Nanyang Technological University, Singapore

1
Business Study Mission Shanghai / Suzhou,
December 2002 Foreign Banks in China Critical
Success Factors and Lessons Learnt

• Nanyang Technological University, Singapore
• Corporate Day, 19th September 2003
• Arati Varma
• Susann Naomi Bhatti
• Masayoshi Odaka
• Gabriel Rüeck

2
Setting the Stage
What is your estimation of the market share of
foreign banks in China?

• Market share of the 200 foreign banks in total
  current assets only 2

3
Agenda

• Project Overview
• Our Mission in Shanghai
• Current Situation in China
• Deutsche Bank AG
• Banking in China
• Conclusions
• QA

4
Project Overview
2 Market Share
Research on Financial Sector in China
BSM
Comparison with the Environment in Singapore
Verification and Discussion of Findings with
Experts
Summarise Findings and draw Conclusions
5
Project Overview Mission in Shanghai

• Verify
• Economic parameters
• Competitive environment
• Regulatory framework

Discuss

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

• Managers of MNCs
• Government Officials
• Academics

6
Current Situation in China
Gradual Opening of the Financial Markets
7
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 banks strategy
• Regional HO in Singapore
• operates under a wholesale banking license

8
Deutsche Bank AG - China
1995 Representative Office in Shanghai
1999 Branch status granted
2002 RMB License granted

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

9
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

10
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

11
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

12
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

13
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

14
QA
??! 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