1. Nanyang Technological University, Singapore Corporate Day, 19 th September 2003: Arati Varma Susann Naomi Bhatti Masayoshi Odaka Gabriel Rüeck Business Study Mission Shanghai / Suzhou, December 2002 Foreign Banks in China: Critical Success Factors and Lessons Learnt

2. 2 Setting the Stage Market share of the 200+ foreign banks in total current assets: only 2% 100% What is your estimation of the market share of foreign banks in China?

3. 3 Agenda  Project Overview  Our Mission in Shanghai  Current Situation in China  Deutsche Bank AG  Banking in China  Conclusions  Q&A

4. 4 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

5. 5 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

6. 6 Current Situation in China Geographical and product related restrictions on foreign banks’ business TodayChina 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 business with all Chinese (enterprises & individuals) 2007 Gradual Opening of the Financial Markets:

7. 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 bank’s strategy  Regional HO in Singapore - operates under a wholesale banking license

8. 8 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

9. 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. 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. 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. 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. 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. 14 Q&A 谢谢 ! 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