cautious pace.

• The banking regulations in both sides of Taiwan Straits should be improved as soon as possible. The earlier this can be achieved, the higher its benefits will be and the lower its costs for the pacific basin as a whole.

• Both government’s long-term strategies are to continue improving the bank infrastructure for development, and to develop service industries to speed up economic transformation.

Ⅲ.CONCLUSION

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THANK YOU ！