ICBC Continued to Expand Overseas

As more and more China enterprises head to the world, ICBC who has a wealth of customers in China, also continue to expand their overseas branches. Currently, ICBC's network of overseas organizations has already taken shape. Assets overseas continues to increase, operation efficiency is improving steadily.

Cross-country operations strategy has achieved phenomenal results. As at end of Sept 2005, ICBC has 16 overseas organizations, of which, 8 branches, 3 wholly-owned bank, 2 shareholding companies, 3 representative offices, standing a total of 100 overseas subsidiaries. At end of Sept 2005, total assets of ICBC overseas organizations reached 22.

9 billion USD, or 32.8% of total ICBC foreign exchanges assets. First 3 quarters of 2005, ICBC overseas organizations accomplished a total of 104.64 million USD carrying profits (profit before tax after reserve allocation), or 14.8% increase compared to last year. Furthermore, assets quality of ICBC overseas organizations is also improving.

At end of Sept 2005, according to statistics on classified 5-level, rate of non-performance loan in ICBC overseas organizations is only 0.92%, balance of bad-debt reserves is 165.13 billion USD, coverage of reserve allocation reaches 128.4%. Besides, ICBC actively promote the change of type of overseas services.

Adjustments and optimizations are made incessantly on business structure. Operation efficiency is further enhanced. Intermediary services and retail services are developed in muck quicken pace while maintaining existing advantageous services. In the first three quarters of this year. ICBC overseas organizations have realized 60.

89 million USD of intermediary services, or 21.6% of net operating income.

Aiming at international business, ICBC established joint-venture bank with overseas organizations ever since its inception, an initial attempt in cross-country operation. ICBC participated in establishing China first joint-venture bank -- Xiamen International Bank in 1985. In 1992, ICBC jointly ventured with Banque Nationale de Paris to establish Shanghai Paris International Bank, jointly ventured to establish Huashang Bank in Shenzhen in 1993.

In 1996, ICBC co-operated with Korea First Bank to set up Qingdao International Bank. Looking Back, JV Banks have played an important role in training ICBC personnel and in introducing advanced management experiences from foreign commercial banks. Further, after more than 10 years of development, JV banks also achieved substantially.

However, as China continued to increase its level of openness to the world, such operating style as JV Bank started to show its shortfall. Therefore, while actively promoting the development strategy of cross-country operation, ICBC will gradually move out of JV bank operation in steps, with emphasis on main development points and under principle of optimizing the allocation of resources.

Attention will be changed to establish ICBC own overseas network instead.

Since the establishment of the first overseas representative office in Singapore in 1992, (promoted to Branch in the next year), ICBC is actively promoting cross-country operation strategy. After more than 10 years of efforts, ICBC owned a number of subsidiary branches in major international financial centers through establishment, participation in capital to own shares, and shareholding.

A comprehensive banking service scheme with co-existed wholesale and retail banking services, investment and commercial banking services was thus in place. In the choice of setting up the organization, ICBC has gradually changed from just setting up subsidiary organization to merge and acquisition. In particular, through a series of capital operation in Hong Kong, ICBC's overseas business was remarkably improved.

Scale of business was double. Organization network expands quickly. In July 2000, ICBC successfully acquired HK Union Bank and reorganized as ICBC Asia Co. Ltd ("ICBC Asia" in short). In July 2001, ICBC re-group ICBC HK and ICBC Asia to reposition the direction of business development of ICBC Asia and HK Branch.

Leveraging ICBC domestic's resources advantages in network, customer foundation, capital base and Clearing System. ICBC Asia worked with domestic organizations to develop overseas markets to offer all-in-one cross-regional services for customers. This move soon became the driving engine for ICBC to implement its cross-country development strategy, the platform for capital market operation and the flagship for overseas business.

In December 2003, ICBC Asia acquired Huabi Fudong Bank, a Bank from Belgium Futong Group. ICBC scale was further expanded with number of branch network increased to 42. ICBC jumped to the 6th Bank in the List of Hong Kong Banks in terms of total assets. This is the first case of China Bank to acquire a European Bank overseas.

Acquisition was highly recognized in the market. Shares of ICBC Asia were then increased dramatically. Further, ICBC also establish business relationships with many financial institutions across the World. Until the end of September 2005, ICBC has established corresponding banking relationships with 1093 banks in 110 countries.

Service Network has reached all corners of the world.

While ICBC oversea organization network is expanding, at the same time, all ICBC overseas business organizations strive to develop large important customers by way of timely grasp the opportunities in industry policy. Selective efforts are spent in strengthening the customer marketing and credit release in such industries as public utilities, manufacturing, power, post, telecommunications, finance and real estate.

Earnings and market reputation of ICBC services are continued to improve. In Hong Kong, ICBC successfully take the lead to organize syndicate loan to East Shenzhen Water Supply Project. Also, ICBC actively participated in the syndicate loans with a group of local customers such as HK Cheong Kong Group.

Sun Hung Kai, HK Telephone Co. Ltd., China Merchants Group, and HK Airport Management Group. In Korea, ICBC established stable business relationships with such large multinational Corporations as Hunydai, Samsung, LG, Puxiang Railway in trade finance, loan commitment. In Europe, ICBC participated in syndicate loan of Tier 1 market in French Teleocm, as well as wide co-operation with such reputed companies as Benz, Mercedes, Simens, Deutch Telecom, BOSCH, French DIOR in trading settlement, syndicate loan and consultancy services in conducting business in China.

Development trend in financial industry showed that more and more financial institutions choose to adopt the strategy of following the ride of industry expansion to reorganize the global presence. In recent years, multi-national banks are in common to follow the customer, serve the customer. In this regard, ICBC fully manifest its advantages by developing foreign business through domestic and overseas branches working together.

Subsequently, close business relationships were established with headquarters of numerous multi-national companies to provide them and their overseas subsidiaries quality and highly efficient global financial services. Further, ICBC has spent huge exploratory efforts in supporting China Enterprise to "go out to the World".

Under China Financial Policy Framework, ICBC has successfully helped a group of China Enterprises to solve the problem of overseas financing through innovative products and improved services. Currently, ICBC not only offer to Enterprises such financing products as direct loan, export credit, foreign guarantee, syndicate loan set-up, but also through overseas branches to offer overseas companies or project companies such innovative products and financial services as "guarantee by China, lending overseas", collection for listed companies and shares interests distribution.

Since this year, ICBC strictly adhere the guidelines of scientific development. Technological moves are much quicken in overseas. Based on the established overseas data centers, continued efforts and resources will be spent in technological research and development to improve e-management in overseas branches.

Under the great support of technological strength, ICBC has successively launched overseas such services as "Pre-settled remittances", "Euro-China Link", "China-Korea Deposit-Remittance Link". "Global Express Remittance", a brand that ICBC created through full co-operation between domestic and overseas branches, has helped ICBC exert much influence in international market and bring a new profitability growth point to ICBC as well.

In order to further complete the management scheme of "Vertical Management, Coordinated unification" for overseas organization, ICBC set up Overseas Organization Management Department in 2004. This is a driving-seat department to fully implement the cross-country operation strategy, a department to manage overseas organization, as well as a hub for coordinating all internal ICBC departments to strengthen the management of overseas branches and promote the inter-workings between domestic and foreign services.

In internal control, since 2004, ICBC has successfully instituted a series of Systems and Practices in overseas organization operation management, foreign credit services evaluation, credit and approval. An organization framework and operating mechanism in risk management has been in place through set up and operation of risk management committee in overseas organization.

Overseas branches are guided through in how to establish a standardized corporate governance and operation mechanism through strengthening internal control in order to form a complete, mutual-supportive and mutual-constraint management control scheme. Risk control was integrated into every business-processing step through drilling down the management practices on all types of services.

Performance reviews are enhanced through improvement in incentive mechanism, so that comprehensive and fair review can be conducted on overseas branches. Guidance is given to overseas organizations to scientifically adjust operation strategy for good development through continued improvement in credit management and business index scheme.

Moreover, ICBC is dedicated to establish a complete internal control scheme for domestic and overseas branches to increase the management and monitoring all kinds of its operation risks. All these moves will make overseas business to be included under unified standardized management.

ICBC Spokesman told reporters that, during 2005, ICBC will stick to State Council's requirement in improving the standard of opening to the outside and in implementing the development strategy of "go out to the world". More overseas branches will be soon established to offer quality, highly efficient financial services for China overseas enterprises.

Besides, under the guidance of Banking Regulatory Commission, internal management will be strengthened to strictly control risk to promote the healthy growth of cross-country operation. Under cross-country operation strategy, ICBC will continue to follow the principle of "Increase the base in Asia, strengthen the base in Europe, making breakthroughs in America".

According to the real situation in different countries and regions, a global operation network of clearly-defined, rational distributed, covering all major financial centers and China main trading regions will be established through setting up different types of organizations as subsidiary banks, branches, shareholding institutions or representative offices.

So that ICBC integrated competitiveness can come into full play.

In Asia, ICBC will actively attempt to enlarge market scale through such merger and acquisitions, reorganizations, or inter-change of equity. Leveraging China's influence in Asia Pacific and combining the trading relationship developed between China with South East Asia countries, further market exploration efforts will be spent in East Asia, South East Asia, in particular under the co-operative framework of "10+1","10+3".

In Europe, works will be finished as soon as possible to upgrade Moscow Representative Office, and use the upgraded Moscow subsidiary bank to spread to Soviet Independent Countries. Advantages of one single EU Passport should be fully utilized to expand subsidiary branches in batch and in periods. Time should not be missed in entering Eastern Europe market in order to complete the strategic layout of branches in Europe.

In America, opportunity should be seized in ICBC's shareholding restructuring to make a breakthrough in setting up operational entity in US. Further, study will be conducted in ways in entering Latin America market. Subsidiary branches should be set up in those great potential new emerging markets, which have close trading relationships with China.