Q Bank of China is the most internationalised bank in China, with branches and subsidiaries in 28 countries. As domestic competitors move abroad, how do you plan to develop your international network and what are your key areas of expansion?

A Bank of China has the unique advantage in establishing business overseas through its broad international network of branches and subsidiaries. Looking forward, first we want to focus on organic growth by leveraging our existing banking network and our universal banking platform, which covers investment banking, insurance and asset management, and gives us a good platform to meet all customer requirements. Bank of China used to be a specialised foreign exchange bank and we dominate the market in foreign exchange deposits and related products; we are the market leader. We want to use this position to further leverage our international reach and improve our overseas business.

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We regard mergers and acquisitions as an important means of expansion, and in 2006 we bought a Singapore-based aircraft leasing company whose profits in 2007 were better than expected. But our focus is on synergy strategies in the bank; we don’t just want to enlarge our size, we want to focus on a high quality growth rather than size. Our overseas expansion strategy is focused on considering how potential targets will complement our business synergies. We don’t have any specific targets for mergers and acquisitions at the moment. It is not our strategy to focus on the size of our assets; our core philosophy is to build high quality assets and high quality growth. Selective expansion is the key for 2008.

Q With more than 11,000 branches and outlets in China, Bank of China has a huge domestic network. What are your critical strategies for domestic growth and what particular markets and products are you targeting?

A We have divided our network into Tier 1 and Tier 2 branches. We have identified the top 10 provinces or regions and 40 major cities as our key strategic targets. Our focus is on middle and high-end customers, which reflect faster growth rates, and we allocate resources and prioritise our efforts based on this strategy and the top 10 regions, plus the 40 major cities.

In terms of the retail sector, there is a huge potential market in China and about 80% of our retail lending is in mortgages. This has quite a low non-performing rate of less than 1% and is very safe and profitable. We will continue to focus on this as a major part of our personal banking business. For the remaining 20%, we see personal loans, including student loans, and auto loans as an expanding area. We focus only on the top 100 universities out of the 1000 universities across the country. This targeted lending to high quality people is a good investment in the future and Bank of China is the market leader in student loans and auto loans.

Q What is your outlook for Bank of China in 2008?

A Besides increased profitability from retail, the capital markets are developing fast and there is a huge market for wealth management products, with the wealth cake getting bigger and bigger; more than 600,000 people have over $1m in cash assets. With about 30% of profits from overseas, a radically different structure from other Chinese banks which are almost all domestic, Bank of China is much more diversified than the other banks and less reliant on lending growth with less than 50% of total assets in lending.

For a few years the growth rate in domestic will be higher than in international but we want to maintain a significant proportion of profits from overseas and maintain momentum in our expansion in Africa, the Middle East and elsewhere. For corporate banking and treasury, we seek to reinforce our leading position in trade related services, trade finance and treasury products and continue to develop fee-based businesses.

And as a key partner in the Beijing Olympics in 2008, we are happy to benefit through our involvement in the infrastructure, endorsements and ticketing projects surrounding the Games.