EUROPEAN UNION
               Economic and Financial Affairs Section

                                                                                Beijing, 30 June 2010

                             China’s Banking System Post Crisis

1. Chinese banks at the heart of the stimulus package
2. Concerns with the risk of NPLs and moral hazard
3. Risks remain manageable, for the moment
4. Chinese banks remain profitable despite the crisis…
5. But times are getting tougher
6. Chinese banks continue to grow and diversify
7. Prudently expanding overseas
8. Reform: two steps forward, one step back
9. Privatisation stalls
10. Foreign banks continue to struggle for market share

                           Basic fact sheet of the Chinese banking system
       (most figures based on 2009-10 available data from various sources, rounded for easy reference)
Number of banks……..………………………………………………………3,800 legal entities
Employees…………………………………………………………………….2.8 million staff
Point-of-sale terminals………………………………………………………...2 million
ATM …………………………………………………………………………..200,000 units
Debit/credit cards in circulation……………………………………………….1.8 bn/200 mn
Bank cards issued in 2009 ……………………………………………….……270 million
Market value of 3 largest banks …………………………………... …………420 billion EUR
Total assets/liabilities………………………………………………………….9.5/9 trillion EUR
Total deposits/loans…………………………………………………………....7.5/5 trillion EUR
Capital adequacy ratio(CAR)………………………………………………….11.1%
NPL (Non Performing Loans)…………………………………………………1.58% of total
After tax profits in 2009………………………………………………………..80 billion EUR
Estimated State ownership …………………………………………………….70%
Market share of the big 5 State-owned commercial banks…………………….50% (of assets)
Number of Chinese banks with foreign capital………………………………...31
Number of operational entities of foreign banks……….………………………450
Market share of foreign banks …………………………….……………….......1.7% (of assets)

1. Chinese banks at the heart of the stimulus package
China’s state owned banking system was, and remains, at the heart of the Chinese
stimulus package. Total balance of outstanding loans last year increased by an eye
watering RMB10tn (approximately 33% y-o-y) with total outstanding loans for all
financial institutions amounting to RMB42.6tn (€5.1tn). The People’s Bank of China
(PBoC) has set the growth target for outstanding loans by a maximum RMB 7.5tn
(€0.9tn) or 17.5% this year - reigning in lending slightly but unequivocally maintaining
“the moderately loose monetary policy” much publicised by Chinese policy makers.
Lending on this scale has led to questions regarding the sustainability of this approach but
also about China’s commitment to improving corporate governance given how obediently
Chinese banks responded to political demands to rapidly expand lending.

For the moment, there is no denying that in the short term the banks’ lending binge
has contributed to helping China recover more rapidly than any other global
economy from the financial crisis. China has steamed back into double digit y-o-y
GDP growth in 2010, with estimates hovering around 10% for the year as a whole. But,
there was no free lunch. The excess liquidity in the system has led to building
inflationary pressures including rapid price increases in the real estate market of large
Chinese cities and raised serious concerns over the build up of non performing loans
(NPLs) extended to large local government infrastructure projects.

2. Concerns with the risk of NPLs and moral hazard
The potential size of these NPLs is hotly debated and a subject of serious concern.
A number of local investment vehicles (LIVs) - that have been used by local governments
to manage investment projects and keep debt off their books - were last week shut down
by decree of the State Council (Chinese Cabinet). LIV debt is estimated to have made
up 36.5% of last year’s record new lending and the build up on NPLs in this area is seen
as particularly likely because of money being pumped into large infrastructure projects on
which returns will not be immediate. Credit rating agencies have also expressed their
concerns and warned that hidden sales and re-packaging of loans could be sizeable,
distorting credit growth and credit exposure figures that could be higher than official
figures suggest. Lending decisions driven by political motives mean there are concerns
about the medium term asset quality outlook for Chinese banks. Fitch downgraded the
credit ratings of two of China’s largest banks Merchants and CITIC at the end of 2009,
largely due to the disproportionate increase of loan growth compared to tangible equity
growth in that year.

While Beijing’s policy makers underline the effectiveness of their economic policies
and management of their banking system, western analysts point to the risk of
moral hazard stemming from the central government’s implicit backing of the banking
sector and local governments borrowing wantonly from it. China analyst Victor Shih is
particularly vocal about this risk claiming “the key fact governing most credit and
investment decisions today is that everyone believes the central bank would bail out any
financial institution large or small”. Indeed depositors are at ease with placing much of
their savings into financial institutions in spite of the lack of a formal deposit guarantee
scheme in China and the recent lending binge.

In truth the degree of risk presented by moral hazard is difficult to quantify or
substantiate, but the polemic does highlight contradictory forces at play in the
management of the Chinese banking system.

3. Risks remain manageable, for the moment
For the moment the level of risk seems manageable despite all the excitement.
Banks are maintaining healthy profits and the authorities have been taking ever more
stringent measures to ensure that the necessary provisioning and capitalization is taking
place. In the medium to longer term, it is clear that some loans extended as part of the
monetary stimulus will not provide a full return on investment. However, the threat to
the banking sector should not be overplayed, there is no imminent collapse.

As long as the economy continues to grow at the current rate – and there are few
signs of a significant slow down – the banks should be able to absorb a large
proportion of NPLs and soften their blow by rolling over non-performing loans and
inflating away their cost. But while a collapse of the Chinese banking system is not on
the cards, politically motivated non-performing loans will carry a cost. Should LIV
loans turn bad to the extend that local governments can no longer continue repaying them
thanks to the proceeds of land sales - which made up a quarter of local government
revenue last year but are now decreasing – last year's monetary stimulus could turn a
fiscal liability for the State down the road. The implicit guarantee and the concern
with stability means that central government will not leave local governments out in the
cold or their lenders to go to the wall. So taxpayers and depositors will definitely be hit
for the cost – depositors through very low fixed deposit rates, currently negative in real
terms, which helps pay for banks rolling over bad debt.

4. Chinese banks remain profitable despite the crisis…
The Chinese banking system is often accused – most vehemently by Professor
Michael Pettis - of being artificially profitable thanks to a fixed deposit lending
interest rate spread that ensures a constant revenue stream to banks largely at the
expense of the depositor. In response to this criticism, Chinese policy makers
underline with disdain the recent failings of what they consider to be a discredited
western banking system and point to their banks’ positive balance sheets.
In terms of profits, Chinese banks have definitely weathered the storm of the global
financial crisis well. Although profits were hit in 2009 by a series of interest rate cuts
shrinking interest margins, profits nevertheless increased above GDP with the average
return on equity increasing by 16.2% compared to 2008, reporting RMB668.4bn
(€79.6bn) in after tax profits. The increase in net profits was reported at 15% for the
Industrial and Commercial Bank of China, 15% for China Construction Bank, 26% for
Bank of China and 5.6% for Bank of Communications. The combined after-tax profits
of the five major commercial banks plus CITIC Bank and Minsheng Bank increased by
18.5% y-o-y. In spite of lower increase compared to last year when net profits increased
by some 30% over 2007, or RMB577.6bn (€69 bn), these net profit figures remain solid.

5. But times are getting tougher
In spite of the healthy profits, times will get harder for Chinese banks. Fist, because
it is only natural that the promised market-based interest rate policy reform will have to
be implemented one day or the other, with negative impact on interest based income. But
the most immediate issue for concern is that no one knows the degree to which banks’
longer term profit growth will be threatened by bad debt accumulated from loans rashly
extended to local authorities as part of the stimulus. So as the lending frenzy and
political pressure that lay behind it begins slowly to subside, the banking regulator
(CBRC) and the central bank (PBoC) have been trying to regain its grip and limit the
build up of further bad debt. Banks have had to set aside significant amounts to cover
potential losses. The CBRC requires banks to maintain their loan loss provisioning at
150%, and on average Chinese banks provisioning is 165%. In January, capital
adequacy ratio requirements were raised from 8% to 11% for large banks and 10% for
medium-sized banks. The PBoC, concerned with the inflationary consequences of the
lending surge and CPI forecast to reach 3.1% in Q2 2010, raised the reserve requirement
ratio for Chinese banks for a third time in May, nudging the rate up by yet another 0.5ppt
to 17% in an attempt to absorb some of the excess liquidity in the system. Most
recently, the CBRC has requested China’s banks to report on the quality of their loan
books by the end of June as part of the Government’s drive to stem the rapid rise of urban
real estate prices. Even if there might be implementation problems on the ground,
these measures and requests have to be taken seriously: the CBRC sits as a vocal
observer on the boards of all Chinese banks and threats to halt business expansion if
legal requirements are not met are more than credible.
The indications are that these increasingly stringent requirements on banks to
strengthen their capital base are starting to weigh on banks’ profit margins. This
was brought into focus when in May reports emerged that the State Council had approved
a combined RMB 287 billion (€34.1bn / 42bn USD) fundraising quota for the country’s
four biggest listed lenders: Industrial and Commercial Bank of China, Bank of China,
China Construction Bank and Bank of Communications. This is the latest in the string
of announcements of capital raising schemes worth billions, stoking fears of excessive
share supplies which continue to weigh on the stock market. Whether the banks will be
able to raise such capital on the markets smoothly is uncertain, as such large issuances
could flood the market, giving rise to speculation as to whether Chinese taxpayers will
end up bearing some of the cost as the Government intervenes and further increases its
stake in these institutions.

6. Chinese banks continue to grow and diversify
Growth and diversification in the Chinese banking industry continues to be both real
and significant. In parallel with impressive economic dynamism, both loans and
deposits in mainland China have grown to a staggering pace in the last few years, and
banks’ balance sheets have expanded accordingly. In 2009 the banking sector grew
against the headwinds of the financial storm and at the end of 2009 total assets were
RMB78.8tn (€9.4tn), up 26% since the end of 2008. Figures available for 2010 suggest
this is unlikely to change in the immediate future. The CBRC estimated that by the end
of March 2010 that total assets denominated in both RMB and foreign currencies of
Chinese banking financial institutions to have reached RMB84.3tn up by 21.3% y-o-y,
while total liabilities stood at RMB 79.5 trillion, up by 21.4%.

Chinese banks’ have recently seen non-interest income make up an increasingly
important part of their profits, albeit starting from a low base 1 . Non-interest
income of Chinese banks on average grew by 29% y-o-y in 2009. This suggests that
while there are now more limits in place and greater supervision of new lines of products
by the regulator in the light of the financial crisis, banks are continuing to offer
increasingly diversified and specialized services, bringing more sophisticated financial
tools to the Chinese market place. Much business diversification is taking place on a
pilot basis, often with a small number of large banks being allowed to do so first. Banks
are now getting into insurance business, fund and wealth management, trust business,
leasing, consumer finance, rural finance, private banking, the bond market and private

 According to KPMG’s Mainland China Banking Survey 2009, non interest income grew by 55% on average from 2007 to 2008 for
China’s 118 largest banks.

equity. Trust companies in particular are being used as a testing ground by regulators to
promote asset management and other alternative financing methods.                    This
diversification and the increasing role of non-interest income could provide a quantum of
solace to banks facing a possible interest spread contraction in the coming years if
Chinese leaders keep their promise to reform the interest rate policy.

Business innovation has been accompanied by sustained growth and the emergence
of a few global banking giants, as more and more banks are transforming into true
financial conglomerates. Much publicity continues to be given to the fact that the
world's top three largest banks by market capitalisation are Chinese (Industrial and
Commercial Bank of China, China Construction Bank and Bank of China). This headline
is misleading for a number of reasons: the current global markets' volatility renders this
parameter relatively irrelevant; with the majority of shares being either state-owned or
locked-up, only a small proportion of them are tradable and traded; and prize formation
depends mostly on movements by a handful of local retail investors bullish for local firms.
This bias is only partially corrected by the small window of the Hong Kong bourse where
there is a much higher presence of international and institutional investors and where
mainland companies usually trade at considerable discounted prices compared to Shanghai
(although this is not the case right now).

The CBRC continues its cautious approach towards the universal banking model and
insists on the maintenance of strict fire walls between the banks and the stock exchange in
which they are not allowed to invest their own funds directly. In combination with the
ever stringent requirements that Chinese banks are subject to in terms of capitalisation and
loan loss provisioning this could help avoid systemic risks. Yet the stringent regulatory
environment combined with a generally underdeveloped financial services sector
inevitably means banks are developing their businesses in a similar way. The lack of
differentiation between the players does raise the question as to whether the risk of
systemic failure is more likely.

7. Prudently expanding overseas
The expansion of Chinese banks abroad has been cautious in the wake of the global
financial crisis and in an environment in which risk remains difficult to price.
2007's deals by China Development Bank, CIC, Ping'an and Industrial and Commercial
Bank of China with Barclays, Blackstone, Morgan Stanley, Fortis and Standard Bank led
to huge paper losses of billions of USD and revealed the risks of such operations. In
response Chinese authorities have taken a conservative stance on outward financial
investments in spite of extremely attractive prices due to collapsing market values of
Western banks and securities firms.

There has been some recent activity, but it has been limited. Noteworthy has been
the ICBC's acquisition of Bank of East Asia Canada completed in January this year and
its purchase of 97.24% ( approx 72m USD) of all outstanding shares of Thailand’s ACL
Bank (545m USD) in April. Last August ICBC purchased an 80% stake in Macau’s
Seng Heng Bank (584m USD) wile China Construction Bank acquired AIG Finance Ltd.

Overall though, overseas acquisitions seem to be on pause for the moment and
Chinese banks concentrate on organic growth through the establishment of
branches and subsidiaries in the US, Europe Australia, South Korea and emerging
countries. Industrial and Commercial Bank of China opened a subsidiary in Kuala
Lumpur in April this year and China Construction Bank, Minsheng Bank and Merchants

Bank continue to actively looking for overseas organic growth opportunities. Some
branches are also opening in Europe. China Construction Bank opened a branch in
London in 2009, and Merchant’s bank, Agricultural Bank of China and Shanghai Pudong
Bank also have plans to do so. ICBC and Banks of China have announced they will soon
open a branch in Brussels. Banks are also moving into funding overseas investment
operations with China Development Bank and EXIM bank being particularly active in
financing natural resources projects and acquisitions.

8. Reform: two steps forward, one step back
Prior to crisis Chinese banks had made considerable progress in improving corporate
governance and risk management, pushed by the binding requirements related to the
listing process including: the adoption of international accounting and internal control
standards; greater transparency; tighter supervision by regulators; and closer scrutiny.
Foreign participation had helped to improve some decision making and management
processes and practices.
Recent events have highlighted there is still a long way to go as listed banks with
foreign investors were demonstrably at the beck and call of political masters in
Beijing – putting commercial considerations to one side and extending loans at
breakneck speed in an environment in which risk was difficult to price. Many of
the senior directors in local banks are still bureaucrats rather than professional bankers
and local press corruption stories involving bankers and regulators are common. Recent
stories have included the vice present of the China Development Bank being convicted of
receiving bribes to grant loans against banking regulations, while another banker in
Guangdong province reportedly bribed local police to arrest an auditor evaluating the
bank branch’s books.       The fact that both major shareholders and clients of large
Chinese banks are largely state-controlled remains as a real barrier to the improvement of
corporate governance.
In line with corporate governance reform, the pace of restructuring of Chinese
banks has slowed. Agricultural Bank of China 2 (ABC) is the exception and has
completed a major restructuring process following sizable injections of public money. It
is preparing to publicly list in the next few weeks, both in Hong Kong and Shanghai.
The listing of a 15% stake is expected to involve over 22bn USD (€18bn) worth of share
issuance. If successful, this could be the world largest ever IPO. The amount has been
revised down from 30bn USD (€24.3bn) because of the envisaged difficulties of raising
such capital at the same time as China’s four biggest lenders also seek to raise sizable
amounts of capital.
China Development Bank (CDB), one of the three policy banks, was formally registered
as a commercial bank in December 2008, although it can still only accept deposits from
cooperate clients and not individuals. It was thought then that the other two policy
banks (EXIM bank and Agricultural Development Bank of China) were likely to follow
ABC’s lead and list afterwards, completing their journey to becoming commercial banks.
Yet there is little to suggest any impending move on this front. It seems the transition of
policy banks to commercial status has been put on pause.
The establishment of regional and provincial banks continues at a brisk pace,

 ABC was the last of China’s four biggest lenders to go through a state-led restructuring. The bank received a $19 billion cash
injection from the government and removed RMB 800 billion of non-performing loans from its balance sheet in 2008. The
restructuring of ABC and CDB would mark the final stages of an overhaul that started a decade ago. After transferring the bulk of
their bad loans to dedicated Asset Management Companies (China’s ‘bad banks’) BOC, CCB and ICBC each received over 20 billion
USD capital injections between end 2003 and mid 2005. Subsequent public offerings of these three banks were among the largest seen
in international capital markets. Today ICBC still remains the world's largest listing in history, as it raised some 22 billion USD in a
combined listing in Hong Kong and Shanghai stock exchanges in 2006.

primarily through the merging and consolidation of city commercial banks and
rural financial institutions within each province. The establishment of the Postal
Savings Bank of China (PSB), the second largest bank in number of outlets and fifth in
terms of assets is, in conjunction with the roll out of other micro credit cooperatives an
important boost to microfinance. This remains a strong political priority, reiterated at
this year’s National People’s Congress (NPC), as access to finance in rural areas remains
very limited.

9. Privatisation stalls
Restructuring has not though been accompanied by further privatization and the
current level of state ownership of the banking sector (70%) is unlikely to decline in
the foreseeable future. Political pressure to do so from major international jurisdictions
has vanished since the financial crisis. If anything, the Chinese government is buying
back shares in major banks, rather than selling them to the market. China Investment
Corporation (CIC) and the National Social Security Fund (NSSF) have been increasing
their holdings in China's three biggest State-owned banks. It will be interesting to see
whether following the State Council’s recent approval of China’s four biggest listed
banks plans to raise new capital through share issuance the Government’s Huijin
Investment Corporation - CIC’s domestic arm - will get involved. Market appetite for
financials is subdued in China after many investors burnt their hands in 2008. The
Shanghai Composite Index, 25% down, has been one of the world's worst performers this
year and the signs are that it will remain so in the second half of the year given a general
slow down of economic growth, anticipated post-stimulus monetary tightening and
expected large share issuances.
The general retreat from Chinese markets by some troubled western banks during
the crisis has also left its mark on China. The cashing in of shares, confirmed
regulators’ belief that existing foreign investment caps contribute to ensuring the
maintained stability of the financial system. The Ministry of Finance issued last year
new rules requiring that state-owned stakes in banks and other financial institutions be
sold at market prices, through public trading or, in the case of private deals, at no less
than the weighted average market price of the shares. The CBRC also extended the share
lock-in period from 3 to 5 years. The Agricultural Bank of China is a case in point. No
foreign strategic investors are being sought for ABC’s listing, while the Government’s
National Social Security Fund will become an important investor. Furthermore foreign
investors will pay the full share price (no discount as in the previous listings). This
clearly points to a change in the modus operandi used in the past for the listing of
Chinese financial institutions and must partly be seen as a response to domestic criticism
that previous stakes were sold to foreign investors too cheaply.

10. Foreign financial institutions continue to struggle to have a bigger bite
on the Chinese cake
Foreign banks in China continue to struggle to get a bigger part of the cake. Following
the global economic slowdown, and the massive monetary stimulus in 2009 through
the Chinese banks, there has been a significant impact on the development and
expansion of foreign financial institutions on the mainland. There are two main
factors to consider that go some way to explaining why, although foreign banks remain
positive about their future in China, they have seen little in the way of further market
penetration over the last eighteen months, growing only organically if at all. Primarily,
the lending binge by domestic banks has meant that there has been considerably
more competition for foreign banks looking to take a greater share in the loans market.

With the rapid expansion of local banks' balance sheets, the tiny market share of foreign
firms has been squeezed even further, coming down to 1.7% of total assets in 2009 from
over 2% in 2008. Secondly, foreign banks continue to navigate with difficulty an ever
growing set of local regulations. The required loan to deposit ratio in particular and
tighter controls on business activities has resulted in lower than anticipated room for
increasing market share, product innovation or business diversification. Foreign bank's
profits have reached a welcome €750 million in 2009, which nevertheless represent just
under 1% of those reported by local banks (€80 billion).
The door to credit card, RMB derivatives and custody businesses for instance remains
closed to most foreign banks. There is still interest in further acquisition and
diversification within the Chinese market by foreign players, however foreign investment
caps are well in place (20% for banks, 33% for securities JV and 49% for asset
management JV). Overall, foreign participation remains limited due to a lack of
established branch networks, so foreign banks will need to focus their business plans
on giving them maximum possible exposure to compete with strengthening domestic
businesses if they are to hold on to their current market share, let alone expand upon it.
There are however reasons for cautious optimism in certain business segments. Consumer
finance and rural banking are areas being explored by foreign institutions, and indeed the
good news are that regulations allow now foreign firms to set up consumer finance
companies and 100% foreign owned village banks. A number of foreign banks are also
actively pursuing further market share in private banking. This is a key area, not yet
tapped to its full potential, as China's continued economic growth has accelerated the
number of high net worth individuals who are in a position to put their money into wealth
management products.
Within the wholesale sector, the main focus of growth will surely be in the debt
markets as foreign institutions are being given greater role on the growing corporate
bond market. The People's Bank of China (PBOC) earlier this year outlined objectives to
accelerate financial product innovation to further enhance healthy development of the
financial markets. The first port of call will be to develop the bond market, leading to the
introduction of a wider range of financial derivatives. They are also promoting the wider
issuance of short-term financing bills by SMEs, and are looking at introducing
convertible debt financing tools and third-party bond repos. With the internationalization
of the RMB in view, programmes that allow mainland-based financial institutions to issue
RMB bonds in Hong Kong and foreign corporates and banks to issue financial bonds and
shares in China will continue. Private equity and interest rate swaps also have great
potential, and so will undoubtedly be a focus for foreign participants.
All of this would bode well for the foreign banks currently in China, who have
considerable experience in these products, however there is a stumbling block. Their
credit reputations significantly damaged following the financial crisis, foreign banks do
face the prospect of being cut out of rapidly expanding markets.

                                                   Javier Arribas Quintana / Paul Bunsell
                                                   With the assistance of Shane O'Doherty
                                                                  EU Delegation in Beijing

Annex: Major Chinese banks – Basic company fiche

     Industrial and Commercial Bank of China (ICBC)
     Bank of China (BOC)
     China Construction Bank Corporation (CCB)
     Agricultural Bank of China (ABC)
     Bank of Communications (BoCOM)
     China Development Bank (CDB)
     The Export-Import Bank of China (EXIM)
     Agricultural Development Bank of China (ADBC)
     China CITIC Bank (CITIC)
     China Merchants Bank (CMB)
     China Minsheng Bank (CMB)
     Shanghai Pudong Development Bank (SPDB)

                            Industrial and Commercial Bank of China (ICBC)
General        The largest of China's "Big Four" state-owned commercial banks founded in 1984 and reformed into joint-stock limited
                company in 2005.
               The largest bank in the world in terms of market value (180 billion USD) and one of the world's top ten banks by assets
                (11 trillion RMB).
               Simultaneously listed on both the HKSE (1398) and SSE (601398) on 27 October 2006.
               Market capitalisation: 230 billion USD, Employees: 385,000 staff, NPL: 4.69%
Board of       Chairman: Jiang Jianqing, President: Yang Kaisheng, Executive Directors: Zhang Furong, Wang Lili, Non-executive
Directors       Directors: Huan Huiwu, Gao Jianhong, Li Chunxiang, Li Jun, Li Xiwen, Independent Non-executive Directors: Antony
                Leung Kam Chung, Qian Yingyi, Xu Shanda, Frank Wong Kwong Shing, Malcolm Christopher McCarthy, Kenneth
                Patrick Chung.
Ownership      State-owned shares 70% (MOF 35%, Huijin 35%)
               Shares held by other domestic investors 5.2% (NSSF 4.2%)
               Shares held by foreign investors 8.35% (Goldman Sachs 5.75%, Dresdner 2.2% and American Express 0.4%)
               Shares subject to restriction on sales 83%
               Foreign shares listed overseas 17.09% (HKSCC Nominees Limited 15.05%)
Business       Traditional Commercial Banking, Corporate Finance Business, Personal Finance Services (1 st place in domestic deposits
Scope           and loans), Bank Card Business, Internet Bank Services
               Non-licensed New Financial Services, Insurance agency, Funds sales agency, Asset custody, Corporate annuity
               Investment banking, licensed Non-banking Services (Fund business of ICBC Credit Suisse, Investment banking of ICEA,
                Leasing of ICBC Financial Leasing)
Overseas       ICBC bought 20% of Standard Bank of South Africa, the largest bank in Africa, for 5.5 billion USD, October 2007. ICBC
expansion       closed acquired 90% stake of Halim Bank, Indonesia, January, 2008
               It has purchased the Hong Kong subsidiary of Fortis Bank and rebranded it under its own name on 10 October 2005.
               Acquired 80% of Seng Heng Bank, the largest local bank in Macau, August, 2007.
               ICBC entered into new markets such as Russia and Indonesia and open branches in Sydney, Dubai and Doha. ICBC has
                134 overseas institutions and built up a global network covering China's major trading and exchanging areas

                                                 Bank of China (BOC)
General        State-owned commercial bank founded in 1912 and was converted into a wholly state-owned commercial bank in 1994.
                BOC Limited was formally incorporated in Beijing as a state-controlled joint stock commercial bank in 2004.
               The most international of China's banks, with branches on every 'major' continent. Outside of mainland China, BOC also
                operates in some 30 countries/regions.
               Listed on the HKSE on June 1 2006 and mainland China SSE on July 5, 2006
               Employees of the Group: 250,000
               Total assets 8.2 trillion RMB. Liabilities 7.7 trillion RMB. NPL 2.65%
               Market capitalisation 100 billion USD
Board of       Chairman: Xiao Gang, President: Li Lihui, Executive Directors: Zhou Zaiqun, Li Zaohang, President of Bank of China
Directors       Hong Kong Ltd.: Liu Mingkang, Non-executive Directors: Chen Muhua, Anthony Neoh, Alberto Togni, Huang
                Shizhong, Cai Haoyi, Hong Zhihua, Zhang Jinghua, Huang Haibo, Wang Gang, Huang Danhan, Lin Yongze, Independent
                Non-executive Directors: Dr. Lawrence Lau, Lim Huat Seah.
Ownership      Joint-stock commercial bank
               State-owned shares 71% (CIC-Huijin 68%, NSSF 3%)
               Shares held by foreign investors: Li Ka Shing, Asia Financial Holdings, Asian Development Bank… (5%)
               RBS, UBS recently sold their stakes (5% and 1.6%)
               Shares listed overseas 13% (HK)
Business       Investment Banking
Scope          BOC International
               Commercial Banking
               Insurance Business
               Equity Investment
               Asset Management
Overseas       BOC has bought Singapore Airlines's stake in Singapore Aircraft Leasing Enterprise, in 2007 it was renamed BOC
expansion       Aviation.
               20% of La Compagnie Financière Edmond de Rothschild (announced Sept. 2008)
               600 branches and subsidiaries overseas

                              China Construction Bank Corporation (CCB)
General        Founded in 1954 and was restructured into a state-owned commercial bank in 1996.
               CCB is listed both in Hong Kong and Shanghai.
               Total assets 8.7 trillion RMB. Liabilities 9.5 trillion RMB NPL 2.7%
               Market value 180 billion USD
Board of       Chairman: Guo Shuqing, President: Zhang Jianguo, Secretary of the Discipline Inspection Committee: Ms. Xin
Directors       Shusen, Executive Director and Vice President: Chen Zuofu, Non-executive Directors: Wang Yonggang, Wang
                Yong, Ms. Wang Shumin, Liu Xhianghui, Zhang Xiangdong, Ms. Li Xiaoling, Independent Non-executive
                Directors: Lord Levene, Song Fengming, Ms. Jenny Shipley, Ms. Elaine La Roche, Wong Kaiman, Tse Hau Yin
Ownership      Joint-stock commercial bank
               State-owned shares 60% by CIC-Huijin, others Jianyin, NSSF, ABC, Baosteel Group
               Shares held by foreign investors 16.6% by Bank of America, and Asia Financial Holding 5.1%
               BoA sold recently some 3% of its stake (BoA had 10%, then upped at 19.9%, now 16.6%)
Business       Corporate banking, personal banking, and treasury operations. CCB is among the market leaders in China in a
Scope           number of products and services,including infrastructure loans,residential mortgage and bank cards.
               Its corporate banking products and services include corporate loans, trade financing, deposit taking activities,
                agency services, consulting and advisory services, cash management services, remittance and settlement services,
                custody services, and guarantee services. The Company’s personal banking products and services comprise personal
                loans, deposit taking activities, card business, personal wealth management services, remittance services and
                securities agency services.
               Owns 67% in Hefei Xingtai Trust
Overseas       In 2006, CCB acquired Bank of America (Asia), which started in 1912 in Hong Kong as Bank of Canton, and which
expansion       has a subsidiary in Macao.
               Open a number of overseas branches, most recently New York and London

                                        Agricultural Bank of China (ABC)
General        One of the four large state-owned commercial banks established on February 1979. And the only state-owned
                commercial bank which hasn't gone through public stock listing.
               It has been recapitalized with 30 billion USD. IPO agreed by CBRC in June 2010.
               Largest network of outlets (25,000) and work force (300,000) in Mainland China,
               Total assets 7 trillion RMB. Total loans 3.1 trillion, total deposits 6.1 trillion.
               ABC has been historically the most troubled bank with the largest percentage of nonperforming loans (now cleaned
                up at 2.9%).
Board of       Chairman: Xiang Junbo, Executive Directors: Xiang Junbo, Zhang Yun, Yang Kun, Pan Gongsheng, Non-executive
Directors       Directors: Lin Damao, Zhang Guoming, Ms. Xin Baorong, Shen Bingxi, Yuan Linjiang, Cheng Fengchao,
                Independent Non-executive Directors: John Dexter Langlois, Anthony Wu Ting-yuk, Mr. Qiu Dong
Ownership      State-owned 100%. Huijin 50%, Ministry of Finance 50%
Business       Shareholding reform completed January 2009 and got new financial and corporate business license.
               Now the bank is building itself into a modern universal bank that plays a pillar role in serving agro-related sectors,
                with diversified business lines covering both urban and rural markets.
               Agro-related loans account for 40%
               It aims to build an innovative channel for microfinance.
               ABC also got subsides from Government for rural business. Insurance and pension business are also served at rural
               ABC has done well in costal area, such as Zhejing and Jiangshu province, and it aims to strengthen its business in
                capital cities.
Overseas       Overseas branches in Singapore, Frankfurt, Seoul, Sydney and Hong Kong, and three representative offices in
expansion       London, Tokyo, and New York.

                                      Bank of Communications (BoCOM)
General        Founded in 1908 and was restructured into a state-owned shareholding commercial bank in 1986. BoCOM was
                formally incorporated as a state-controlled joint stock commercial bank in 2005.
               Listed on the HKSE on June 23 2005 and SSE May 15, 2007
               Subsidiaries: BOCOM International, BOCOM Insurance, BOCOM Leasing, BOCOM Schroder, BOCOM Trust
               Employees: 70,000
               Total assets 3.5 trillion RMB, total deposits 2.5 trillion RMB, NPL 1.9%
               Market value 35 billion USD
Board of       Chairman: Jiang Chaoliang, President: Zhang Jianguo, Executive Directors: Hu Huaibang, Niu Ximing, Peng Chun,
Directors       Qian Wenhui, Non-executive Directors: Zhang Jixiang, Hu Huating, Qian Hongyi, Peter Wong Tung Shun, Ms.
                Laura M. Cha, Ji Guoqiang, Lei Jun, Yang Fenglin, Independent Non-executive Directors: Xie Qingjian, Ian
                Ramsay Wilson, Thomas Joseph Manning, Chen Qingtai, Dr. Eric Li Ka-cheung, Gu Mingchao
Ownership      Joint-stock commercial bank
               State-owned shares, Ministry of Finance 20.36%, Capital Airports Holding 2%
               Shares held by foreign investors, HSBC 19.9%
               Foreign shares listed overseas 28.47% (China SAFE Investment Limited 6.12%, HKSCC Nominees Limited
Business       BoCOM now provides diversified services in fields such as corporate banking, retail banking, international banking
Scope           and fee-based business
               Corporate banking comprises corporate loans, bills, trade finance, corporate deposits and remittance. Retail banking
                mainly comprises retail loans, retail deposits, credit card and remittance. Treasury comprises money market
                placements and takings, investment in securities, and securities sold subject to linked repurchase agreements
               Fee-based business including settlement & agency, banking card, custodian, funds sales
               Wealth Management offered to high and medium net-worth customers through “OTO Fortune” and “BOCOM
                Fortune” brand.
Overseas       BoCOM has 7 overseas branches and wants to open in Sydney, San Francisco, Taiwan and Ho Chi Min. London and
expansion       Frankfurt representative offices.

                                        China Development Bank (CDB)
General        Policy bank, recently converted into commercial bank (Dec. 2008). After injection of USD 20 billion end of 2007, it
                is awaiting IPO. In 2009 this plan was postponed.
               Founded in 1994
               Development-oriented financial institution of the government
               One of the biggest issuers of bonds in the PRC. Debts issued are fully guaranteed by the central government.
               Total assets close to 4.5 trillion RMB. Outstanding loans of 3.7 trillion RMBNon-performing loan ratio under 1%.
Board of       Governor: Chen Yuan, President: Jiang Chaoliang, Vice President: Zheng Zhijie.
Ownership      Under the direct jurisdiction of the State Council
               Solely State-owned. 50% Huijin (CIC), 50% Ministry of Finance
Business       Support State's macroeconomic policies and assume an active role in raising and channeling funds to alleviate the
Scope           bottleneck restraints to the development of the economy and society.
               Supporting the development of infrastructure, basic industries and pillar industries (Power, Transportation, Energy,
                and Telecommunication.)
               Promoting coordination in regional development and industry restructuring. Promote overseas acquisition, support
                technology innovation, support new rural communities.
               Enhanced support to bottlenecked sectors, including SMEs, housing and medical programs
               CDB has long focused on businesses related to nationally strategic industries and basic public needs. The reform
                strategy, however, forced a rethinking of its lending strategy and business model.
               Launched ABS products in 2006 which showed a promising development in the debt capital and structured finance

Overseas       CDB spent €2.2bn (£1.5bn) on a 3.1% stake of Barclays.

                                The Export-Import Bank of China (EXIM)
General        Policy bank / Non-commercial bank founded in 1994
               Over 10 business branches and domestic representative offices and 3 overseas representative offices in
                Johannesburg, Paris and St. Petersburg
               Total assets 950 billion RMB. NPL 1.28%. Total loans after 2009 reached 600 billion RMB.
Board of       Chairman & President: Li Ruogu, Vice Presidents: Su Zhong, Zhu Hongjie, Li Jun, Liu Liange, Zhu Xinqiang, Chief
Directors       Disciplinary Officer: Gong Jie, Assistant Presidents: Sun Ping, Yuan Xingyong.
Ownership      Under the direct leadership of the State Council
               Solely State-owned
Business       Export credit and Import credit;
Scope          Loans to overseas construction contract and Loans to overseas investment project;
               Chinese Government Concessional Loan;
               International guarantee;
               Lending loans of foreign governments and financial institutions;
               International and domestic settlement and corporate deposits under the loan facilities provided by the Bank;
               Raising funds in domestic and international capital markets and money markets;
               International inter-bank loans, organizing or participating in international and domestic syndicated loans;
               Renminbi inter-bank borrowing and lending and bond repurchases;
               Foreign exchange dealing and approved risk protection Foreign Exchange (FX) business for client;
               Creditworthiness investigation, consultation, appraisal and witness services which are relevant to the Bank’s
Overseas       EXIM along with three other banks provided 19.5 billion USD loan to Chinalco for its stake purchase in Rio Tinto
expansion       Contributes to other overseas investments by Chinese companies.

                            Agricultural Development Bank of China (ADBC)
General        Agricultural Policy bank / Non-commercial bank founded in 1994
               To promote the further development of agriculture and rural economic development
               Total outstanding loans 1.45 trillion RMB. NPL 3.8%
Board of       President: Zheng Hui, Vice President: Meng Xianbin.
Ownership    Under the direct jurisdiction of the State Council
             Solely State-owned
Business     To raise funds for agricultural policy businesses and to undertake the agricultural policy credit businesses specified
Scope         by the Central Government; agriculture-related commercial businesses approved by the regulators and to serve as an
              agent for the state treasury to allocate the special funds for supporting agriculture.
             Loans for agricultural related activities, enterprises, infrastructure construction
             Disburse central government’s funds supporting the agricultural development;
             Handle the deposit business including contractual deposits and inter-bank deposits for the domestic enterprises
             Handle settlement for policy-oriented corporate and institutional customers maintaining accounts with ADBC
             Issue financial bonds
             Money market trading business
             Insurance agency and other intermediate services such as agent settlement, agent collection and payment;
             International settlement for policy-oriented enterprises under import and export account, foreign exchange deposit,
              foreign exchange inter-bank lending, foreign exchange dealing as agent and foreign exchange purchase and sale

Overseas    N/A

                                           China CITIC Bank (CITIC)
General       China CITIC Bank, established in February 1987, is a nationally comprehensive and internationally oriented commercial
               bank. The bank is part of CITIC Group, the largest state-owned conglomerate in China
             Reformed and was renamed "China CITIC Bank" in August, 2005. China CITIC Bank is a wholly-owned subsidiary of
               China International Trust and Investment Corporation (CITIC)
             Listed in SSE and HKSE on April, 2007.
             Total assets, 1.5 trillion RMB
             Employee: 15,000
Board of     Chairman: Kong Dan, Vice Chairmen: He Guangbei, Li Lihui, President: Chen Xiaoxian, Executive Directors: Gao
Directors      Yingxin, Lam Yim Nam, Wong See Hong, Zhuo Chengwen (CFO), Lee Wing Kwai (COO), Li Juizhong (CRO),
               Non-executive Directors: Li Zaohang, Zhou Zaiqun, Zhang Yanling, Independent Non-executive Directors: Fung Kwok
               King, Shan Weijian, Tung Chee Chen, Koh Beng Seng, Tung Wai Hok.
Ownership    Joint-stock commercial bank
             Shares held by state-owned conglomerate 65%
             Foreign shares listed overseas 32% (CITIC International Financial Holdings)
             BANCO Bilbao Vizcaya Argentaria, (BBVA) acquired 10% of CITIC bank and 30% of CITIC International Financial
Business     The Bank is vigorously developing corporate banking business, international business, treasury and capital market
Scope          business, investment banking business, mortgage loan business, personal wealth management business, credit card
               business and private banking business.
             The bank provides corporate banking service and leading international trade settlement business, logistic financing
               business and treasury and capital market business. The Capital Market business provides transaction-sale business and
               asset management.
             personal wealth management, consumer credit and credit card
             In 2008 the Company had 500 branch offices, including 28 first level branches, 17 second level branches and 450
               sub-branches and one finance company.
Overseas    N/A

                                          China Merchants Bank (CMB)
General        Founded 1987 with its head office in Shenzhen, China Merchants Bank is the first share-holding commercial bank
                wholly owned by corporate legal entities.
               China's top credit card issuer
               Listed in SSE on April 9 2002. Listed in HKSE on September 2006
               Assets 1.7 trillion RMB
Board of       Chairman: Qin Xiao, Vice Chairman: Wei Jiafu, Governor: Ma Weihua, Executive Directors: Zhang Guanghua, Li
Directors       Hao, Non-executive Directors: Fu Yuning, Li Yingquan, Hong Xiaoyuan, Edward Ding An Hua, Sun Yueying, Wang
                Daxiong, Fu Junyuan, Independent Non-executive Directors: Wu Jiesi, Yi Xiqun, Yan Lan, Edward Chow Kwong
                Fai, Liu Yongzhang, Liu Hongxia.
Ownership      Joint-stock commercial bank
               Shares held by state-owned legal persons 45%
               Shares listed overseas HKSE 18%
Business       Corporate banking includes the provision of financial services to corporations and institutions, such as lending and
Scope           deposit activities, project and structured finance products, syndicated loans, cash management, investment advice
                and other investment services.
               Retail banking includes the provision of financial services to retail customers, such as lending and accepting deposit,
                credit card facilities and investment services.
               Treasury business includes interbank and capital market activities and trading
               Intensified various marketing campaigns and actively commenced the promotion of cutting-edge products such as
                cash management and online banking services.
Overseas       In June 2008, the Company announced the acquisition of a 53.12% interest in Wing Lung Bank Limited at
expansion       HK$156.50 per share, a Hong Kong bank with branches at Hong Kong, Los Angeles and China Mainland.
               In 2007, the Company was approved to establish its New York branch in New York, the United States, which made
                it the first Chinese bank to open its branch in the U.S. since the issue of the US Foreign Bank Supervision
                Enhancement Act of 1991.

                                        China Minsheng Bank (CMBC)
General        Established officially in Beijing in January 1996, China Minsheng Banking Corp., Ltd. (“CMBC”) is the first
                national joint-stock commercial bank primarily held by non-public-owned enterprises,
               Listed in SSE since 2000
               Total assets 1.4 trillion RMB, deposits 1.1 trillion RMB, loans 0.8 trillion RMB
               NPL: 0.84%, Capital adequacy: 10.8%
Board of       Chairman: Wenbiao Dong, President: Eddie Wang, Executive Directors: Hong Qi, Liang Yutang, Non-executive
Directors       Directors: Zhang Hongwei, Lu Zhiqiang, Liu Yonghao, Wang Yugui, Chen Jian, Ms. Wong Hei, Shi Yuzhu, Wang
                Hang, Wang Junhui, Independent Non-executive Directors: Andrew Wong, Wang Songqi, Liang Jinquan, Wang
                Lihua, Qin Rongsheng, Han Jianmin.
Ownership      Joint-stock commercial bank
               First private bank in China
Business       Engaged in corporate, institutional and personal banking sectors in China.
Scope          The Bank's corporate businesses include loans (75.83% to total loans), note discount (81.27% to total consumer
                deposite), corporate financing planning and wealth management, corporate bank brand such as enterprise finance
                innovation plan, trade financing (outstanding business)and asset custody.
               The Bank's retailing businesses include loans, deposits and bank cards.
               Its e-banking businesses include corporate online banking, personal online banking, telephone banking and mobile
                banking. The Company also involves in financial market business.

Overseas       Acquisition of 20% of UCBH, the holding company for California-based United Commercial Bank. United
expansion       Commercial Bank has $11 billion in assets and 71 branches, mostly in California (one in Hong Kong).

                               Shanghai Pudong Development Bank (SPDB)
General        Shanghai Pudong Development Bank Co. Ltd incorporated on January 9, 1993, is a joint-stock commercial bank
                with its headquarters located in Shanghai.
               Listed in SSE the first bank listed on the Shanghai Stock Exchange in 1999
               Total assets 1.6 trillion RMB, NPL 0.8%, deposits 400 billion RMB

Board of       Chairman: Ji Xiaohui, Vice Chairmen: Xin Chen, Fu Jianhua, Executive Directors: Liu Xinli, Ji Guangheng, Mu Shi,
Directors       Xu Haiyan, Shen Si, Shang Hongbo, Jiang Mingsheng, Non-executive Directors: Huan Jianping, Wei Pengcheng,
                Stephen Bird, Yang Dehong, Pan Weidong, Deng Weili, Ma Xinsheng, Wang Guanchang, Independent
                Non-Executive Directors: Sun Zheng, Li Yan, Liu Tinghuan, Chen Xuebin, Xu Qiang.
Ownership      Joint-stock commercial bank
               Shares held by state-owned legal persons 18% (Shanghai International Group 15.96, Shanghai Int’ l Trust &
                Investment Co.Ltd. 2.79%)
               Shares not subject to selling restrictions 82%. RMB-denominated ordinary shares (Shanghai International Group
                7.6%, Shanghai Int' Trust & Investment Co.Ltd. 4.5%, CITIBANK Overseas Investment Corporation 3.8%)
Business      The Bank's products and services are offered through three business divisions: Personal Banking, featuring the
Scope          Orient Cards, private deposits and private loans; Corporate Banking, including corporate deposit accounts,
               financing, asset custody, annuity and offshore businesses, and Intermediate Business, including credit card
               (cooperate with Citibank) and point of sale (POS) businesses. The bank is aiming to double retail net work,
               preparing for a nationwide expansion. In 2008, the Bank had 35 branches in 50 cities throughout China.
             Pudong Bank has a joint business with Citigroup for a co-branded credit card.
             September 2007, the bank launched a fund management joint venture in Shanghai with French insurer AXA and it
               had also signed an initial pact to set up an insurance venture with French firm BNP Paribas
             The Bank also offers Internet banking and telephone banking services.
             Other financial services include trading of foreign exchange, providing letter of credit services and guarantees,
               acting as agent for insurance and providing safety deposit box services.
Overseas    N/A


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