a comparative analysis of the competitiveness of financial...

Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB)

An Online International Research Journal (ISSN: 2306-367X)

2017 Vol: 6 Issue: 2

2317 www.globalbizresearch.org

A Comparative Analysis of the Competitiveness of Financial Services

Trade Between China and the Countries along “One Belt, One Road”

Manying Huang,

School of Management,

Capital Normal University, China.

E-mail: [email protected]

Xiaohong Deng,

Business College,

Beijing Union University, China.

E-mail: [email protected]

___________________________________________________________________________

Abstract

Based on the BOP data and the Banker database, the paper makes a comparative analysis on

the competitiveness of China’s financial services trade with the countries and regions along

“One Belt, One Road”. Our main conclusions are as follows: (1) About the cross-border

delivery of financial services trade, most of the countries and regions along “One Belt, One

Road” are lack of competitiveness. Compared with the western developed countries, the gap

is obvious. The competitiveness of China ranks in the middle in the countries along “One Belt,

One Road”. The competitiveness in East Asia and Southeast Asia, South Asia is stronger than

that in other regions, and the competitiveness in the CIS countries is the weakest. (2) About

the commercial presence of financial services trade, the macro and micro indicators show

that whether compared with western developed countries or compared with other countries

along “One Belt, One Road”, China’s banking industry has a strong competitive edge.

Finally, according the empirical analysis, the paper puts forward corresponding

countermeasures on how to improve the competitive power of China’s financial services

trade.

___________________________________________________________________________

Key Words: Financial services trade, cross-border delivery, commercial presence,

competitiveness, one belt and one road

JEL Classification: F14, O57





1. Introduction

In March 2015, the National Development and Reform Commission, the Ministry of

Foreign Affairs and the Ministry of Commerce jointly issued the “Vision and Action to

Promote the Construction of Silk Road Economic Belt and the 21st Century Maritime Silk

Road”, in which it is clearly pointed out that financing is an important support for the

construction of “One Belt, One Road”. The construction of “One Belt, One Road” has

provided the opportunity for the development of China’s financial services industry, and

challenged the development of China’s financial services trade as well. According to the data

from State Administration of Foreign Exchange, China’s financial services trade amounted to

only $140 million in 2002 and the amount reached $4980 million in 2015, with an average

annual growth of 31.6% in 13 years, surpassing the growth rate of trade in services over the

same period (17.5%), and the growth rate of trade in goods (16.1%) as well. However, in the

rapid development process of China’s financial services trade, there are still many problems,

such as the long-term imbalance of financial services trade, it has been in a deficit state most

of the years. In addition, China’s financial services trade is still in small scale, and its share is

still relatively low both in the domestic market and in the international market. In this context,

a comprehensive and objective assessment of financial services trade competitiveness

between China and the countries along “One Belt, One Road” is of great significance to

strengthen China’s financial cooperation with the countries along “One Belt, One Road” and

promote the strategy of “One Belt, One Road”.

On the competitiveness of China’s financial services trade, domestic scholars have carried

out a lot of research. For instance, Wang Tieshan and Feng Zongxian (2008), Zheng

Zhanpeng (2009), Huang Manying and Deng Xiaohong (2010), Qin Siyi and Yang Hao

(2011), Yin Guojun and Liu Jianjiang (2012), Yuan Yang (2014), Wei Xin (2015), Xiao De

and Li Kun (2016), Chen Yang (2017), Zeng Linchu (2017), et. al., respectively used the

international market share, trade competitiveness index, revealed comparative advantage

index and other different indicators to comparatively analyze the competitiveness of financial

services trade between China and other economies. However, there are important

shortcomings in these studies: they only analyzed a portion of the financial services trade,

while ignoring most of the financial services trade, that is, the existing study mainly analyzed

financial services trade of cross-border delivery based on the balance of payments statistics

(That is, BOP statistics). Due to the limitations of the data, the financial services trade

provided through commercial presence is rarely involved, the commercial presence is the

most important form of international financial services trade activities, which is estimated to

account for over 60-70% of the total international financial services trade (Luo Chunyan,

2008). This paper will make a detailed analysis of the competitiveness of China’s financial





services trade in the two modes of cross-border delivery and commercial presence based on

the existing research. In addition, the choice of the comparison object has been mainly

concentrating in the United States, Britain, Japan, Singapore, Hong Kong, Brazil, Russia and

other countries and regions. The scope of this study will be greater, in addition to the

developed economies of Europe and the United States, it also includes 53 countries and

regions along the “One Belt, One Road”, so as to more fully reflect the competitiveness of

China’s financial services trade in the world market.

The paper is organized as follows: the second part illustrates the comparison objects and

data; the third part conducts a comparative analysis of the competitiveness of China’s

financial services trade based on the BOP statistics; the fourth part also conducts a

comparative analysis of the competitiveness of China’s financial services trade in the

commercial presence mode; the last part is the conclusion and enlightenment.

2. Comparison Objects and Data

By the end of October 2016, there have been 66 countries along the “One Belt, One

Road”, most of them belong to developing countries and transitional economies, of which, 53

countries and regions have provided related statistics on financial services trade, which is the

focus of this paper. Among these 53 countries or regions, in accordance with the region, 12

countries or regions from East Asia and Southeast Asia: China, Mongolia, Singapore,

Malaysia, Indonesia, Thailand, Laos, Cambodia, Philippines, Vietnam, Hong Kong, Macau;

11 countries or regions from West Asia, the Middle East: Iran, Iraq, Turkey, Syria, Lebanon,

Israel, Saudi Arabia, Kuwait, Greece, Cyprus, Egypt; 5 countries or regions from South Asia:

India, Pakistan, Bangladesh, Afghanistan, Sri Lanka; 3 countries or regions from Central

Asia: Kazakhstan, Kyrgyzstan, Tajikistan; 7 countries or regions from CIS: Russia, Ukraine,

Belarus, Georgia, Azerbaijan, Armenia, Moldova; 15 countries or regions from Central and

Eastern Europe: Poland, Lithuania, Estonia, Latvia, Czech Republic, Slovakia, Hungary,

Slovenia, Croatia, Bosnia and Herzegovina, Montenegro, Serbia, Albania, Romania, Bulgaria.

In order to ensure the continuity of the data and the consistency of the statistical caliber,

the data of this paper are from the WTO database in 2011-2015. From the GATS, financial

services trade can be divided into four modes: cross-border delivery, consumption abroad,

commercial presence and movement of personnel. WTO statistics on financial services trade

is also based on the BOP statistics, so the WTO’s data mainly cover three modes of data of

cross-border delivery, consumption abroad and movement of personnel, do not contain the

data in the commercial presence mode. In addition, the database is based on the IMF “Balance

of Payments Manual (Sixth Edition)”, in which the provisions on the scope of financial

services statistics are of little change compared with the Fifth Edition, financial services





mainly are provided by the financial intermediary support services from banks and other

financial companies, and they do not include insurance and pension services.

3. Comparative Analysis of China’s Competitiveness of Financial Services

Trade Based on BOP Statistics

There are many indicators of trade competitiveness, trade competitiveness index (TC) and

revealed comparative advantage index (RCA) are selected in this paper for analysis, because

these two indicators not only exclude the impact of the fluctuations in the total amount of the

country and the world, but also rule out the incomparability of international data due to the

different sizes of the countries, thereby can better reflect the relative competitive advantage of

financial services trade.

3.1 Analysis of TC Index

The TC index reflects the ratio of the net exports to the total import and export of an

industry so as to illustrate the international competitiveness of the industry. The formula is:

TCij=(Xij-Mij)/(Xij+Mij) (1)

Xij indicate the export of product j of Economy i，TC index ranges from [-1，1]. When

the TC index is close to zero，indicating the comparative advantage of the economy is close

to the average level; when TC>0, indicating the comparative advantage is larger, and almost

close to 1 with a stronger industrial comparativeness; when TC<0, indicating that the

comparative advantage is small, and the closer to -1, the industry competitiveness is also

weaker. In order to more carefully evaluate the trade competitiveness, the TC index can be

divided into six intervals: When 0.6≤TC<1, it is the strongest comparative advantage; when

0.3≤TC<0.6, it is a stronger comparative advantage; When 0<TC<0.3, it is a weak

comparative advantage; when -0.3≤TC<0, it is a weaker comparative disadvantage; When -

0.6≤TC<-0.3, it is a larger comparative disadvantage; When -1<TC<-0.6, it is a great

comparative disadvantage. Table 1 calculates the TC index of financial services trade for each

economy.

[Table 1 is here]

As can be seen from Table 1, in the countries and regions along the “One Belt, One Road”,

TC index of most countries is less than 0, lacking competitive advantage, and there is an

obvious gap when compared with the United Kingdom, the United States and other developed

countries. In 2015, for example, there were 30 countries with TC index less than 1 in 42

samples, and 11 countries with TC index between -0.3~-0.6, 7 countries with TC less than -

0.6 and the TC index of Albania was -0.852. China’s TC index had been negative from 2012

to 2015, but greater than -0.1, showing a smaller comparative disadvantage, China’s TC index

in 2015 ranked 16th out of 42 samples.





In the countries and regions along the “One Belt, One Road”, Singapore’s TC index has

always been greater than 0.6, showing a strongest comparative advantage, Hong Kong’s TC

index is close to 0.6, with a stronger comparative advantage, which also reflects the world

financial center status of Singapore and Hong Kong. In 2015, the countries with the top TC

index were Cambodia, Afghanistan, Tajikistan, Latvia, Cyprus and other countries, in which,

the TC index of Cambodia and Afghanistan was even greater than 0.8, which may be related

to the strict financial control implemented in these countries.

As seen from the trend of the TC index of each economy, there were 19 economies rising

from 2011 to 2015, 21 economies was in decline, and the number of economies whose TC

index fell and rose was even, in which, China’s TC index also appeared a certain decline.

Among the many economies, the largest increase in the TC index was India, which grew by

288% compared to 2011 and the largest decline was Albania, which fell by 2405% in 2015

compared with 2011.

From the perspective of each location, the competitiveness of financial services trade in

East Asia and Southeast Asia is stronger than that in other regions, but only shows a slight

comparative advantage. In 2015, for example, the average TC index in East Asia and

Southeast Asia was 0.067, the average TC index in South Asia was 0.101, while the average

TC index in other regions was negative, with the TC index in the CIS countries being the

smallest to be -0.4.

3.2 Analysis of RCA Index

Revealed comparative advantage index (RCA) refers s to the proportion of a country or

region in which a product accounts for the total amount of its export to the world’s total

export. If it is used in the financial services trade, then it reflects the proportion the export of

financial services trade in a country or region to the world’s financial services trade export,

the formula is as follow:

RCAij=(Xij/Xit)/(Xwj/Xwt) (2)

In Formula (2), RCAij indicates the revealed comparative advantage index of the financial

services trade of Country i; Xij indicates the export of financial services trade of Country i; Xit

indicates the total export of services trade of Country i; Xwj indicates the export of world

financial services trade; Xwt refers to the total export of the world’s services trade. In general,

if RCA> 1, indicating that the financial services trade of Country i has a revealed comparative

advantage; If RCA <1, it shows that there is no revealed comparative advantage in financial

services trade of the country. The greater the country’s RCA index, the greater the country’s

competitive advantage. In order to more carefully evaluate the trade competitiveness, RCA

can be divided into five intervals: When RCA≥2.5, it shows that the financial services trade

of this country has a strong comparative advantage; when 1.25≤RCA<2.5, indicating that the





financial services trade of the country has a stronger comparative advantage; When 0.8≤

RCA<1.25, it shows that the financial services trade of the country has a weak comparative

advantage; when 0.4≤RCA<0.8, it shows that the financial services trade of the country has

a weaker comparative disadvantage; When 0<RCA<0.4, it shows that the financial services

trade of the country has a greater comparative disadvantage. Table 2 calculates the RCA

index for financial services trade in various economies.

[Table 2 is here]

As can be seen from Table 2, in the countries and regions along the “One Belt, One Road”,

the RCA index of most countries is less than 1, lacking competitive advantage, and there is an

obvious gap when compared with the United Kingdom, the United States and other developed

countries. In 2015, for example, there were only 5 countries and regions with RCA index

greater than 1 in 42 samples, and 36 countries and regions with RCA index less than 0.4,

accounting for 85.7% of the total sample, with Azerbaijan’s RCA index being the smallest

0.008. Among the countries and regions along the “One Belt, One Road”, the RCA index in

Hong Kong and Singapore is always greater than 1.25, showing a strong comparative

advantage. The countries with RCA index in 2015 ranking top are Cyprus, Latvia,

Afghanistan and so on. China’s RCA index were less than 0.2 from 2011 to 2015, showing a

larger comparative disadvantage, in 2015 China’s RCA index ranked the 27th in 42 samples.

It can be seen from the trend of RCA index, from 2011 to 2015, the number of economies

with RCA index rising was 19, the number of economies with RCA index falling was 21.

China’s RCA index also appeared in a certain rise. Among the many economies, the largest

increase in the RCA index is Kyrgyzstan, which grew by 355.6% in 2015 compared with

2011, and the largest decline in the RCA index is Albania, which fell by 82.8% from 2015 to

2011.

In the case of each location, the competitiveness of financial services trade in East Asia

and Southeast Asia is stronger than that in other regions. In 2015, for example, the average

RCA index in East Asia and Southeast Asia was 0.504, and the average RCA in South Asia

was 0.608, and the average RCA index in Central Asia, CIS and Central and Eastern Europe

was less than 0.4, with the CIS’s average RCA index being the smallest to be 0.096.

3.3 Some Conclusions

Based on the statistical data of BOP, this paper makes a comparative analysis of the

competitiveness of financial services trade between China and the countries along “One Belt,

One Road”. The main conclusions are as follows:

1. The financial services trade in most countries and regions along the “One Belt, One

Road” is not competitive, the gap is obvious compared with the United Kingdom, the United

States and other developed countries, in which, financial services trades of Singapore and





Hong Kong have a strong competitive, the competitiveness of China’s financial services trade

ranks in the middle in the countries along “One Belt, One Road”.

2. In recent years, the financial services trade of about half of the countries and regions in

the countries along the “One Belt, One Road” has an increased competitiveness, while the

competitiveness of financial services trade in the other half countries has declined. China’s

TC index of financial services has a certain deduction, while the RCA index has increased.

3. From the perspective of the location, the competitiveness of financial services in East

Asia and Southeast Asia is stronger than that of other regions, and the competitiveness of

financial services trade in CIS countries is the weakest.

4. Comparative Analysis of China’s Competitiveness of Financial Services

Trade in Commercial Presence

At present, as for the services trade in commercial presence mode, the emerging statistical

method is FATS, which can reflect the services trade of foreign affiliates in the host country,

including the transactions with the host country, the transaction with the residents of host

country and the transactions with other countries. Although the Western countries are actively

promoting the FATS statistical system, only the United States has access to this complete

data. One of the main points in the academic community is to use indirect data to describe the

financial services trade in commercial presence. The magazine database of British “The

Banker” will be used to conduct a comparative analysis of the competitiveness of banking

industry in the countries along the “One Belt, One Road” so as to indirectly reflect the

competitiveness of financial services trade in commercial presence mode. This paper will

conduct a comparative analysis of the competitiveness of banking industry in various

economies from the macro and micro aspects, and the macro indicators are the listed number

of in 1000 major banks from “the Bank”, while the micro indicators are mainly to analyze the

tier 1 capital, assets size and operating conditions, etc. As for the comparison object, the top

banks in various economies are selected for analysis in accordance with The Banker 2016 in

this study.

4.1 Comparison of the Listed Number of the 1000 Major Banks

The analysis of the listed number of the 1000 major banks in various economies can reflect

the overall strength of a country’s banking industry. Table 3 lists the listed number of banks

of the 1000 major banks in various economies over the past years.

[Table 3 is here]

It can be seen from Table 3, in the countries and regions along the “One Belt, One Road”,

China’s banking is thriving. Since 2011, China has surpassed Japan to become the No. 2

economy with the listed banks, and from the beginning of 2012, China’s four big state-owned

commercial banks have been ranked in the top 10, showing that China’s banking industry





already has strong competitiveness in the world. Compared with the USA, Japan and other

developed countries, the other countries and regions along the “One Belt, One Road” have an

obvious gap. In recent years, the countries and regions which have over 15 listed banks are

India, Russia, the United Arab Emirates, Indonesia, Malaysia, Thailand, Turkey, Hong Kong

and Vietnam and other a few countries and regions, most of which rank the bottom 100 on the

list.

Among the countries and regions along the “One Belt, One Road”, there have 18

economies with the number of banks on the list rising in 2011-2016, accounting for 42% of

the total sample, of which China has the largest increase in the listed banks, with an increase

of 25 banks. In addition, the countries with more than 5 banks include Vietnam, Indonesia,

the United Arab Emirates and India. The countries whose number of listed banks remains

unchanged are Singapore, Malaysia, Philippines and other 14 economies. The number of the

economies with a decreased listed banks is 11, accounting for 25.6% of the total sample, in

which, Russia has the most reduced number, with a reduction of 16 banks, the countries

which have over 5 reduced number of banks are Ukraine, Greece and Serbia.

From the aspect of the location again, the number of listed banks in East Asia and

Southeast Asia is significantly higher than that in other regions. In this region, China,

Indonesia, Malaysia, Thailand and Hong Kong have the most listed banks. In the West Asia

and Middle East, the United Arab Emirates and Turkey have much more listed banks,

followed by Iran and Saudi Arabia. In South Asia, India has the largest number of listed

banks, and several other economies have less or none listed banks. In Central Asia, only

Kazakhstan and Uzbekistan have listed banks. In the CIS countries, Russia has the largest

number of listed banks, and several other economies generally have less listed banks. In

Central and Eastern Europe, Poland has the largest number of listed banks, and the number of

listed banks in other countries is no more than 10.

4.2 Comparison of Tier 1 Capital and Assets Size

Tier 1 capital is the standard and basis for the world’s 1000 most powerful banks selected

by “The Banker” magazine of United Kingdom each year. The tier 1 capital of a commercial

bank determines the size of a bank, business expansion capacity and risk tolerance, is an

important indicator of financial strength.

[Table 4 is here]

It can be seen from Table 4 that among the top 10 banks in 2016, both China and the

United States have four banks, the UK and Japan each has one bank on the list. ICBC and

China Construction Bank have been consecutively in the top 2 list since 2014. Of the

countries and regions along the “One Belt, One Road”, only the Sberbank, State Bank of

India, DBS Bank, Saudi National Commercial Bank and Qatar National Bank have entered





the top 100 list, and most of the other banks are on the bottom list, International Bank of

Azerbaijan only ranks 970. From the scale of tier 1 capital, China’s banking industry,

especially the four major state-owned commercial banks have the larger size of tier 1 capital.

For example, ICBC and China Construction Bank have respectively the tier 1 capital of 274

billion US dollars and 220 billion US dollars in 2016，and they are respectively 9 times and

7.2 times of the Russian Sberbank, and are 619.5 times and 496.6 times of International Bank

of Azerbaijan, and are also 36.9% and 9.7% higher than the JP Morgan ranking the third. In

addition, from the growth rate of tier 1 capital, the tier 1 capital of China’s four banks have

more than 7.5% growth in 2016 compared with that of in 2015, the growth rate not only

surpassed that of the United States, Britain, France, Germany and other developed countries,

it also overtook the growth rate of that of Russia, India, Singapore, Malaysia, Thailand,

Turkey, Iran, Poland, Hungary and other countries.

From the assets size, in 2016, ICBC, China Construction Bank, Bank of China and

Agricultural Bank of China respectively ranked 1st, 2nd, 3rd and 5th. Of the other countries

and regions along “One Belt, One Road”, only the assets of State Bank of India, Sberbank and

DBS Bank have entered the top 100 list, while Bank Islam Brunei Darussaiam, National Bank

of Uzbekistan ranked on the list after 900. In 2016, the scale of assets of ICBC, China

Construction Bank were 342 billion US dollars and 2827 billion US dollars; the figure was far

more than the scale of assets of other banks, they were respectively 7.6 times and 6.3 times of

State Bank of India and 602.8 times and 498 times of National Bank of Uzbekistan, which

were also 29.2% and 6.7% higher than Mitsubishi UFJ Financial Group which ranked No. 4.

In addition, the assets size of these four banks of China respectively increased by 1.60%,

3.32%, 5.01% and 3.95% in 2016; while the assets size of JP Morgan, HSBC, Crédit Agricole,

Deutsche Bank, MayBank, Bangkok Bank, Turkiye Is Bankasi, Bank of Cyprus, Halyk Bank,

Sberbank, OTP Bank and so on were declined by over 5% in the same period, indicating the

advantage in size of China’s banking industry is even more obvious. In short, no matter it is

the tier 1 capital or assets size, the advantages of China’s banking industry are very obvious.

4.3 Comparison of Operating Conditions

The operating conditions of the listed banks in various economies were compared from

pre-tax profit, profit growth rate, profits on capital, return on assets, cost to income ratio and

other aspects in Table 5.

[Table 5 is here]

Influenced by the subsequent impact of the international financial crisis and the debt crisis

in Europe, in 2016, the total pre-tax profit of the 1000 listed banks was $ 974 billion,

decreasing by 1.81% compared with 2015. The pre-tax profit of China’s banking industry can

be described as thriving in the countries and regions along “One Belt, One Road”, in which,





the pre-tax profit of ICBC and China Construction Bank have ranked the top 2 for the past

few years, with the profit of $ 55.968 billion and $ 45.993 billion in 2016. Among the banks

in other economies, the banks with the pre-tax profit up to $ 2 billion are only six banks,

including the Sberank, DBS Bank, and Qatar National Bank, State Bank of India, Saudi

National Commercial Bank and Maybank. Five banks had less than $ 100 million in pre-tax

profit, and even four banks had a loss. However, as China’s economy has been in the new

normal state, the pre-tax profit of China’s banking industry in 2016 was in the first negative

growth in more than 10 years in the new century, and the pre-tax profit of the four banks were

decreased by about 5.7%.

The profit on capital reflects the viability of the owner’s investment. The return on assets

reflects the total result of the bank’s total assets. The higher the two indicators, the higher the

benefits of bank owner investment, the higher the efficiency of the assets use, and it also

indicates the bank has stronger profitability. According to the requirements of “Key Indicators

of Risk Supervision of Commercial Banks” issued by China Banking Regulatory

Commission, the capital rate of return should not be less than 11%, the rate of return on assets

should not be less than 0.6%. In 2016, the capital rate of return of China’s four major state-

owned commercial banks were up to 18%, and higher than the requirements of no less than

11% of China Banking Regulatory Commission. Among the banks in other economies, the

banks with the profits on capital higher than China’s four state-owned banks were only the

National Bank of Egypt, Habib Bank, Bank of Ceylon and other 8 banks, and the banks with

the profits on capital less than 11% were the Bank Saderat Iran, State Bank of India, OTP

Bank and other 13 banks. From the point of view of return on assets, the return on assets of

China’s four major state-owned commercial banks in 2016 were higher than 1.3%, this figure

was more than the level of many developed countries, for instance, the return on assets of

UniCredit was only 0.25%, which was also more than the level of many national banks such

as Maybank, PKO Bank Polski, Bank Saderat Iran, State Bank of India along “One Belt, One

Road”.

The cost to income ratio is used to measure the cost control level of banks. It emphasizes

that banks, while constantly increasing their operating income, should scientifically allocate

cost resources, and strengthen the overall cost management and control. According to the

provisions, the indicators should not be higher than 45%. Due to the huge impact of the

financial crisis, the Western developed countries witnessed a substantial decline in operating

income, resulting in a higher cost to income ratio, in which, the cost of these banks of the

United States, Britain, Japan and Italy were more than 60%. The cost to income ratio of

China’s four major state-owned commercial banks was lower than 45%, of which, China

Construction Bank was the lowest, with the ratio of 29.83%. Among other banks, the banks





with the cost to income ratio lower than this figure were only Emirates NBD, Halyk Bank,

Qatar National Bank and ICBC Macau.

In summary, both from the macro indicators or from the micro indicators, China’s banking

industry has strong competitiveness no matter when they are compared with the Western

developed countries or the other countries along “One Belt, One Road”.

5. Conclusions and Recommendations

The main conclusions are as follows: (1) On the financial services trade of cross-border

delivery, the majority of countries and regions along the “One Belt, One Road” are lack of

competitiveness, and there are obvious gaps compared with the United Kingdom, the United

States and other Western developed countries, the financial services trade competitiveness of

China is in the middle among the countries and regions along the “One Belt, One Road”;

From the perspective of the location, the competitiveness of financial services trade in East

Asia and Southeast Asia is stronger than that of other regions, and the competitiveness of

financial services trade in CIS countries is the weakest. (2) In terms of the financial services

trade in the commercial presence model, the macroeconomic indicators and microeconomic

indicators show that China’s banking industry has a strong competition both in comparison

with Western developed countries and other countries along the “One Belt, One Road”.

In order to enhance the competitiveness of China’s financial services trade, it is needed to

consider from the following aspects: First, we must strengthen the financial services trade

statistics. Service trade statistics is the basis of the work of services trade, and it is also one of

the first difficulties need to be solved, on one hand, the existing BOP statistics are needed to

be improved, on the other hand, it is needed to set up FATS statistics so as to more fully and

accurately reflect the competitiveness of China’s financial services trade. Second, the

financial services trade of Hong Kong and Singapore is highly competitive in countries and

regions along the “One Belt, One Road”, so we can strengthen our cooperation with them and

learn from the advanced development experience for our financial industry. For example, we

can further relax the market access conditions under the framework of CEPA, strengthen

cooperation between Mainland China and Hong Kong in the field of financial services, and

gradually realize the liberalization of financial services trade between the two places. Third, it

is needed to fully implement the “going out” strategy, encourage the outward development of

the banking industry. The implementation of the “going out” strategy is the inevitable choice

for the development of open economy in China, and China’s banking industry has also had

stronger competitiveness, so China’s banking industry should actively explore new areas and

new business of financial services trade, improve the level of the existing international

business and intermediary business, go abroad actively, strengthen the international

competitiveness of China’s financial industry.





Acknowledgement: This paper is supported by the National Social Science Foundation of China

(No. 14BJY224).

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Table 1: TC index of various economies’ financial services trade

Region

Year

Economy

2011 2012 2013 2014 2015 Region

Year

Economy

2011 2012 2013 2014 2015

East Asia

and

Southeast

Asia

China 0.064 -0.010 -0.074 -0.043 -0.062

CIS

Russia -0.375 -0.356 -0.332 -0.201 -0.247

Mongolia -0.697 -0.449 -0.756 -0.943 -0.745 Ukraine -0.507 -0.585 -0.487 -0.568 -0.654

Singapore 0.660 0.672 0.670 0.650 0.639 Belarus -0.840 -0.781 -0.812 -0.797 -0.761

Malaysia -0.166 -0.236 -0.176 -0.170 -0.123 Georgia -0.081 -0.024 -0.143 -0.300 0.000

Indonesia -0.251 -0.511 -0.471 -0.472 -0.476 Azerbaijan -0.875 -0.692 -0.200 -0.385 -0.684

Thailand 0.257 -0.021 0.177 0.017 -0.047 Armenia -0.158 -0.467 -0.100 -0.182 -0.368

Laos 0.000 1.000 1.000 - - Moldova -0.200 -0.286 -0.067 -0.125 -0.077

Cambodia 0.733 0.583 -0.184 0.471 0.838

Central

and

Eastern

Europe

Poland -0.438 -0.385 -0.234 -0.211 -0.181

Philippines -0.450 -0.429 -0.561 -0.318 -0.020 Lithuania 0.368 - - -0.207 -0.158

Vietnam -0.021 -0.077 -0.484 -0.466 - Estonia 0.156 0.063 -0.072 0.032 -0.052

Hong Kong 0.575 0.596 0.593 0.594 0.600 Latvia 0.357 0.369 0.337 0.480 0.428

Macau 0.138 0.219 0.439 0.524 - Czech Republic -0.027 -0.052 -0.115 -0.328 0.039

West Asia,

the Middle

East

Iran -0.693 -0.714 -0.651 -0.630 - Slovakia -0.538 -0.434 -0.123 0.034 0.042

Iraq -0.931 -0.991 - - - Hungary -0.026 0.074 0.032 -0.097 -0.252

Turkey -0.394 -0.375 -0.263 -0.396 -0.460 Slovenia -0.027 -0.063 -0.134 -0.348 -0.464

Syria 0.215 - - - - Croatia - -0.659 -0.706 -0.556 -0.540

Lebanon 0.607 0.456 0.444 0.266 - Bosnia and

Herzegovina -0.733 -0.684 -0.852 -0.810 -0.786

Israel 0.337 0.161 0.095 0.019 - Montenegro -0.143 -0.200 -0.200 -0.091 -0.333

Saudi Arabia -0.888 -0.814 -0.674 -0.697 -0.524 Serbia -0.319 -0.231 -0.370 -0.421 -0.435

Kuwait -0.669 -0.761 -0.701 -0.716 - Albania -0.034 -0.133 -0.333 -0.625 -0.852

Greece -0.429 -0.755 -0.404 -0.268 -0.557 Romania -0.514 -0.309 -0.401 -0.160 -0.107

Cyprus 0.633 0.624 0.423 0.404 0.369 Bulgaria 0.197 -0.018 -0.169 0.268 0.048

Egypt 0.538 0.774 0.779 0.854 -

Western

developed

countries

United States 0.637 0.642 0.639 0.635 0.622

South

Asia

India -0.141 0.001 0.039 0.157 0.265 Britain 0.672 0.684 0.623 0.662 0.694

Pakistan -0.259 -0.472 -0.400 -0.363 -0.479 Japan 0.103 0.180 0.116 0.157 0.258

Bangladesh -0.136 -0.614 -0.780 -0.839 - Germany 0.263 0.291 0.266 0.215 0.276

Afghanistan 0.875 0.619 0.333 0.296 0.818 France 0.253 0.291 0.367 0.380 0.326

Sri Lanka - -0.092 -0.165 -0.155 -0.199 Italy -0.106 -0.150 -0.192 -0.247 -0.270

Central

Asia

Kazakhstan -0.740 -0.690 -0.831 -0.690 -0.690 Canada 0.145 0.196 0.158 0.127 0.057

Kyrgyzstan -0.556 -0.333 -0.263 -0.600 -0.333

Tajikistan 0.375 0.105 -0.049 -0.667 0.500

Data source: calculated according to WTO database.





Table 2: RCA index of various economies’ financial services trade

Region

Year

Economy

2011 2012 2013 2014 2015 Region

Year

Economy

2011 2012 2013 2014 2015

East Asia

and

Southeast

Asia

China 0.048 0.111 0.181 0.193 0.093

CIS

Russia 0.219 0.254 0.288 0.293 0.271

Mongolia 0.092 0.235 0.083 0.062 0.124 Ukraine 0.173 0.138 0.187 0.180 0.168

Singapore 1.461 1.542 1.530 1.610 1.662 Belarus 0.031 0.047 0.038 0.058 0.064

Malaysia 0.104 0.095 0.089 0.081 0.117 Georgia 0.101 0.096 0.037 0.028 0.041

Indonesia 0.241 0.116 0.133 0.116 0.140 Azerbaijan 0.004 0.005 0.029 0.022 0.008

Thailand 0.074 0.089 0.089 0.039 0.038 Armenia 0.071 0.034 0.071 0.067 0.046

Laos 0.022 0.021 0.015 - - Moldova 0.072 0.060 0.075 0.076 0.073

Cambodia 0.114 0.074 0.070 0.080 0.103

Central

and

Eastern

Europe

Poland 0.192 0.202 0.193 0.195 0.183

Philippines 0.063 0.059 0.043 0.089 0.167 Lithuania 0.192 - - 0.133 0.153

Vietnam 0.276 0.187 0.177 0.192 - Estonia 0.249 0.227 0.177 0.219 0.198

Hong Kong 1.797 1.874 1.844 1.943 2.092 Latvia 1.257 1.135 1.098 1.297 1.317

Macau 0.108 0.145 0.175 0.247 - Czech Republic 0.217 0.196 0.220 0.236 0.214

West Asia,

the Middle

East

Iran 0.140 0.141 0.125 0.136 - Slovakia 0.160 0.166 0.187 0.239 0.303

Iraq 0.206 0.022 - - - Hungary 0.159 0.109 0.116 0.105 0.085

Turkey 0.149 0.148 0.193 0.192 0.164 Slovenia 0.214 0.174 0.135 0.117 0.090

Syria 0.384 - - - - Croatia - 0.053 0.052 0.073 0.082

Lebanon 0.748 1.300 1.174 1.548 - Bosnia and

Herzegovina 0.012 0.021 0.013 0.013 0.021

Israel 0.317 0.239 0.224 0.220 - Montenegro 0.054 0.039 0.036 0.044 0.034

Saudi Arabia 0.098 0.123 0.165 0.215 0.207 Serbia 0.125 0.134 0.088 0.078 0.065

Kuwait 0.230 0.234 0.603 0.557 - Albania 0.058 0.065 0.026 0.015 0.010

Greece 0.052 0.044 0.063 0.052 0.039 Romania 0.183 0.291 0.218 0.195 0.162

Cyprus 3.249 3.079 2.663 2.899 2.834 Bulgaria 0.089 0.073 0.095 0.180 0.127

Egypt 0.074 0.087 0.100 0.082 -

Western

developed

countries

United States 1.474 1.435 1.481 1.505 1.429

South

Asia

India 0.517 0.437 0.504 0.432 0.392 Britain 3.073 2.958 2.765 2.696 2.806

Pakistan 0.231 0.159 0.297 0.295 0.296 Japan 0.340 0.411 0.403 0.543 0.736

Bangladesh 0.458 0.526 0.438 0.505 - Germany 1.215 1.225 1.158 1.036 1.009

Afghanistan 1.141 0.435 0.503 1.777 1.287 France 0.383 0.602 0.610 0.642 0.588

Sri Lanka - 0.729 0.591 0.547 0.456 Italy 0.562 0.536 0.554 0.547 0.497

Central

Asia

Kazakhstan 0.078 0.116 0.062 0.047 0.046 Canada 0.970 1.009 1.031 1.076 1.154

Kyrgyzstan 0.027 0.050 0.080 0.040 0.123

Tajikistan 0.236 1.589 3.973 0.077 0.174

Data source: calculated according to WTO database.





Table 3: Listed numbers of banks of the 1000 major banks in various economies

Region

Year

Economy

2011 2012 2013 2014 2015 2016 Region

Year

Economy

2011 2012 2013 2014 2015 2016

East Asia and

Southeast

Asia

China 111 110 110 111 132 136 Central

Asia

Kazakhstan 5 5 7 5 8 3

Singapore 3 3 3 3 3 3 Uzbekistan - 1 1 1 1 1

Malaysia 17 17 18 18 17 17

CIS

Russia 31 30 34 38 26 15

Indonesia 14 13 20 20 22 19 Ukraine 8 9 11 9 4 1

Thailand 15 14 17 19 18 18 Belarus 3 2 2 2 3 2

Philippines 11 8 10 8 12 11 Georgia 1 1 1 1 2 -

Vietnam 8 8 11 11 14 18 Azerbaijan 1 - 1 1 1 1

Brunei - 1 1 1 - 1

Central

and

Eastern

Europe

Poland 15 15 15 16 14 13

Hong Kong 16 16 18 18 18 18 Lithuania 3 3 3 3 3 3

Macau 1 1 2 2 3 3 Estonia 2 2 2 2 2 2

West Asia,

the Middle

East

Iran 10 13 14 13 9 14 Latvia 2 2 2 2 2 2

Turkey 17 15 20 18 20 18 Czech Republic 6 5 7 7 6 6

Jordan 4 4 3 2 3 3 Slovakia 3 4 7 5 5 5

Lebanon 9 8 8 8 9 10 Hungary 8 8 8 8 7 7

Israel 6 6 6 6 6 6 Slovenia 7 6 3 2 3 3

Saudi Arabia 10 11 12 12 12 12 Croatia 5 4 6 6 6 5

Oman 6 6 6 6 7 7 Serbia 6 6 3 4 1 1

United

Arab Emirates 15 19 20 21 20 20 Romania 5 7 5 6 5 5

Qatar 7 9 10 10 10 10 Bulgaria 6 6 7 7 6 6

Kuwait 9 10 10 8 9 9

Western

developed

countries

United States 192 180 167 163 173 181

Bahrain 9 10 9 10 10 10 Britain 29 28 26 30 27 33

Greece 11 6 5 5 4 5 Japan 105 103 100 94 92 93

Cyprus 3 4 - 3 5 4 Germany 40 38 38 35 32 27

Egypt 10 8 9 6 7 8 France 8 9 9 7 9 8

South Asia

India 35 36 36 40 39 40 Italy 25 29 27 26 26 29

Pakistan 5 5 5 5 5 5 Canada 11 11 11 11 12 12

Bangladesh - 1 1 1 1 1

Sri Lanka 1 2 2 2 2 2

Note: the number of data in the table contains the economies’ foreign banks.

Data source: according to “The Banker” journal database collation.





Table 4: Comparison of tier 1 capital and assets size of the listed bank in 2016

Economy Bank Tier 1 capital Assets

Economy Bank Tier 1 capital Assets

rank $m %ch rank $m %ch rank $m %ch rank $m %ch

China

ICBC 1 274432 10.39 1 3422154 1.60 India State Bank of India 55 26380 7.22 54 447897 3.82

China Construction Bank

2 220007 8.85 2 2827348 3.32 Pakistan Habib Bank 566 1328 3.27 517 21154 13.82

Bank of China 4 198068 7.51 5 2591001 3.95 Bangladesh Islami Bank

Bangladesh 939 492 9.57 774 9246 10.47

Agricultural Bank of

China 5 185607 10.68 3 2741355 5.01 Sri Lanka Bank of Ceylon 937 494 2.66 714 11177 7.28

Singapore DBS Bank 56 26289 0.07 69 324705 -2.66 Kazakhstan Halyk Bank 518 1544 -39.20 667 13102 -14.97

Indonesia Bank Mandiri 167 7327 7.97 228 65971 -4.02 Uzbekistan NBU 962 459 0.84 907 5677 6.85

Malaysia Maybank 102 12593 -7.90 112 165115 -9.87 Russia Sberbank 51 30553 -14.39 61 375064 -16.27

Thailand Bangkok Bank 131 9464 2.69 199 78577 -6.15 Ukraine PrivatBank 627 1113 -27.58 709 11431 -21.30

Philippines BDO Unibank 243 4169 9.34 318 43062 3.09 Belarus Belarusbank 545 1425 -31.95 679 12720 -11.98

Vietnam VietinBank 382 2282 -2.04 363 35609 14.43 Azerbaijan IBA 970 443 -46.61 795 8755 -25.39

Brunei Bank Islam Brunei

Darussaiam 740 860 -2.66 915 5319 -8.39 Poland PKO Bank Polski 190 6310 -0.98 221 68446 -3.48

Hong Kong The Bank of East

Asia 140 8875 22.35 163 100821 -1.75 Lithuania Swedbank Lithuania - 1047 -5.48 - 7248 -5.26

Macau ICBC Macau - 1979 47.76 - 24017 8.28 Estonia Swedbank Estonia - 1480 -34.91 - 10533 -6.87

Iran BSI 264 3669 6.27 324 41469 22.55 Latvia Swedbank Latvia - 1120 -6.56 - 5860 -4.79

Turkey Turkiye Is Bankasi 109 12167 -10.45 145 111855 -5.86 Czech Republic Ceska Sporitelna - 4005 21.47 - 38662 -2.19

Jordan Arab Bank 226 4691 -1.99 277 49045 1.86 Slovakia VUB Banka - 1338 -5.10 - 13723 -3.34

Lebanon Bank Audi 350 2560 -3.14 320 42270 0.74 Hungary OTP Bank 305 3107 -17.00 351 37396 -11.67

Israel Bank Hapoalim 138 8963 4.25 149 110676 5.55 Slovenia NLB 554 1395 -7.32 671 12850 -11.10

Saudi Arabia National Commercial

Bank 87 14694 19.62 139 119824 3.33 Croatia Zagrebacka Banka - 2290 -14.42 - 18312 -3.92

Oman BankMuscat 288 3307 6.67 386 32626 28.95 Serbia Banca Intesa Serbia - 510 2.29 - 4682 -8.51

United

Arab

Emirates

Emirates NBD 110 12045 11.40 148 110689 11.99 Romania Banca Transilvania 553 1400 53.97 707 11465 18.09

Qatar Qatar National Bank 89 14260 18.03 121 147969 10.74 Bulgaria UniCredit Bulbank - 1263 -0.18 - 10546 6.09

Kuwait National Bank of

Kuwait 168 7290 19.21 198 78660 5.80 United States JP Morgan 3 200482 7.42 7 2351698 -8.61

Bahrain Bank ABC 244 4071 -2.26 424 28195 -3.95 Britain HSBC Holdings 9 153303 0.37 6 2409656 -8.52

Greece Piraeus Bank Group 124 10271 22.93 172 95140 -12.20 Japan Mitsubishi UFJ

Financial Group 10 131753 11.99 4 2648521 11.17

Cyprus Bank of Cyprus 315 2987 -22.87 453 25294 -22.20 Germany Deutsche Bank 21 63285 -18.39 12 1770793 -14.61

Egypt National Bank of

Egypt 367 2375 -5.05 222 68277 6.88 France Crédit Agricole 11 84522 -4.79 10 1846586 -13.68

Italy UniCredit 31 48826 -11.58 25 935254 -8.71

Canada Royal Bank of Canada 40 38581 3.12 32 820006 -1.66

Note: the rank of economies’ foreign banks is not available.






Table 5: Comparison of Operating Conditions of the listed bank in 2016

Economy Bank Pre-tax profit

Profits on

capital

Return on

assets

Cost to

income Economy Bank Pre-tax profit

Profits on

capital

Return on

assets

Cost to

income

$m %ch % rank % rank % $m %ch % rank % rank %

China

ICBC 55968 -5.29 20.39 156 1.64 208 30.40 India State Bank of

India 2740 -34.46 10.39 639 0.61 700 -

China Construction

Bank 45993 -5.90 20.91 146 1.63 209 29.83 Pakistan Habib Bank 575 19.04 43.27 20 2.72 54 40.62

Bank of China 35681 -5.68 18.01 225 1.38 294 36.15 Bangladesh Islami Bank

Bangladesh 115 -14.72 23.40 102 1.25 376 44.68

Agricultural Bank of

China 35571 -6.28 19.16 194 1.30 335 38.12 Sri Lanka Bank of Ceylon 211 10.16 42.70 21 1.89 135 42.84

Singapore DBS Bank 3755 1.26 14.28 410 1.16 423 42.51 Kazakhstan Halyk Bank 448 -42.41 29.02 54 3.42 34 27.36

Indonesia Bank Mandiri 1912 -8.57 26.09 74 2.90 47 37.25 Uzbekistan NBU 59 -0.62 12.89 511 1.04 487 47.08

Malaysia Maybank 2133 -18.17 16.94 272 1.29 338 45.41 Russia Sberbank 4544 -31.68 14.87 381 1.21 394 37.55

Thailand Bangkok Bank 1192 -12.83 12.60 530 1.52 241 43.36 Ukraine PrivatBank 10 5.83 0.90 941 0.09 938 54.24

Philippines BDO Unibank 652 7.48 15.64 333 1.51 242 60.04 Belarus Belarusbank 91 -26.90 6.37 831 0.71 652 46.07

Vietnam VietinBank 336 -2.37 14.71 389 0.94 537 - Azerbaijan IBA -650 - -146.6 1000 -7.42 997 82.26

Brunei Bank Islam Brunei

Darussaiam 98 -9.92 11.40 585 1.84 144 32.82 Poland PKO Bank Polski 818 -28.89 12.97 500 1.20 401 48.75

Hong Kong The Bank of East

Asia 871 -19.82 9.81 664 0.86 579 51.01 Lithuania

Swedbank

Lithuania 107 -28.68 10.18 - 1.47 - 43.48

Macau ICBC Macau 302 19.56 15.26 - 1.26 - 19.74 Estonia Swedbank Estonia 231 -12.01 15.62 - 2.20 - 34.20

Iran BSI 396 -11.19 10.80 614 0.96 531 82.08 Latvia Swedbank Latvia 155 -5.84 13.82 - 2.64 - 36.45

Turkey Turkiye Is Bankasi 1577 -22.72 12.96 503 1.41 283 58.85 Czech

Republic Ceska Sporitelna 723 -11.83 18.05 - 1.87 - 41.76

Jordan Arab Bank 719 -14.47 15.34 358 1.47 259 56.86 Slovakia VUB Banka 232 0.89 17.35 - 1.69 - 42.42

Lebanon Bank Audi 510 12.06 19.92 173 1.21 396 54.41 Hungary OTP Bank 209 - 6.74 810 0.56 720 61.35

Israel Bank Hapoalim 1307 14.04 14.58 394 1.18 413 61.15 Slovenia NLB 116 38.18 8.32 741 0.90 557 54.54

Saudi Arabia National Commercial

Bank 2440 4.04 16.60 287 2.04 111 32.99 Croatia Zagrebacka Banka -33 - -1.46 - -0.18 - 45.15

Oman BankMuscat 514 6.04 15.53 345 1.57 220 38.96 Serbia Banca Intesa

Serbia 87 21.57 17.06 - 1.86 - 40.71

United

Arab

Emirates

Emirates NBD 1979 37.98 16.43 294 1.79 160 28.13 Romania Banca

Transilvania 554 296.41 39.61 - 4.84 - 46.07

Qatar Qatar National Bank 3297 7.32 23.12 105 2.23 92 20.06 Bulgaria UniCredit Bulbank 211 7.38 16.75 - 2.01 - 34.30

Kuwait National Bank of

Kuwait 1100 7.70 15.09 368 1.40 288 32.24 United States JP Morgan 30807 0.85 15.37 353 1.31 332 63.05

Bahrain Bank ABC 238 -38.18 5.85 845 0.84 590 57.75 Britain HSBC Holdings 18867 1.00 12.31 545 0.78 620 60.24

Greece Piraeus Bank Group -3216 13.04 -31.31 991 -3.38 993 57.17 Japan Mitsubishi UFJ

Financial Group 13307 -1.02 10.10 653 0.50 754 61.77

Cyprus Bank of Cyprus -484 -34.67 -16.20 976 -1.91 987 39.96 Germany Deutsche Bank -6627 - -10.47 967 -0.37 964 98.11

Egypt National Bank of

Egypt 1367 15.56 57.57 7 2.00 116 34.45 France Crédit Agricole 10238 8.77 12.11 555 0.55 725 57.54

Italy UniCredit 2315 -46.03 4.74 868 0.25 895 63.60

Canada Royal Bank of

Canada 9636 -7.18 24.98 88 1.18 415 55.31


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