INTLCOUNCILChina's Banking IT & Services Industry

U.S.
Opportunities in China’s
Finance IT & Services Market
and CIFTEE 2005
Ida Peng
Commercial Specialist
US Embassy Beijing, China
July 2005
Outline
I. Changes on the Chinese banking sector
bring opportunities to U.S. companies
II. How the U.S. Commercial Service can
help with the export of U.S. products and
services
III. CIFTEE 2005
8/2/2005 US & FCS Beijing, China 2
China’s Banking System
• Policy Makers in banking sector: PBOC, CBRC
• ‘Big Four’ Commercial Banks: ICBC, CCB, BOC,
ABC
• Three Policy Banks: SDB, Ex-Im, ADB
• 11 Second-tier Shareholding Banks
• 112 City Commercial Banks
• 211 Foreign Banks
Highlights 2004 - 2005
• The reform on the ‘Big Four’ Banks in China: from
state-owned to shareholding; to be listed on the
international market
• Foreign investment on the Chinese commercial
banks, especially the recent agreement between
Bank of America and China Construction Bank
Highlights 2004 - 2005
• New Law on the ‘Electronic Signature’
• National Data Integration Work as instructed by
the PBOC
• Establishment of CBRC in 2004
• Competition between Chinese Commercial
Banks and Foreign Banks: on-line banking will be
a focus area
Foreign Investment in Chinese Commercial Banks
Chinese Commercial Bank Foreign Commercial Bank Share Percentage
China Construction Bank Bank of America Investment by stages to 19.9%
Bank of Communications HSBC 19.9%
Shanghai Pudong Development Bank CitiBank 5% (optional acquisition will be 24.9%)
Shenzhen Development Bank New Bridge Capital 17.89%
Industrial Bank Hengsheng Bank 15.98%
IFC 4%
Singapore Government Direct 5%
Investment
Bank of Shanghai HSBC 8%
IFC 7%
HSBC 3%
Bank of Beijing ING Group 19.9%
IFC 5% (under plan)
Xian City Commercial Bank Bank of Nova Scotia 2.5% (will increase to 12.4%)
IFC 2.5% (will increase to 12.5%)
Jinan City Commerical Bank Australian Federal Bank 11% (optional acquisition to 20%)
Hangzhou City Commercial Bank Australian Federal Bank 19.9%
Chinese Banks’
National Data Integration Work
• Banks’ Data Center construction involves database
implementation plan, business application system
plan and telecom network system plan, etc.
• The majority of core products used in the data
Center construction are foreign brands, including
domain system, operating system, database
system and telecom system, etc.
• Safety concerns after data integration
Main Areas of Concern in 2005
• On-Line Banking Technology: foreign banks and
Chinese banks all put e-banking as future
development focus
• Network Information Safety
• Risk and Management Information Systems
• Accounting/Card/Capital Management Systems
• New Generation Core Banking System
• Finance IT consultancy service
PBOC’s Plan:
• Small Amount Payment System Improvement
• National Individual Credit System Construction
• National Reserve System
• Anti Money Laundering Monitoring and Analysis
System
CBRC’s Plan:
• Banking Supervision System
• CBRC Internal Network Construction
• Office Automation
Finance IT Market Size
Billions In 2004, the total investment in China’s
finance IT industry was approximately
! 25 3 billion US$, an increase of 5%
compared to Year 2003. The
! 20 investment in the banking IT was
approx. 2.6 billion US$, an increase of
! 15 6.2% compared to Year 2003.
! 10 In 2005, the total finance IT investment
will reach approx. 3.3 billion US$,
!5 among which the banking IT will
!0
reach approx. 2.8 billion US$, an
Year Year Year increase of 7.7%; insurance IT
2003 2004 2005 investment will reach approx. 16.7
million US$, an increase of 6.2%;
Banking IT securities IT investment will be
Securities IT approx. 31.8 million US$, an increase
of 15.9% compared to Year 2004.
Insurance IT
Infrastructure Environment for
E-Banking Development
• By June 2004, the number of on-line PCs reached 36.3
million, with 87 million PC users in China, ranking second in
the world, next to the U.S.
• In 2005, it’s expected that mobile users will reach 300 million,
fixed telephone sets will reach 500 million, and on-line users
will reach 200 million.
• Such increases will promote E-Banking development such as
on-line banking, telephone banking and mobile phone
banking.
• Example: ICBC’s E-Banking clients have exceeded 20
million.
Finance Industry Clients’ Needs in 2005
(Trend Analysis by Huawei 3Com)
• Practical & reliable products preferred
• Whether or not the products can satisfy with its personalized
needs
• Safety – some banks (especially those big banks that have
finished their national data integration work) have named Year
2005 as a ‘safety year’, to focus on its safety instruction and
maintenance work
• Pay more attention to after-sale service as provided by the
suppliers
• Not in a hurry to input most advantageous technology – keep a
close eye on it though, such as the next generation net
technology MPLS VPN and IPv6, etc.
Who makes purchase decision?
• Varies among Chinese banks
• Main decision maker will be the Vice President/General
Manager in charge of science & technology department
• Business department and accounting department also have a
say on the purchase decision
• For national, large transactions, head office will make decision
• For small amount transactions, provincial or city branches can
make decision, but needs to be approved by the head office.
Key Chinese Governments
in Charge of Finance IT
• PBOC
Its website is: www.pbc.gov.cn
PBOC drives the demand of the Chinese commercial banks for
banking technology, such as the national data integration work,
national credit bureau establishment. PBOC is working on the
finance IT standards.
• CBRC
Its website is: www.cbrc.gov.cn
Note: we’ll introduce PBOC or CBRC senior officials to our U.S.
Pavilion exhibitors during the VIP Session of CIFTEE show.
Case Studies
• Huawei 3Com’s joint laboratories and working groups
with big commercial banks and system integrators
• SCO (China), owner of Unix operating system, built up
strategic partnership in Nov. 2004 with Iomega, data
storage supplier, to share client resources, market
promotion and provide more solutions to the clients of
the both sides. The partnership strengthened the safety,
reliability and stability of the SCO Unix operating
system.
Case Studies
(continued)
• IBM and Cisco jointly set up a banking solution
cooperation Center in Beijing in November 2004.
Practical Tips to Remember
UNDERSTANDING THE MARKET
• Visit China to understand opportunities – Exhibit at the major
industry show
• Know and sell what the market demands
• Localize your products
• Conduct due diligence and market research before entering
China
• Find a strong and experienced partner
MANAGING REALISTIC EXPECTATIONS
• Have a long-term market strategy
• Have an ‘exit’ plan
Challenges
• IPR Infringement
• Transparency
• Developing Regulatory System – no complete law
yet on new products, such as on-line banking
• Corruption
• Protectionism/Over Regulation
• Lack of Credit Information
• Different Accounting System
• Different Culture
Improvement in Market Conditions
American Chamber of Commerce Survey Results 2004
• 16% of members say they
are “very profitable”, up from
Very 10% last year
Large Loss
Breaking Profitable
4%
16%
• 57% say they are profitable,
Even or
down from 65% last year
Small Loss
23% • 23% say they are “breaking
even or have a small loss,”
22% in 2003
• Only 4% say they have a
“large loss”, the same as in
2003
Profitable
• 70% say the climate for US
57% business improved in 2003
• 81% say they will expand
overall business activities in
the coming year
U.S. Exports to China
Jan – Dec Year on Year
35.00 34.70
30.00 28.40
USD (Billion)
25.00
22.10
20.00 19.20
16.30
15.00
10.00
5.00
0.00
2000 2001 2002 2003 2004
Participating in Tradeshows is
an important way to establish
contacts and presence
Emphasis on relationship
and direct contact
China International Financial
Banking Technology & Equipment
Expo 2005
(CIFTEE 2005)
September 18 – 21, 2005
Beijing Exhibition Center
U.S. Pavilion at CIFTEE 2005
September 18 – 21, 2005
• Largest finance IT show in China is organized by
the PBOC annually since 1993.
• Visitors include senior officials in the science &
technology, business and accounting department
of the Chinese commercial banks nationwide.
• U.S. Embassy & PBOC’s agreement on introducing
VIPs to the U.S. Pavilion Exhibitors during VIP
session at CIFTEE.
Products to be Exhibited
1. Interbank clearing and settlement systems
2. New generation banking transaction systems
3. Securities exchanging systems
4. System integration technology & products
5. Bank card technology and products
6. ATM & banking automation
7. POS
8. Cash/check processing equipment
9. Safe guard robotized system in bank
10. Anti-counterfeiting technology and products
Products to be Exhibited
(continued)
11. Information security technology & products
12. Digital/voice/video technology and products
13. VPNs (visual private network) & wireless network system and
products
14. Business continuity & recovery solutions
15. Data warehouse technology and applications
16. Multimedia technology & products
17. OA systems
18. Managerial information systems & financial information
service systems (call centers)
19. Test/evaluation/supervision of financial application system
20. Others
US Pavilion at CIFTEE 2005
An unique opportunity for leading American
companies to truly make an impact at such
international exhibitions in China.
Website:
www.ciftee.com.cn
www.buyusa.gov/china/en/ciftee2005.html
Comprehensive Package
• Fully furnished, nine square-meter booth(s)
• A prime location on the expo floor as part of a
‘pavilion’ of representative US companies
• Pre-show region-wide marketing campaign to buyers
• One-on-one briefing from a U.S. Embassy commercial
representative
• On-site counseling and support throughout the show
CIFTEE 2005
• PLACE: Beijing Exhibition Center, China
• DATES: September 18 - 21, 2005
• COST OF BOOTH: USD 3,690 for a 9 square
meter booth (3m x 3m) within a 14-booth USA
Pavilion
Contact Information
• Ida Peng, 105 Export Assistance Centers in the U.S.,
US Commercial Service Beijing e.g.:
Tel: +86 (10) 85296655
• James Mayfield
Fax: +86 (10) 85296559 San Francisco, CA
Email: aiqun.peng@mail.doc.gov Tel: (415) 705-2282
http://www.buyusa.gov/china/en Fax: (415) 705-2299
Email: James.Mayfield@mail.doc.gov
http://www.buyusa.gov/sanfrancisco/
• Zhang Liwen,
CIFTEE Office • Keith Hwang
Tel: +86 (10) 64649714 San Jose, CA
Email: zhang_lw@ciftee.com.cn Tel: (408) 271-7300 x 110
http://www.ciftee.com.cn Email: keith.hwang@mail.doc.gov
• Shakir Farsakh
New York, NY 10005
Tel: (212) 809-2682
Fax: (212) 809-2687
Our Website
www.buyusa.gov/china/en
Your Success is Our Concern!
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