Chinas WTO Commitment on Banking Liberalization Foreign banks will be allowed to conduct all types of foreign exchange transactions with foreign clients immediately upon entry and with Chinese clients within one year of entry in designated cities Foreign banks must be allowed to make corporate loans in local currency within two years of entry and deal with individual Chinese customers five years after entry Furthermore, foreign banks will be allowed to engaged in joint ventures upon WTO entry by China, full foreign ownership will be permitted within five years of entry

Chinas Four State-owned Commercial Banks Bank of China China Construction Bank Industrial and Commercial Bank of China Agriculture Bank of China

Share in Total Loans Per Cent Share in Total Deposits Per Cent Policy Banks (3) State-owned Commercial Banks (4) Small Commercial Banks (100) Urban Credit Cooperatives (836) Rural Credit Cooperatives (41755) Foreign Banks (65) Loan and Deposit Distribution in Chinas Banking System, 2000

End of 1996End of 1998Beginning of 2002 Proportion of NPLs (per cent) Four SOCBs Ten Joint-Stock Banks Capital Adequacy Ratio (per cent) Four SOCBs Problems of Chinas Domestic Banking System Notes: The official number on NPL ratio for the four SOCBs was 26.2 per cent at the beginning of 2002.

Major Measures in financial restructuring Setting December 31st 2003 as the baseline, use the original paid-up capital, retained profits, reserves and all shareholders equity of Bank of China (BOC) and China Construction Bank (CCB) to write-off past loss and 50% of loans classified as doubtful Invest 45bn US dollars into BOC and CCB, 15bn into ICBC Sold Doubtful loans to AMCs at half of the price Retain profits form 2004 in the two banks as bad debts provision Issue RMB66bn subordinated debt as Tier 2 capital

Shareholding structure of BOC SAFE Bank of China Subsidiaries like Bank of China (HK) Strategic investors Other shareholders

Shareholding structure of CCB SAFE CCB Investment 10% 85% Institutions like CICC Other shareholders China Construction Bank

Share of General Trade and Processing Trade in Chinas Total Exports

General Trade Exports State-owned 41.7% Solely foreign- invested 10.7% Sino- foreign Cooperation 15.2% Private 22.9% Collective 9.4% Solely foreign-invested 55.7% Sino-foreign cooperation 25.5% State- Owned 13.5% Processing Trade Exports The Share of Chinas General Trade and Processing Trade Exports by the Ownership of Enterprises, 2004 Note: Processing Trade includes both pure-assembly and import-and-assembly processing. Under pure-assembly regime a foreign buyer supplies a plant in China with inputs and hire the plant to process them into finished goods; while under import- and-assembly regime the plant in China imports inputs, processes them, and sells the processed goods to a foreign buyer. P 2.9 C 2.5

The Share of Primary Goods and Manufactured Goods in Chinas Exports % Year

Sweden 25, India 32.5, United States 40.8, China 44.7, Brazil 59.1 Gini Coefficient for Chinas Income Distribution