CEOROUNDTABLE CHINA DAILY WEDNESDAY MARCH 21, 200715 Witnessing the dawn of a new partnership A ringside view of gradual changes in the banking sector

By Dicky Yip There are nearly 200 for- eign banking institutions in China. The expansion of I was fortunate to have worked their products and services for a foreign bank as well as a will bring both opportunities domestic bank in the past four and challenges to players in and half years and witness the growing consumer bank- the gradual opening up of the ing sector. banking sector since China There’s no doubt that the became a member of the World personal wealth of individuals, trade Organization (WTO) fi ve especially those in major cities, years ago. is growing twice as fast as the During my stint as the China gross domestic product, and the CEO in HSBC, I witnessed the demand for new products and regulators’ well-planned and services are increasing virtu- fair approach in inviting foreign ally daily. banks to offer more services to Given the limited access of Attendants deliver speeches at the 31st China Daily CEO Roundtable. (From left) Vivek Arora, IMF’s senior resident representative in China; Huang Yi, director- a wider variety of customers in local residents to international general of CBRC’s Supervisory Rules and Regulations Department; Dicky Yip, executive vice-president of Bank of Communications; and Qi Bin, director-general of more cities. investment instruments, es- CSRC’s Research Center. The changes initiated by pecially in the retail market, the China Banking Regulatory banks will take advantage of geographical locations, and Commission to every window they could easily erode local modernize the provided by banks’ seemingly established Excess liquidity a headache for central bank banking sec- There’s no doubt that the regula- advantages. tor were being the personal wealth tors, such as In preparing for the complete A sizzling economy, infl ationary to issue more local currency public services such as pen- implemented the latest QDII opening up of the market, the risk and asset price bubbles — all to absorb it, thus resulting in sions, healthcare and educa- successfully of individuals, (qualified do- cooperation of HSBC and Bo- possible results of too much li- the excess liquidity. And the tion. When the social security by domestic especially those mestic institu- Com brought benefi ts to each quidity, one of the thorny issues People’s Bank of China must system improves, people will be banks, spear- tional investor) other, their shareholders and currently facing China. To fi nd keep a watchful eye on the pos- more willing to spend money. headed by Bank in major cities, is initiatives. customers. a way out, China Daily spoke sible impact of excess liquidity of Communica- growing twice as Foreign HSBC’s contribution from to Ba Shusong, a renowned on prices and investments. : Economists offer dif- tions (BoCom), fast as the gross banks will China business last year more economist with the Develop- ferent proposals to restructuring bring their than doubled from a year ago to ment Research Center of the : How can excess liquid- Qaddress the problem of their balance domestic product. international $700 million, with 70 percent State Council, the government’s ity be tackled? And what excess liquidity. What’s your sheets, partner- experience in coming from strategic partners think-tank. Qproblems does it cause? viewpoint? ing with major this area and in China. BoCom reported 33 A: To reduce liquidity, we A: In the short term, the international banks and fl oat- will most probably work with percent growth in its net profi t : What is the major source must cut the savings ratio. central bank can absorb ex- ing their shares in the Hong local partners to bring their after tax to 12 billion yuan in of excess liquidity in Chi- From the perspective of the cess liquidity by increasing Kong stock exchange. products to a wider client base. 2006 and the non-performing Qna’s banking sector? balance of payments, too much above 40 percent or higher in the required reserve ratio, I had a ringside view of the Large retail banks that will be in- loan ratio was the lowest in its A: The direct trigger is liquidity is caused by the trade recent years. launching central bank notes pace and scope of the changes corporated in China soon will ex- history. China’s ballooning foreign surplus and foreign investment. The key to cutting the sav- and controlling commercial taking place — way faster than pand their network of branches Retail customers gained reserves brought about by But from an economics angle, ings ratio is to reduce govern- bank loans. other fi nancial markets, notably and build a mass-market brand from the international credit its continuous trade surplus overly high savings is the key ment and company deposits. For the moment, raising the Hong Kong. for themselves. card that HSBC and BoCom and the infl ow of foreign in- reason. The economic formula Individual savings, in fact, required reserve ratio is the The recent promulgation of Although domestic banks co-branded as well as the high vestment. China’s foreign re- states: “Investment - Savings have been gradually dropping most effi cient way. In fact, to new rules at the fi fth anniver- have advantages of scale return from the QDII products serves, which had exceeded 1 = Trade surplus”. If China’s in terms of the broad picture. curb the ever-growing money sary of China’s entry into the in terms of branches and by using investment vehicles in trillion yuan at the end of last savings ratio is not reduced, But government and company supply, the central bank raised WTO was the culmination of the customers, it will be a chal- Hong Kong and elsewhere. year, will probably maintain even if the rapid growth of deposits continue their rapid the required reserve ratio for move toward granting full and lenge for them to leverage an annual growth rate of no investment is under control, growth as a result of enhanced commercial banks three times equal access of foreign banks to those advantages. Foreign The author is executive less than $200 billion. the trade surplus will continue tax revenue and profi tability. in 2006, and further increased the estimated 12-trillion-yuan banks are focusing on cer- vice-president of Bank of The skyrocketing foreign re- to soar. Statistics show that Therefore, we suggest more it in January. Each rise could consumer deposit market. tain customer segments and Communications serves force the central bank China’s savings ratio has been government savings go to freeze 150 billion yuan.

The 31st China Daily CEO Roundtable Next step: break free from the pack Honorary Chairman Director –general of Supervisory Rules Dr Huang Yi & Regulations Department China Banking Regulatory Commission By Jing Ji they want, he said. Although are a good fi t with the bank’s Honorary Co-chair banks already focus on this brand and service environ- VIP category of customers, Sze ment, Sze said. Banks need Mr Dicky Yip Executive Vice-President Bank of Communications Major domestic and foreign said, “They fail to see that not to take a systematic approach Keynote Speakers banks have adapted well to the all VIP customers are created to identifying and developing opening up of the banking sec- equal. For example, some VIPs talented employees through- Dr Vivek Arora Senior Resident Representative in China IMF tor, but to break free from the could be expatriates working for out the organization. China’s Mr Qi Bin Director-general of Research Center China Securities Regulatory Commission pack they must micro-manage multinational companies; some growing economy has seen Honorable Moderator processes to gain the competi- could be C-level executives in bank employees leave for tive advantage in the next fi ve large China enterprises. Each greener pastures because they Brandon Ho-ping Lin Mr Zhu Yinghuang Editor-in-Chief Emeritus China Daily years. segment has different needs.” were not receiving the career- Moderator So said Norman Sze, man- He said management must planning support they sought, aging partner with the China ask: Are we failing to maximize Sze said. This is not helped by Mr Alexander Wan Executive Editor China Daily CEO Roundtable consulting practice of Deloitte revenue because we provide the demand for new talent outstrip- Delegates Touche Tohmatsu. same wealth management ser- ping supply. “Forward-looking Mr Barry Livett Chief Executive Abacus Corporate Finance Limited Sze made the remarks on vice to all our VIPs? banks need to embrace a the sidelines of the China Daily “If the answer is yes,” Sze talent-management approach Dr Brian Murray Managing Director, Research, Asia AIG,Research CEO Roundtable sponsored by said, “management needs to that looks holistically at train- Banca Intesa S.p.A. Beijing Representative Deloitte, one of the global Big get complacency out of the ing, performance management, Dr Leonardo Dini Chief Representative Offi ce Four accounting fi rms. way and raise the urgency for and workforce planning.” Mr Chun-chun Li Managing Director/General Manager Bank of America Sze said banks should re- Sze said an increasing focus think their growth strategies on retail business is the key Ms Yan Xiaoyan President Bank of Beijing and give up product innovation Banks should reason training has never Prof Tan Yaling Senior Economist Bank of China in favor of process and service rethink their growth been more important. “Banks Chief Representative to China Bohai improvements. “Deloitte es- need to train branch staff to Ed Zhang Ms Elizabeth Chua Bank, Standard Chartered Bank/ Vice China Bohai Bank timated the world’s top 100 strategies and focus not only on processing Chairman, China Bohai Bank fi nancial services companies give up product transactions, but more impor- Ms Guo Yuhua Producer, BizChina CCTV 9 invested a combined total of tantly on selling sophisticated nearly $11 billion a year in innovation in fi nancial products. Mr Laurent Tournier Chief Representative Credit Agricole Asset Management Ltd product development,” Sze favor of process Frontline staff need to Mr. Ed Zhang China News Editor China Daily said. “Yet their products are and service be able to explain and sell rarely differentiated and com- a broader range of complex Mr Richard Leung Country Head, China DBS Bank (Hong Kong)Limited petitors quickly copy those improvements. products, including securities Mr Norman Sze Managing Partner Deloitte Consulting (Shanghai) Co Ltd that are.” Process and service and insurance offerings. They innovations, however, focus need additional training in Mr Shin Bong Kil Minister Embassy of The Republic of Korea on simplifying operations and change, perhaps by comparing sales techniques — engaging Ms Charlene Chu Director and Head of Banks - China Fitch Ratings giving customers what they the bank’s market share of customers, probing to learn really want. “These types of high-value clients against its their needs, fi nding solutions, Regional Managing Director, Asia Franklin Templeton Investments (Asia) Limited Mr Jack W. Lin Institutional innovations also tend to be peers.” closing sales.” Development ef- Financial Counsellor/Deputy Head of much harder for competitors Having identifi ed target seg- forts should also cover branch Norman Sze Mr Jean-Patrick Yanitch French Trade Commission French Embassy in Beijing to replicate and so give a more ments, banks must build an managers, who play a critical Ms Guo Tehua CEO ICBC Credit Suisse Asset Management Co Ltd enduring advantage.” emotional bond and long-term role in motivating and encour- Sze said banks needed to relationships through improved aging the best people to stay. Mr Bruno Houdmont Executive Director, Bank of Beijing ING China commit to enhancing the cus- service. Sze suggested banks Addressing risk management tomer experience. “Process copy successful retailers by concerns, Sze said not only Mr Zhang Jingzhi Chief Representative Norddeutsche Landesbank Girozentrale Beijing Representative Offi ce and service innovations also instilling a customer-oriented would banks need to answer Dr Brandon Ho-ping Lin Partner SAIF Partners/SB Asia Investment Fund tend to reduce complexity and approach across all elements to stakeholders, they would cost. They are likely to prove of their operation. Also, banks also have to comply with the Head of Financial Institutions, China, Ms Lyn Kok and Branch Manager, Beijing Standard Chartered Bank themselves the most effective should use technology to regulatory requirements of levers to achieve sustainable analyze customer data to offer the China Banking Regulatory Ms Jenny Ma Vice-President Tian Hua Capital growth and differentiation “what will sell”, as against the Commission, the China Secu- Mr Andrew Mankiewicz Chairman Tozai Capital from the competition.” traditional approach of offering rities Regulatory Commission Process and service innova- “what we want to sell”. and the Ministry of Finance. Chief Representative, Visa International Ms Vivian Zhao (AP) Beijing Offi ce Visa International tions show their worth when Much of a bank’s customer- He said an integrated approach banks determine their most relationship success will come to company-wide risk manage- Mr James Wu Chief Representative WestLB important customers and what down to having employees who ment was needed. Yan Xiaoyan

Shin Bong Kil Guo Yuhua Bruno Houdmont Tan Yaling Guo Tehua Richard Leung Elizabeth Chua