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21 – 22 September 2006, Kuala Lumpur21 – 22 September 2006, Kuala Lumpur

Opportunities and challenges of globalisation for the (retail) banking sector

Mr. Jiang Jianqing, Chairman, Industrial and Commercial Bank

of China Ltd

“Savings banks: the retail gateway to a global market.

Driving sustainable development”

September 2006

Building a New Retail Bank Through Reform and Innovation

Jiang JianqingChairman, Industrial and Commercial Bank of

China

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目 录

■ Chinese banking industry facing unprecedented opportunities

■ The retail banking market in China is in a critical phase of transformation

■ ICBC’s Initiative to Build the “No 1 Retail Bank in China

I. Chinese Retail Banking Faces Unprecedented Opportunities

Chinese fast economic growth and wide application of IT

technology in recent years have created new opportunities

for the Chinese banks

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I. Economic Growth and Market Reform Laid

Foundation China’s Fast Economic Growth

Since China adopted the reform and opening-up policy, China realized high-speed economic growth for more than 20 years,

From 1978 to 2005, Annual real GDP growth rate was more than 9.6 percent

China has become an engine of world economy

40000

70000

100000

130000

160000

190000

0

2

4

6

8

10

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GDP（ RNB 100 million ）67884.6 74462.6 78345.2 82067.5 89468.1 97314.8 105172 117390 136876 182321

GDPGrowth rate （％） 9.6 8.8 7.8 7.1 8 7.5 8.3 9.5 9.5 9

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

GDP Growth 1996 － 2005 2005 年中国GDP 超过 18.2万亿元，按可比价格计算，

1996 － 2005 年 10年间， GDP 年均增长率达到8.5 ％，已成为世界三大经济增长动力源之

一。

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I. Economic Growth and Market Reform Laid Foundation

Foreign Trade Growth

1978 － 2005 ， China’s foreign trade volume increased from RMB 35.5 billion to RMB 12.7 trillion, with a average annual growth of 24 ％。

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30000

60000

90000

120000

150000

1978 1985 1990 1992 1994 1996 1998 2000 2002 2004

-15

0

15

30

45

60

75

90

Foreign Trade volume Growth rate

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（ I ） Economy Growth and Market reform Laid foundation (continued)

Urban resi dent di sposabl e i ncome per capi taf rom 1978 to 2004

0

2000

4000

6000

8000

10000

人均可支配收入 343. 4 477. 6 739. 1 1510. 2 4283 6280 9421. 6

1978 1980 1985 1990 1995 2000 2004

China’s resident income and deposit grow rapidly

1978 to 2004, urban resident average income per capita grew from RMB 343 Yuan to RMB 9,421.6 Yuan, up by 13.6% annually.

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（ I ） Economy Growth and Market Reform Laid Foundation

China’s savings banks growth and outlook

1978 to 2005, China’s resident savings deposit grew at 27.6% annually, and

banking assets grew from 1980 by 142 folds as of 2005 year-end.

Sound economic outlook and steady market-oriented financial reform lay

foundation for savings banks continued growth and remarkable investment

value.

399.5 2700

140000

374696.9

0

100000

200000

300000

400000

1980 2005

RMB Outstanding Savings Deposit Banking Assets

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（ II ） Diversified resident financial service demands

provide drive for bank growth Resident wealth accumulation and consumer credit demand growth

Continued resident wealth accumulation and escalating demands for investment,

consumption on credit, trading and settlement provide constant drive for savings banks to

grow at diversified directions.

2001 to 2005, China’s consumer lending outstanding grew from RMB 699 billion Yuan to

RMB 2.2 trillion Yuan, up by 33.19% annually; ratio of consumption on bank card to social

consumer goods retail sales grew from 2.97% to 14.29%.

6990

22000

2.97%

14.29%

5000

10000

15000

20000

25000

2001 2005

0.00%

4.00%

8.00%

12.00%

16.00%

Outstanding Consumer Loan Card Spending Ratio

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（ II ） Diversified resident financial service demands provide drive for bank growth (continued)

Resident wealth management demands growth

Sep. 2004, first RMB wealth management product was launched.

By 2005 year-end, RMB and foreign currency wealth management products issued

by banks in China amount to over 20 brands or over 100 products, and personal

customer wealth management accounts record total sum of RMB 100 billion Yuan.

China has become a region of fastest growth in consumer credit, resident trading and

settlement, and wealth management products and services, which provides constant

drive for savings banks diversified growth and service level escalation.

Wealth management

products

Wealth management

products

Prime brands Personal

wealth manageme

nt fund growth

Diversified products and

services

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（ III ） Recapitalization promotes transform for ICBC

ICBC’s corporate governance, asset quality and operational efficiency are

improved fundamentally during state-owned banks recapitalization and

joint-stock reform.

Healthy corporate governance structure and information release

mechanism, “wealth-creating cooperation relations” among stake holders,

asset and financial standing improvements are working together to

change ICBC’s operational and management model.

To seek for competitive advantage enhancement and to improve

shareholder return level and customer service ability abreast of ongoing

transform become the theme to ICBC’s growth in the new era.

II. China’s savings banks are in critical stage of comprehensive transform

Savings banks now faces challenges as financial market opening-up, competition heating, resident demands and distribution channel diversifying. Their service mode and the banking sector landscape is changing considerably.

The fast-growing savings banks faces also practical and critical requirement of comprehensive transform. Business growth and service level escalation are coordinated concurrent with transform.

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（ I ） To transform from savings bank to diversified retail bank

Continued resident income and wealth growth and diversified financial service demands are pushing ICBC to transform:

from resident deposits and settlement service provider to more diversified services provider, and

from traditional savings bank to diversified retail bank.

ShoppingShopping

HousingHousing

CarCar

TravelTravel

EducationEducation

InvestmentInvestment

InsuranceInsurance

•Mortgage loan, on-mortgage loan, social housing fund loan……•Motor consumer loan, comprehensive consumer loan……•Debit card, credit card, comprehensive consumer loan……•Debit card, credit card, insurance……

•Student-aid loan, overseas education set loan, certificate of credit……•Fund, banking-security link, FX trading, bullion trading……•Agent life insurance……

SettlementSettlement •Fund transfer express, inter-city deposits……

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（ I ） To transform from savings bank to diversified retail bank (continued)

Banking services

•deposits•Term deposit•Current account•Payment and settlement•safe

•Motor loan•Consumer loan•Mortgage loan•Credit card

•Personal wealth management•Investment services•Insurance services•Fund services

Savings demand

Financing demand

Wealth accumulation

Income growth

It becomes trend in savings banks growth to:

build diversified service provider according to escalated resident financial service demands and,

to innovate new product and service spectrum including deposits, consumer credit, settlement, wealth management, bank card and e-banking.

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（ II ） Distribution channels diversification

Banking service mode diversification: from physical banking offices to more diversified channels.

Drives: progress of information technology; fast growing e-banking business.

2003 to 2005, personal e-banking customer base in China grew from eight million households to 34.6 million, up by 108% annually.

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（ III ） From standard services to personalized services

Opened-up financial markets and heated competition are pushing ICBC to transform in the following dimensions:

Product-centricProduct-centric Customer-centricCustomer-centric

Standard servicesStandard services Personalized servicesPersonalized services

Product valueProduct value Customer valueCustomer value

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(IV) From domestic to global services

■ Savings bank: important driving force in China’s globalization.

■ From domestic to global financial services: overseas spending, remittance, off-shore investment and global RMB wealth management services, etc.

■ Domestic and overseas customers

■........

■ Off-shore investment

■ Global remittance and Conversion

■ Overseas investment

■Global RMB wealthmanagement services

III. Innovation makes No. 1 retail bank in China

■ As market leader and the largest savings bank in China, ICBC always pays attention to new trend of global saving banks and seeks development in reform.

■ In line with future trend of global retail bank, we believe innovation makes “No.1 Retail Bank in China”, and are transforming ICBC from a traditional savings bank to a modern retail bank that provides more diversified, comprehensive and high-tech financial services.

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(I) Solid foundation to build modern savings bank

By 2005 year-end, ICBC’s tier-one capital is up to RMB 255.59 billion Yuan; the total assets is up to RMB 6,454.1 billion. Its retail banking business tops the peers in terms of personal deposits, personal loan, bank card, e-banking, agency treasury bill and open-ended fund distribution.

By the end of 2005, ICBC has:

Tier-one capital: RMB 255.59

billion Yuan

Total assets: RMB 6,454.1

billion Yuan

Savings deposit: RMB

3,116.6 billion Yuan

Leading Retail Banking

Business in:

Personal deposit and loan

Bank card and e-banking

Treasury bill and open-end

fund distribution

Operating Strength

Operating Strength

Product StrengthProduct Strength

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■ To provide comprehensive financial services including fund, technology, network and intellectual support.

■ To provide comprehensive financial services including fund, technology, network and intellectual support.

■ To promote interacted product-developing covering savings deposit, wealth management and financing products, and to design individualized wealth management and investment plans for different customer segments.

■ To promote interacted product-developing covering savings deposit, wealth management and financing products, and to design individualized wealth management and investment plans for different customer segments.

■ To provide diversified products to meet customer needs, including savings deposit, consumer credit, wealth management advisory, credit and risk appraisal, asset management, trade settlement and e-banking.

■ To provide diversified products to meet customer needs, including savings deposit, consumer credit, wealth management advisory, credit and risk appraisal, asset management, trade settlement and e-banking.

利用雄厚的客户基础、中国境内最具竞争优势的分销实力和

网络体系，

To build diversified and comprehensive modern retail bank To build diversified and comprehensive modern retail bank

(II) To innovate new retail banking products

■ To build modern bank that provides a diversified and comprehensive range of retail banking products.

To leverage solid customer base and the most competent distribution strength and network

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With the most advanced operating system, IT system and settlement network, ICBC aims at first-class high-tech financial service.

Based on strategic positioning for all levels of target customer segments, to establish well-based CRM system and identify brand, content, channel and features of required services to be provided to different levels of customers.

To provide individualized services to all levels of customers on a uniform marketing platform.

To consolidate the leading position as No.1 settlement bank, No. 1 consumer credit bank and No. 1 on-line bank in China, and prioritize high-tech services as new settlement areas and wealth management in domestic and foreign currencies.

To always play leading role in enhancing technical level of financial services in China, promoting consumer credit and improving resident wealth management level in China.

(III) To innovate financial service technology

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Banking outlets + e-banking +self-service devices

more than 20 millionmore than 20 million

over 80% of market shareover 80% of market share

E-banking customers

E-banking trading

(IV) To innovate financial service mode

■ To diversify service channels and make ICBC the largest internet trade enterprise in China through a multi-functional e-banking network.

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(IV) To innovate financial service mode (continued)

Layered banking outlets:

Fortune Management Center – Wealth Management Center – Wealth Management Outlet – Financial Supermarket

Wealth Management Center

Layered business outlets

Wealth Management Outlet

Fortune Management Center

Financial Supermarket

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High-Quality Brand

High-Quality Brand

Elite ClubElite ClubHigh-Quality BrandHigh-Quality Brand

Banking @ HomeBanking @ HomeHigh-Quality BrandHigh-Quality Brand

Peony CardPeony CardHigh-Quality BrandHigh-Quality Brand

Happy LoanHappy LoanHigh-Quality BrandHigh-Quality Brand

(IV) To innovate financial service mode (continued)

Staff and brand:

■Professional individual customer managers

■High-quality brands: Elite Club, Happy Loan, Peony Card and Banking@Home.

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To pushTo push

The social responsibility of retail bank. To create value for customers.

The constructive function of retail bank in building innovative country and harmonious society.

The social responsibility of retail bank. To create value for customers.

The constructive function of retail bank in building innovative country and harmonious society.

To push To push

To pushTo push

Coordinated development of domestic and foreign currencies retail banking. Integration of savings deposit with new products and services like financing

and wealth management.

Coordinated development of domestic and foreign currencies retail banking. Integration of savings deposit with new products and services like financing

and wealth management.

Balanced combination of business growth and restructuring. Effective combination of business range expansion and risk

management.

Balanced combination of business growth and restructuring. Effective combination of business range expansion and risk

management.

To pushTo push Benign interaction between technical upgrade and brand innovation. Balanced combination of business growth and restructuring.

Benign interaction between technical upgrade and brand innovation. Balanced combination of business growth and restructuring.

(V) To innovate financial service concept

Objective: rational, coordinated and consistent development

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Conclusion

China’s savings banks is faced with enormous opportunity, optimistic prospect and huge room of development. Undergoing a strategic transformation, ICBC aims at building a world-class financial service enterprise and welcomes cooperation and communication from around the world on new ways of reform and development for savings banks. And its present reform and development project a brilliant future -- ICBC will provide more comprehensive and high-quality services and maximize values for our customers.

Thank You!Thank You!