The 19th Annual Conference on PBFEAM

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

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. － I. Overview of Taiwan’s Bank Competitiveness and China’s • Overall Competitiveness Latest ranking ─ China is No.19；Taiwan is No.6. 6 IMD China IMD Taiwan 8 11 12 15 13 18 17 16 17 17 18 17 18 22 20 19 20 23 24 26 27 28 29 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Data source：IMD the World Competitiveness Yearbook.

4. I. Overview of Taiwan’s Bank Competitiveness and China’s • Business Efficiency ─ Finance ─Banking efficiency • Taiwan is superior to China in banking sector, including the financial cards, the banking regulation and supporting business activities efficiently.

5. I. Overview of Taiwan’s Bank Competitiveness and China’s • Business Efficiency ─ Finance ─Stock Market Efficiency • Taiwan is also superior to China in the stock markets, excepting the listed domestic companies.

6. I. Overview of Taiwan’s Bank Competitiveness and China’s • Business Efficiency ─ Finance ─Management Practices • Taiwan has well developed VC industry, sufficient financial institutions' transparency and consumer protection, but China still has a long way to go.

7. Ⅱ.Overview of Taiwan’s Bank Competitiveness and China’s • Business Efficiency ─ Finance ─Availability of Skills and Education • China has more facilities to attract foreign high-skilled people than Taiwan, though Taiwan has more finance skills available.

8. 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. Unit：U.S. $Trillion Data source： July 2005 & July 2010, The Banker

9. Top 1000 World banks in Taiwan and in China • From the view of bank size, Taiwan’ bank is far behind of China. Unit：U.S. $Trillion 單位：百萬美元 Data source： July 2010, The Banker

10. I. Overview of Taiwan’s Bank Competitiveness and China’s • Taiwan’s bank size and China’s • Taiwan’ bank assets is far below the level of the world’s top 100 bank’s. Taiwan’s bank Unit：U.S. $ million The Level of the world’s top 100 bank’s assets 175,397 • Data source：THE BANKER, July 2010

11. I. Overview of Taiwan’s Bank Competitiveness and China’s • Taiwan’s bank size and China’s • China’s top 10 bank assets is above the level of the world’s top 100 bank’s. China’sbank Unit：U.S. $ million 175,397 The Level of the world’s top 100 bank’s assets • Data source：THE BANKER, July 2010

12. I. Overview of Taiwan’s Bank Competitiveness and China’s • The Scale of Asia Countries’ Leading Banks • All of Japan, China, South Korea and Singapore’s leading bank assets are above the level of the world’s top 100 bank’s. • Data source：THE BANKER, July 2010

13. I. Overview of Taiwan’s Bank Competitiveness and China’s • Domestic Banks’ ROA in Taiwan • Taiwan’s Domestic bank’s ROA is below the level of the lowest international standard. % • Data source：http://www.banking.gov.tw Year

14. I. Overview of Taiwan’s Bank Competitiveness and China’s • Domestic Banks’ ROE in Taiwan • Taiwan’s Domestic bank’s ROE is still below the level of the lowest international standard. % • Data source：http://www.banking.gov.tw Year

15. I. Overview of Taiwan’s Bank Competitiveness and China’s • Emerging-market Countries’ Market Share of 5 Largest Banks in Asia • China and Taiwan’s 5 largest banks’ market shareis 51.6% and 38.9% respectively. % Data Source: EM Banking System Datawatch,FitchRatings,25 November 2010. All data as at end-H1 10.

16. I. Overview of Taiwan’s Bank Competitiveness and China’s • Emerging-market Countries’ State Ownership Banks/Sector in Asia • China and Taiwan’s state ownership banks over banking sector is 51.3% and 53.6% respectively. % Data Source: EM Banking System Datawatch,FitchRatings,25 November 2010. All data as at end-H1 10.

17. － I. Overview of Taiwan’s Bank Competitiveness and China’s • Business Environment • 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. • Taiwan is still superior to China in BERI’ rating. Data source：Business Risk Service, BERI, 2008~2011.

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

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

20. Ⅲ.CONCLUSION • 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.

21. THANK YOU！