1. 1 The 19th Annual Conference on PBFEAM Thomas M. F. Yeh Vice Chairman Polaris Financial Group Taipei, Taiwan July 9, 2011 Comparison of bank competitiveness between Taiwan and China Comparison of bank competitiveness between Taiwan and China

2. 2 Outline I. 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

3. 3 Data source ： IMD the World Competitiveness Yearbook. － IMD China 2008200920102011 Overall Competitiveness 17201819 Economic Performance 2233 Government Efficient12152533 Business Efficient33372825 Infrastructure31323128  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 27 28 29 I. Overview of Taiwan’s Bank Competitiveness and China’s 18 15 17 20 18 19 IMD Taiwan 6 8 23 IMD Taiwan 2008200920102011 132386 2127168 18610 2233 17231716 13 1817 11 12 17 20 1617

4. 4 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.

5. 5 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.

6. 6 Business Efficiency ─ Finance ─ Management Practices I. 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.

7. 7 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.

8. 8 Data source ： July 2005 & July 2010, The Banker Unit ： U.S. $Trillion Year 2005Year 2010 Countr y Top 1~10 banks by tier 1 capital Assets (Ranking) Top 1~10 banks by tier 1 capital Country USCitigroup1.48 (2)2.22 (6) Bank of America Corp US JP Morgan Chase1.16 (7)2.03 (8) JP Morgan Chase US UKHSBC Holdings1.28 (4)1.86 (10)CitigroupUS 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 HoldingsUK 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)ICBCChina JAPAN Mizuho Financial Group 1.30 (3)2.96 (1)BNP ParibasFrance UK HBOS0.76 (19)1.60 (14) Banco Santander Spain FranceBNP Paribas1.23 (6)2.23 (5)BarclaysUK 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.

9. 9 單位：百萬美元 Top 1000 World banks Ranking Taiwan Top 1~10 banks by tier 1 capital Assets (Ranking) China Mainland’s Top 1~10 banks by tier 1 capital Top 1000 World banks Ranking 151Bank of Taiwan0.122(127)1.73( 11) Industrial Commercial Bank of China 7 174 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 264Land Bank of Taiwan0.066(181)0.21( 89) China Minsheng Banking Corp 80 272Cathy United Bank0.041(264)0.30( 63) China Merchants Bank 81 275First Commercial Bank0.060(191)0.20( 93) Industrial Bank 97 278Taipei Fubon Bank0.042(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.

10. 10 The Level of the world’s top 100 bank’s assets 175,397 Unit ： U.S. $ million Data source ： THE BANKER, July 2010  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.

11. 11 The Level of the world’s top 100 bank’s assets 175,397 Data source ： THE BANKER, July 2010  Taiwan’s bank size and China’s China’s bank Unit ： 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.

12. 12 World’s Rank9118397127158174181191203210239258264  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.

13. 13 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.

14. 14 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.

15. 15 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.

16. 16 %  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.

17. 17 － Data source ： Business Risk Service, BERI, 2008~2011. Business Environment Risk Intelligence 2008200920102011(f) TaiwanChinaTaiwanChinaTaiwanChinaTaiwanChina Business Risk Composite rating 517516415413 Political Risk Index (ORI) rating 111713181116813 Operations Risk Index (PRI) rating 3245223 320 Remittance & Repatriation Factor (R － Factor) rating 58493938  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 Environment I. Overview of Taiwan’s Bank Competitiveness and China’s  Taiwan is still superior to China in BERI’ rating.

18. 18 Taiwan’s Bank SWOT analysis II. SWOT Analysis

19. 19 China’s Bank SWOT analysis II. SWOT Analysis

20. 20 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

21. 21 THANK YOU ！