Nanyang Technological University, Singapore

Corporate Day, 19th September 2003:Arati VarmaSusann Naomi BhattiMasayoshi OdakaGabriel Rüeck

Business Study MissionBusiness Study MissionShanghai / Suzhou, December 2002Shanghai / Suzhou, December 2002

Foreign Banks in China:Foreign Banks in China:Critical Success Factors and Critical Success Factors and Lessons LearntLessons Learnt

22

Setting the Stage

Market share of the 200+ foreign banks in total current assets: only 2%

100%

98%

2%

What is your estimation of the market share of foreign banks in China?

33

Agenda

Project Overview

Our Mission in Shanghai

Current Situation in China

Deutsche Bank AG

Banking in China

Conclusions

Q&A

44

Project Overview

Research on Financial Sector in China

Comparison with the Environment in Singapore

Summarise Findings and draw Conclusions

Verification and Discussion of Findings with Experts

2% Market Share

BSM

55

Project Overview – Mission in Shanghai

Verify: Economic parameters Competitive environment Regulatory framework

Deutsche Bank AG Bank of America DBS Bank Dresdner Bank Bank of Communications gic AHK DIHK

Discuss:

Managers of MNCs Government Officials Academics

66

Current Situation in China

Geographical and product related restrictions on foreign banks’ business

Today

China signed the accord for admittance to the WTO2001

Market for all foreigners (enterprises & individuals) open to RMB business, subject to grant of license

2002

Unrestricted RMB businesswith all Chinese (enterprises & individuals)

2007

Gradual Opening of the Financial Markets:

77

Deutsche Bank AG

Among the top 20 FIs worldwide

Market Capitalization: € 48.8 billion

Total Assets: € 918 billion

95,000 staff in 2,300 offices worldwide

3 Divisions: CIB, PCAM and CI

APAC is an integral part of the bank’s strategy

Regional HO in Singapore

- operates under a wholesale banking license

88

Deutsche Bank AG - China

3 Offices: Shanghai, Beijing and Guangzhou 100 employees in China Business primarily with foreign corporate

clients

1995: Representative Office in Shanghai

1999: Branch status granted

2002: RMB License granted

99

Foreign Banks in China - threats:

Limited scope of business

“Immature” legal framework

Frequent change in PBOC regulations

Insufficient risk management tools

Telecommunications and infrastructure

Human resources

Importance of “Guanxi”

1010

Foreign banks - opportunities:

No obligation to lend to SOE

Leverage on expertise:

- Consumer credits

- Credit cards

- Asset management and pension funds

- E-banking

- Investment funds

- International transactions

1111

Foreign banks - challenges:

High cost for business operations

Small customer base – foreign companies

Lack of licenses limits business opportunities

No access to local currency deposits

Scantiness of company audits

Missing network of relationships

1212

Foreign banks - leverage on strengths:

Attractiveness to local staff

Large product range

Access to foreign currency market

Higher quality of products and services

Efficient operations

International Experience

Transparency

1313

Conclusions

Long-term strategy necessary (10 years)

No short-term profits possible

Start small (foreign enterprises)

Focus on niche markets

Organize information flow from PBOC

Do not underestimate the government

Diligent selection of banking partners

1414

Q&A

谢谢谢谢 !!Thank you!Thank you!

“Know the other side, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”

Sun Zi