---
title: "Financial Center Frankfurt and Asia, A Growing Relationship"
url: https://www.helaba.com/en/financial-center-frankfurt-and-asia-growing-relationship
type: dd_research
language: en
updated: 2026-09-28
keywords: Länder & Regionen, Financial Centre
---

# Financial Center Frankfurt and Asia, A Growing Relationship

March 2008 Helaba Volkswirtschaft/Research Financial Center Frankfurt and Asia – A Growing Relationship Publisher: Landesbank Hessen-Thüringen Girozentrale Research Editor: Chief Economist/Head of Research Dr. Gertrud R. Traud MAIN TOWER Neue Mainzer Strasse 52-58, D-60311 Frankfurt am Main Phone +49 69/91 32-20 24, Telefax +49 69/91 32-22 44 This publication was very carefully researched and prepared. However, it contains analyses and forecasts regarding current and future market conditions that are for informational purposes only. The data is based on sources that we consider reliable, though we cannot assume any responsibility for the sources being accurate, complete, and up-to-date. All statements in this publication are for informational purposes. They must not be taken as an offer or recommendation for investment decisions. Financial Center Frankfurt and Asia – A Growing Relationship 3 Helaba Research · March 2008 · © Helaba Editorial Dear readers, Everyone is talking about Asia, and not only because China will be hosting the Olympic Games this summer. The Olympic motto ”Faster-Higher-Further” plays an important role also in the Asian financial and commodities markets, which means that it is very important, from the perspec- tive of the financial center Frankfurt, to take a closer look at the disciplines that one can observe in these markets. Olympic Games of the Asian Financial Centers The present study therefore analyses the ways in which the German financial center Frankfurt is intertwined with Asia. In contrast to our 2006 study “Frankfurt: The Financial Center – A City on the Move,” where Europe’s large financial centers competed against each other, this time we are letting the Asian financial centers fight for the medals. A central question answered by the present study is therefore this: Which Asian financial centers have future potential and are especially at- tractive to actors in the German financial center? To that end we created the “Helaba Financial Center Ellipse Asia” to visualize the potential of Asian metropolises as financial centers. This entails a forecast of the future gold, silver, and bronze centers in Asia. Frankfurt as the place to be In addition, we will take a look at Frankfurt from an Asian perspective. In keeping with the Chi- nese saying “You measure a tower by its shadow,” we have carried out a survey among Asian banks in Frankfurt with cooperation from the Goethe University. The central finding is that the local Asian actors in the financial center see the metropolis on the Main as a place to be in the European financial world. Frankfurt was able to score in various respects: starting with the unique advantage of being the seat of the European Central Bank, to the excellent transportation infra- structure, to its favorable geographical location in the heart of Germany and Europe. And so it comes as no surprise that from the perspective of the Asians, Frankfurt was able to win the most gold medals when it comes to the choice of a financial center within Germany. And Frankfurt garnered additional medals for its favorable starting position for opening up other European mar- kets. Recommendations And since the competition is taking place not only in the Asian markets, but the European cities are also continuing to compete for the best rankings as financial centers, the study offers the finan- cial center Frankfurt recommendations in the spirit of Mahatma Gandhi: “Be the change you wish to see in the world.“ Dr. Gertrud R. Traud Chief Economist / Head of Research Financial Center Frankfurt and Asia – A Growing Relationship 4 Helaba Research · March 2008 · © Helaba Content Page 1 Focus of the Study 5 1.1 Why Asia? 5 1.2 Selection of Eleven Asian Countries 5 2 Asian Players on the Main 7 2.1 Asian living in the Main metropolis 7 2.2 Asian Companies on the Frankfurt Stock Exchange 8 2.3 Presence of Asian banks in Frankfurt 9 2.4 Survey by Helaba and Goethe University among Asian Banks 11 2.4.1 Business Development 11 2.4.2 Evaluation of the Community 11 2.4.3 Geographic Base 12 2.4.4 Frankfurt’s Qualities as a Location 13 2.4.5 Prospects for the Financial Center 14 3 Financial Center Frankfurt in Asia 15 3.1 Foreign Trade 15 3.2 Helaba Financial Center Ellipse Asia 16 3.3 Ranking of the attractive banking and stock market locations in Asia 17 3.3.1 Hong Kong 17 3.3.2 Singapore 18 3.3.3 Japan 18 3.3.4 China 19 3.3.5 Malaysia 20 3.3.6 India 20 3.3.7 Korea 21 3.3.8 Vietnam 21 3.3.9 Thailand 21 3.3.10 Indonesia 22 3.3.11 The Philippines 22 4 Recommendations 23 Editorial deadline: 22.02.08 An expanded version of the study is available in German. Financial Center Frankfurt and Asia – A Growing Relationship 5 Helaba Volkswirtschaft · März 2008 · © Helaba 1 Focus of the Study 1.1 Why Asia? Given the increasing globalization of economic and financial processes, a well thought-out strat- egy of internationalization is indispensable for the success of a financial center. That is why Helaba, in its 2006 study “Frankfurt: The Financial Center – A City on the Move,” emphasized internationality as a central criterion of success for a financial center. The present study makes the international ties of the German financial center the primary focus of its examination – more specifically, its ties to the dynamic region of Asia. That successfully emer- ging economic region is playing a growing role in the global economy, and the energetic develop- ment of this, the most populous part of the world, offers promising opportunities for international investors and participants in the financial market. This raises two central questions: To what extent is there Asian interest in the financial center Frankfurt? Which Asian countries have financial cen- ters with potential for the future and are attractive to actors here in the German financial center? 1.2 Selection of Eleven Asian Countries The focus of this study rests on eleven countries from the Asia/Pacific region. The countries were chosen for their overall economic importance and/or high dynamism. In that sense this is the “booming” Asia that is the focus of worldwide attention. Thus, in addition to mainland China and India as the two large emerging markets, we have also looked at the regional hubs of Hong Kong and Singapore, as well as a number of smaller countries that are part of the ASEAN economic community. In addition, two industrialized countries are included in the analysis with Japan and the Republic of South Korea. In what follows we will dispense with the qualifiers “mainland” when talking about China and “Republic of/South” when talking about Korea. The importance of Asian economies China with the strongest GDP dynamic, Japan with the weakest 2007, % real yoy Japan 10.3 127.5 China 5.1 1,323.1 Korea 1.8 49.0 India 1.8 1,110.4 Indonesia 0.7 234.7 Hong Kong 0.4 7.0 Thailand 0.4 66.5 Malaysia 0.3 27.2 Singapore 0.3 4.5 Philippines 0.2 91.1 Vietnam 0.1 85.9 Population\*\* Share of global GDP\* 0 2 4 6 8 10 12 China Vietnam India Singapo re Ph ilipp ines Indonesia Ho ng Ko ng M alaysia Ko re a Thailand Japan 0 2 4 6 8 10 12 \* %, nominal in $ (new data of the World Bank available only for 2005); \*\* Million (EIU, for 2007) Sources: EIU, World Bank, Helaba Research Sources: EIU estimates, Helaba Research In the present study, “Asia” is used as a synonym for these eleven countries. Together, these coun- tries generate a good 21 % of nominal global GDP. The other countries of the Asia/Pacific region contribute only around 2 %. Within the region, Japan has by far the largest GDP share at 10 %. After all, it is the second-largest economy in the world. In part as a result of its enormous popula- tion of over 1.3 billion, China has a 5 % share of global GDP.1 India follows with a contribution to 1 At the end of 2007, the World Bank, in its publication “2005 International Comparison Program,” published updated Author: Ulrike Bischoff, Helaba with contributions from: Ute Bächle, Helaba Barbara Bahadori, Helaba Ulrich Rathfelder, Helaba Manuel Schmitt, Helaba Stefanie Trepl, Helaba Survey in cooperation with Prof. Dr. Michael H. Grote, Johann Wolfgang Goethe- Universität Frankfurt am Main Combined share of global GDP 21% Financial Center Frankfurt and Asia – A Growing Relationship 6 Helaba Research · March 2008 · © Helaba global GDP of just under 2 % and a population of 1.1 billion. Even if these two “population heavy- weights” show similarities with respect to the overal dynamism of their economies (China with 11 % and India with 8 % real GDP growth in 2007 over the previous year), one should not throw the two into one pot, since there are striking differences. For example, China’s focus is on the in- dustrial sector, while India is more strongly specialized in service industries. India’s GDP share is the same as that of Korea, although the latter country has a population of only 49 million. Countries of the Asia/Pacific region\* \* delineation of the region according to World Bank; the countries that form the basis of the present study are shaded dark blue. Source: Helaba Research That the share of global GDP held by less-developed Indonesia is not that far off with just under 1 % is explained also by that country’s larger population of just under 235 million. The other ASEAN states Malaysia, the Philippines, Thailand, and Vietnam each account for 0.1-0.4 % of global GDP, with populations ranging in each case between 30 and 90 million. Hong Kong and Singapore with limited populations of 7 and 4 million are also generating 0.4 % and 0.3 % of total global GDP, respectively. The economic dynamism in the region is generally high: the group of countries with particularly strong growth last year included, alongside China and India, also Vietnam and Singapore with slightly over and just under 8 % growth in GDP, respectively. Likewise, the Philippines (around 7 %) as well as Indonesia and Malaysia (each around 6 %) achieved noticeable economic growth. In the industrialized country of Japan, starting from a fairly high GDP volume, the overall econo- mic expansion in 2007 was only around 2 %, and in economically developed Korea (5 %) it was also lower than in the other countries. calculations of 2005 GDP based on purchasing power parities, using a new basket of commodities. For China, this new value of nominal GDP in purchasing power parities stood at 5,333 billion Dollars in 2005, which is 40% lower than the previous calculation. In the present study we therefore generally use the new GDP volume calculations of the World Bank for 2005. High GDP dynamic in the region – with the exception of the industrialized countries Respectable GDP share in Japan, China, India, and Korea Other countries with small share of global GDP China India Indonesia Malaysia Philippines Japan Korea (South) Vietnam Hong Kong Thailand Singapore China India Indonesia Malaysia Philippines Japan Korea (South) Vietnam Hong Kong Thailand Singapore Financial Center Frankfurt and Asia – A Growing Relationship 7 Helaba Research · March 2008 · © Helaba 2 Asian Players on the Main 2.1 Asian living in the Main metropolis The city of Frankfurt has international flair: 25 % of its residents are foreigners, and 12 % are Ger- man inhabitants with indication of migration. It is also home to a larger number of Asians. Nation- als from the eleven countries in question make up 7 % of Frankfurt’s foreign population (2 % of total population). In the wake of Asian banks taking up residence in the German financial center, an especially large number of Japanese, Indians, Chinese, and Koreans live and work in Frankfurt. Asian population groups in Frankfurt Absolute numbers and share of total number of resident Asians at the end of 2007 Vietnam 6% 680 Thailand 11% 1,192 Philippines 5% 564 Korea 8% 821 Indonesia 4% 367 India 21% 2,232 China 19% 1,951 Japan 25 % 2,545 Malays ia 1 % 122 Sources: Statistisches Jahrbuch Frankfurt, Helaba Research The varied activities of the Asian population groups contribute to Frankfurt’s internationalization: for one, most countries have official representations in the form of consulates and chambers of commerce. For another, some informal organizations and advocacy groups have emerged, such as economic clubs, cultural and athletic clubs, religious institutions, and schools. Asian institutions in Frankfurt General consulates\* Business organizations/ Chambers of commerce Economic clubs\*\* Cultural/ athletic clubs\*\* Religious institutions\*\*\* Schools\*\* China x x x x -- x Hong Kong -- x -- x -- -- India x x x x -- -- Indonesia x -- -- -- -- -- Japan x x x x x x Korea x x x x x x Malaysia -- -- -- -- -- -- Philippines x -- -- -- -- -- Singapore -- x -- -- -- -- Thailand x x -- -- -- -- Vietnam x -- -- -- -- -- \* largest Chinese consulate in Europe, exception the Philippines with Honorary Consulate; \*\* in addition to country-specfic institutions also supra- or international ones; \*\*\* distinct communities can be identified only for the Japanese and Koreans. Sources: Wirtschaftsförderung Frankfurt, Internet-Wissensportal Konsulate (as of the end of 2007), Helaba Research That especially Japanese, Chinese, and Indian influences are hard to miss in Frankfurt is also evi- dent from the comparatively high number of restaurants representing these ethnicities. While there are few Korean restaurants, the culinary scene in Frankfurt is also characterized by a multitude of Thai and Vietnamese establishments. These restaurants are patronized not only by Asians, but also by many Germans and other nationalities. Multi-faceted Asian community A variety of Asian restaurants Frankfurt is home especially to the Japanese, Indians, and Chinese Active lifestyles of the Japanese, Koreans, Chinese, and Indians Financial Center Frankfurt and Asia – A Growing Relationship 8 Helaba Research · March 2008 · © Helaba Many Asian restaurants in the Main metropolis Number (end of 2007) Frankfurt 2007 a popular destination for Asian tourists Number of guests Number of nights 0 10 20 30 40 50 60 Japan China Thailand India Vietnam Korea Malaysia 0 10 20 30 40 50 60 Gelbe Seiten Branchen Kompass Frankfurt Tipp 0 30.000 60.000 90.000 Japan China\* Korea India 0 50.000 100.000 150.000 Guests (left scale) Nights (right scale) Sources: Gelbe Seiten, Branchen Kompass, Frankfurt Tipp, Helaba Research \* incl. Hong Kong Sources: Tourismus+Congress GmbH, Statistisches Jahrbuch Frankfurt, Helaba Research Because of the city’s status as an internationally renowned place for fairs, many business travelers from Asia make their way to Frankfurt. And it is not unusual for Asian companies that have suc- cessfully exhibited at several Frankfurt fairs to settle in the region. The Main metropolis is a popu- lar destination especially for Japanese, Chinese, Koreans, and Indians: in 2007, around 87,000 tourists came from Japan, 73,000 from China, 30,000 from Korea, and 23,000 from India. To- gether, they accounted for about 15 % of foreign tourists in Frankfurt. 2.2 Asian Companies on the Frankfurt Stock Exchange Asian companies are making their presence felt on the Frankfurt stock exchange: more than 700 Asian stocks are traded on the Frankfurt Open Market, with the trade in stocks from China, Hong Kong, and Japan accounting for the largest turnover volume. The comparison with the Top 10 of the respective Asian stock index reveals that it is especially also the large companies that are rep- resented here. Trade in many large Asian companies on the Deutsche Börse Number and share of traded stocks in the open market (end of 2007) Turnover concentrated in stocks from Hong Kong, China, and Japan Turnover with all stocks of a country in million € (end of 2007) Hong Kong 13% 97 India 4% 28 Indonesia 10% 69 Japan 31% 231 Korea 3% 19 Singapore 12% 84 Thailand 11% 78 China 16% 114 Malays ia 0% Philippines 0% Vietnam 0% 0 50 100 150 200 Hong Kong China Ja pa n Korea Singa pore India Thaila nd Ind ones ia M alay sia Ph ilippin es Vietnam 0 50 100 150 200 Sources: Deutsche Börse, Helaba Research Sources: Deutsche Börse, Helaba Research Chinese companies have started to discover the Frankfurt stock exchange as a suitable place to launch their IPOs. The vigor in the Chinese corporate landscape favors the IPO marketing that the Deutsche Börse has been actively pursuing in China. And there have been initial successes: in 2007 a total of seven Chinese companies chose Frankfurt for their IPO. That the Main metropolis is able to successfully win private companies from the new “economic miracle country” early on for their debut in the stock market is promising; after all, so far these companies have no preferred Many Asian tourists and business travelers visit Frankfurt Deutsche Börse: trading in more than 700 Asian stocks Intensive IPO marketing in China Financial Center Frankfurt and Asia – A Growing Relationship 9 Helaba Research · March 2008 · © Helaba foreign stock exchange. Considerations regarding the peer group2 play a role in the choice of Frankfurt to launch an IPO, as do financial aspects. Costs of an IPO in the Frankfurt stock market are comparatively low in international terms and are noticeably below those in Hong Kong, in par- ticular. This suggests that there will be additional IPOs by Chinese companies, and plans in that di- rection are already on the drawing board. 2.3 Presence of Asian banks in Frankfurt Foreign banks from Asia have been present in the German financial center for more than fifty years. A few Asian banks have also newly settled in Frankfurt over the last few years, most recent- ly the Indian ICICI. Of course, over the years there have also been Asian institutions that have re- duced or terminated their activities in Frankfurt. Thus, the Asia crisis and especially the banking crises in Japan and Korea in the 1990s led to a reduced foreign presence of credit institutions from those countries. All told, 31 of the 360 foreign credit institutions in Germany are from Asia. Of those, 24 or three- quarters have their seat on the Main. This makes Frankfurt by far the most favored location for Asian banks that are coming to Germany.3 Japanese banks have a kind of division of labor within Germany: institutions focused on Japanese industry traditionally prefer Düsseldorf, while the lar- ger number – with a stronger focus on non-Japanese customers or stock market activities – are lo- cated in Frankfurt. For the five Korean banks, Frankfurt is the only banking center of importance within Germany. The same holds true for Chinese and Indian institutions, even if their number in the German financial center is still fairly limited at five and two, respectively. Still, a growing in- terest in the German financial center is evident, as banks from China and India are expanding their activities on the Main. When it comes to types of banks, one must distinguish between national central banks (3), state development banks (4), and the majority of commercial banks in the broader sense (17). On aver- age, Asian commercial banks have around 30 local and foreign employees (central and develop- ment banks around five). They are very different in their orientation and area of activity: the com- mercial banks are active in various sectors – a few even as all-purpose banks, most with an empha- sis on certain areas of business (e.g., foreign trade, payment transactions, structured financing, stock sales). In addition, a few are active as specialized institutions: two brokers, one capital in- vestment company, and two automotive financers with Asian background. The Asian central and development banks focus on economic analysis of Germany and other European countries. For central banks this is joined by the intensive cultivation of contacts especially to the ECB, the Bun- desbank, and in part also the EU Commission in Brussels or the Bank for International Settlements (BIS) headquartered in Basel. The state development banks in Germany serve as an interface for companies from the home country and devote themselves in this way to promoting investment by their home country. 2 Meaning the extent to which the Deutsche Börse already has companies that are comparable with respect to sector, size, or core activities. 3 These figures were calculated on the basis of information supplied in the survey by Helaba and Goethe University (see 2.4) as well as on the basis of company profiles; the clear outlier of around 400 employees in one bank (specialized insitu- tion) was not included. In the case of these commerical banks, we are looking almost exclusively at active presence in the form of branch offices or credit institutions with a majority Asian ownership; there is only one representative office. Asian banks have been coming to the Main for more than fifty years – Asian crisis leaves traces Frankfurt: a favored location Countries of origin: Japan, China, Korea, India Three types of banks with different foci Financial Center Frankfurt and Asia – A Growing Relationship 10 Helaba Research · March 2008 · © Helaba Asian banks in the German financial center at the end of 2007 Name of bank Bank type Type of presence Country of origin Comm. bank\* Develop. bank Central bank Branch Foreign majority ownership Represen- tative office China Bank of China Limited Zweigniederlassung Frankfurt am Main Frankfurt Branch x x Bank of Communications Co., Ltd. Frankfurt Branch x x China Construction Bank Corporation Niederlassung Frankfurt x x Industrial and Commercial Bank of China Limited Frankfurt Branch x x People's Bank of China Repräsentanz x x India ICICI Bank UK Ndl.\*\* x x State Bank of India (Indische Staatsbank) Zweigniederlassung x x Japan Daiwa Securities SMBC Europe Limited Niederlassung Frankfurt am Main x x Development Bank of Japan Repräsentanz Frankfurt am Main x x Honda Bank GmbH x x Japan Bank for International Cooperation Repräsentanz in Frankfurt x x Maintrust Kapitalanlagegesellschaft mbH x x MCE Bank GmbH x x Mitsubishi UFJ Securities International plc, Frankfurt Branch x x Mizuho Corporate Bank (Germany) AG x x Nomura Bank (Deutschland) GmbH x x Shinsei International Limited Zweigniederlassung Frankfurt am Main / Frankfurt Branch x x The Bank of Japan Repräsentanz x x Korea Korea Exchange Bank (Deutschland) AG x x Shinhan Bank Europe GmbH x x The Bank of Korea Repräsentanz x x The Export-Import Bank of Korea Repräsentanz x x The Korea Development Bank Frankfurt Representative Office x x Supra- national Asian Development Bank European Representative Office x x \* incl. broker, capital investment company, automotive financers; \*\* licence of BaFin since March 2007, business activity since in February 2008. Sources: Deutsche Bundesbank, Bundesanstalt für Finanzdienstleistungsaufsicht, Helaba Research The importance of the German financial center for the Chinese financial system is being bolstered by the activities of China Union Pay (CUP), the only Chinese issuer of debit and credit cards. Thanks to the intensive collaboration between CUP and the Frankfurt service company B+S Card Service, it has been possible since the end of 2005 to pay with the Chinese card also in Germany. The goal of the two partners in the venture is to increase the acceptance of the CUP card in Ger- many and other European countries. In addition, since the end of 2005, as a result of a cooperation between CUP and Eufiserv (European Savings Banks Financial Service – joint enterprise of Euro- pean savings banks), the ATMs of European savings banks also accept the CUP bank card. Chinese bank card in the German financial system Financial Center Frankfurt and Asia – A Growing Relationship 11 Helaba Research · March 2008 · © Helaba 2.4 Survey by Helaba and Goethe University among Asian Banks The survey conducted by Helaba in cooperation with Professor Dr. Michael H. Grote (Johann Wolfgang Goethe University) has yielded many interesting insights into the Asian perception of the Main metropolis. Apart from 20 personal interviews in Frankfurt, two more managers from Asian banks located in other German towns were phoned. With that procedure a comprehensive picture of the sentiment concerning the qualities and role of Frankfurt for Asian banks was ob- tained. 2.4.1 Business Development The foreign Asian banks view the development of their business in the German financial center positive – both in the past and looking ahead. Nearly two-thirds of the commercial banks can look back on an expansion in Frankfurt. The majority of institutions already present on the Main are optimistic about their prospects for future expansion – good advertisement for additional market participants from Asia. Past business actitivity in Frankfurt Number of commercial banks Assessment of future prospects in Frankfurt Number of commercial banks 0 1 2 3 4 5 6 7 8 9 1 0 1 2 3 4 5 6 7 8 9 Expansion Reduction n.a. 0 2 4 6 8 10 12 14 1 0 2 4 6 8 10 12 14 Expansion n.a. Reduction Sources: Survey Helaba Research & University of Frankfurt Sources: Survey Helaba Research & University of Frankfurt Chinese and Indian credit institutions are already in the process of expanding their activities in the German financial center by either setting up new offices in Frankfurt or converting existing ones into fully operating banks. Bank representatives from these two countries were optimistic that this was a trend that would continue for the time being. Korean bank representatives were equally po- sitive and pointed to the trend to set up an international network. Against this background it is quite conceivable that an expansion of business in Germany and Europe will crystalize once again, bringing in its wake also an expansion of activities by Korean banks in the German financial cen- ter. The situation is different among Japanese institutions, especially since the wave of mergers in the Japanese banking sector has visibly reduced the number of large banks. However, a new move- ment of consolidation is apparent in the Japanese banking sector, this time among the small and medium-sized institutions. Such mergers could mean increased competition for Japan’s large banks both at home and abroad. Moreover, it is conceibable that if the interest of Japanese indus- trial companies in the Frankfurt airport as an attractive distribution center continues to grow, more Japanese financiers will be coming to the city on the Main over the long term. 2.4.2 Evaluation of the Community Of those surveyed, 95 % affirmed the existence of an active banking community in Frankfurt. In fact, many Asian banks felt that it was a very dynamic community, even if they themselves did not necessarily seem to be among the most active players. Nevertheless, many Asian banks clearly Active banking community for contacts and cooperation Good growth opportunities at the financial center Frankfurt Increased future activities by Chinese, Indian, and possibly Korean banks in Frankfurt Long-term several Japanese banks also conceivable in Frankfurt Financial Center Frankfurt and Asia – A Growing Relationship 12 Helaba Research · March 2008 · © Helaba benefit from the financial community in Frankfurt: sector meetings and an institution’s already existing network often serve to establish new business contacts; in addition, numerous institutions are also engaged in an active search for new business contacts, for example via the Internet. When asked about cooperation with other institutions in the German financial center, three-quarters of the Asian banks answered in the affirmative. “How do you establish new business contacts?“ Number (multiple answers possible) Cooperation with other banks in Frankfurt Number 02468101214 Sector meetings Active s earch Existing network Hardly 3 No 2 Yes 15 Sources: Survey Helaba Research & University of Frankfurt Sources: Survey Helaba Research & University of Frankfurt Those surveyed were all agreed that there is no active, pan-Asian union; instead, it is more formal in nature. After all, the various nationalities are too different and form their own communities, though these are limited in size compared to other large cities around the world. Thus, the financial center Frankfurt is home to a Japanese, Korean, and Chinese community. There are regular meet- ings on both the professional and private levels. 2.4.3 Geographic Base For Asian banks, Frankfurt holds an important place on the European continent since it has nu- merous advantages as a location. Nearly all of the Asian banks surveyed are concentrating their activities within Germany on Frankfurt; only two maintain an additional office in Düsseldorf with emphasis in a different area of activities. In general this is no disadvantage for the minority of Asian institutions that are active in German cities outside the Rhine-Main region. After all, a deci- sive argument for their choice of a location is direct customer contact, for example to the shipping sector in Hamburg or Japanese corporate clients in Düsseldorf. Role of the Frankfurt office in relationship to London Percentages Geographical focus of Asian banks on the Main % share (multiple answers possible) More important\* 35% Less important 30% Not specified 20% Equal 15% 0 10 20 30 40 50 60 70 80 90 Commercial banks All banks 0 5 10 15 20 25 30 35 German (-speaking) region Europe Eastern Europe \* incl. only European office on the Main Source: Survey Helaba Research & University of Frankfurt Source: Survey Helaba Research & University of Frankfurt As a location, Frankfurt plays an important role not only in Germany but also within Europe: for 35 % of those polled, their institution’s office on the Main is the most important in Europe – Asian focus in Germany clearly on Frankfurt Japanese, Korean, and Chinese communities For many an office on the Main more important than one on the Thames Financial Center Frankfurt and Asia – A Growing Relationship 13 Helaba Research · March 2008 · © Helaba among them also three banks who felt no need to be present in London. In fact the percentage of those who placed stronger weight on their office on the Thames was even a little lower at 30 %.4 The Asian institutions service a multitude of countries from their office in the German financial center. Their Frankfurt activities concern, in addition to the German-speaking region, many other European countries, such as Scandinavia, the Benelux states, larger member countries of the Euro- zone, and most recently also Eastern Europe to a growing extent. 2.4.4 Frankfurt’s Qualities as a Location As the primary reason for their decision in favor of Frankfurt, two-thirds mentioned the possibility of contact with financial market place actors like the ECB and the Bundesbank, commercial banks, and the stock market. With some frequency the metropolis on the Main was seen as the place to be in the (German) financial system. In addition, for 40 % of respondents Frankfurt’s attractive infra- structure in the heart of Europe played an important role, and they pointed in this regard especially to its airport as an international hub. For one third the German economy was also a motivating fac- tor behind their presence in Frankfurt. Because of the overall size of its economy (in third place globally) and its reputation for quality (“Made in Germany”), Germany is seen in Asia as an inter- esting market, the economic relationships with which should be strengthened. The response to the question of whether the activities pursued in Fankfurt could be done from a different location reveals just how important proximity to their business and cooperation partners is to the Asian banks. Three-quarters answered emphatically in the negative on the grounds that the networks in Frankfurt were indispensable to them. In addition, they pointed to the time differ- ence between Germany and Asia – a clear limitation on the practicality and efficiency of activities pursued only from their home country. Moreover, around 70 % of the Asian banks indicated that their presence in Frankfurt was expected from their customers and that they were taking active advantage of the possibility of direct contact. This confirms the thesis put forth in the Helaba study of 2006 that proximity to the community is not rendered obsolete by increasing technology. On the contrary: it would seem, especially in view of the diversified possibilities of contact across geo- graphic distance, that the face-to-face conversation is becoming increasingly important as a way of expanding business contacts. Asian bank representatives also expressed their personal opinion about the Main metropolis. Near- ly all those surveyed liked living and working in the Frankfurt region. In part this can be attributed to the politeness of the participants in the poll, though it also speaks to a positive view of Frankfurt from an Asian perspective, especially since the responses highlighted special pluses: an excellent transportation infrastructure with short distances, a professional work atmosphere with good career prospects, attractive cultural offerings, nature close by, a high living standard, internationality and cosmopolitanism, and a pronounced feeling of safety. On the whole, the surveyed representatives of Asian banks perceived all the strengths of the Ger- man financial center that Helaba had identified in its last study; in addition, they brought up further positive aspects of Frankfurt. The spectrum of all attributes is visualized by the Asian Financial Center Star Frankfurt. All told, there are fourteen characteristics of the German financial center that are essential in making Frankfurt attractive to Asian actors. Occasionally those surveyed also pointed to weaknesses of the financial center Frankfurt. This was not a general view, but only individual opinions, some of which were contradicted by other state- ments. For one, the three widely known weaknesses of Frankfurt were confirmed: respondents 4 Since the survey was conducted among Asian banks in the financial center Frankfurt, it did not include those institutions with offices only in London. Main reasons for a branch on the Main: proximity to the community, infrastructure and location, and the German economy Cultivation of personal contacts indispensable for business success Feeling comfortable in Frankfurt: many personal pluses Asian Financial Center Star Frankfurt: 14 positive attributes Occasional mention of Frankfurt’s weaknesses Extensive market coverage in Europe with the Frankfurt office Financial Center Frankfurt and Asia – A Growing Relationship 14 Helaba Research · March 2008 · © Helaba faulted the limited size of the financial center and its surrounding region, inner-German competi- tion from regional financial centers with negative repercusions on the international positioning of Frankfurt and Germany, and the marketing of Frankfurt. For another, respondents mentioned as- pects they felt needed improvement, especially in the private sphere: communication in English was often cumbersome in private everyday life and at times still not a given even at business meet- ings. Asian Financial Center Star Frankfurt Attra ctive ne ss of financial center Frankfurt to Asian players Location-specific qualities Existing Asian players Attractive cultural and recreational offerings Acceptable price level Short distances Very good transportation infrastructure Function as a hub Presence of important actors Reputation as a financial center Gateway to (Eastern) Europe Proximity to "Made in Germany" Important stock market "Draw" of the ECB Active international banking community International economic metropolis Important financial center in Europe Tradition as a financial center Stability of the financial system The fourteen factors that make Frankfurt attractive from an Asian perspective are grouped into four main categories (red ovals); in two cases there is overlap in the allocation of the factors. Source: Helaba Research 2.4.5 Prospects for the Financial Center The outlook for the financial center Frankfurt within Germany is clear to those surveyed: The city will continue to hold the top spot unchallenged. This was expressed almost unamiously by the managing directors and representatives, in fact some were puzzled by the question itself. After all, Frankfurt is seen as the “symbol of modern Germany,” for example, with which other cities cannot compete in the area of the financial system. However, when it comes to the future role of the Ger- man financial center within Europe, most of those surveyed found it difficult to articulate an opin- ion. Many justified this by saying that they were not in a position to assess central factors, such as the macroeconomic development and political support. Respondents felt that the starting position of the “City of the Euro” were good, but that Frankfurt had to make better use of its opportunities. Frankfurt remains No. 1 in the German financial system Financial Center Frankfurt and Asia – A Growing Relationship 15 Helaba Research · March 2008 · © Helaba 3 Financial Center Frankfurt in Asia 3.1 Foreign Trade The extent of the economic linkages between Germany and Asia can be measured, for one, by the flow of goods across the borders. For another, direct German investments in Asia provide a good starting point for credit institutions with plans to expand in that region. German foreign trade intensifies especially with Asia Trade volume\* in billion € Trade volume\* in billion € German trade with major focus in Chinas Country shares of Germany’s trade volume\* with Asia 60 80 100 120 140 160 180 2000 2001 2002 2003 2004 2005 2006 2007 8 10 12 14 16 18 Asia (right scale) Total (left scale) China 46% Hong Kong 3% India 8% Indonesia 2% Japan 18% Korea 9% Malays ia 4% Philippines 1% Singapore 4% Thailand 3% Vietnam 2% \* Sum of exports and imports Sources: Destatis, Ecowin, Helaba Research \* Sum of exports and imports, end of 2007 Source: Destatis, Ecowin, Helaba Research Germany’s foreign trade as a whole has shown a dynamic development in the last years, and espe- cially so with Asia. Compared to the beginning of 2002, when the trade of commodities began to pick up steam, the trade volume with Asia was around 90 % higher at the end of 2007 (worldwide it was higher by “only” 70 %). At around 17 billion Euro, 11 % of Germany’s foreign trade activ- ity involved the Asian countries examined in this study. Of that, about 40 % were German exports into this region, while the largest share represented goods imported to Germany. Within Asia, China plays the most important role for German foreign trade (around 8 billion Euro; 45 %), fol- lowed by Japan (20 %) and then Korea and India (10 % each). India and China were able to notch up the largest growth between 2002 and 2007 (260 % and 200 %, respectively). German- Vietnamese trading links also developed robustly and were able to rise by around 130 % in this period, although they started from a much lower level. German direct investments in Asia are expanding . . . Holdings in billion € Holdings in billion € . . . and are visibly diversified Country shares of direct German investments 2005 0 200 400 600 800 1.000 1989 199 0 19 91 199 2 199 3 1994 199 5 19 96 199 7 19 98 1999 200 0 2001 200 2 20 03 200 4 200 5 0 10 20 30 40 50 Worldwide (left scale) Asia (right scale) Thailand 3% Singapore 13% Malaysia 5% Philippines 1% Korea 14% Japan 20% Indonesia 3% India 6% Hong Kong 10% China 25% Vietnam 0% Sources: Deutsche Bundesbank, Helaba Research Sources: Deutsche Bundesbank, Helaba Research Similar to trading links, Germany’s direct investments in Asia have also intensified noticeably during the last years. In 2005 these investments amounted to around 45 billion € , 6 % of all Ger- man investment holdings abroad. Alongside industrial enterprises, German credit institutions are Foreign trade linkages pave the way for financial institutions Dynamic development of trading links – China, Japan, Korea, and India as important partners for Germany Financial Center Frankfurt and Asia – A Growing Relationship 16 Helaba Research · March 2008 · © Helaba also visibly engaged in this way (share of more than 10 % of direct investment holdings). Analo- gously to foreign trade, the focus of German direct investments is also on China, which was the recipient of 25 % of the money that flowed to Asia. Japan and Korea also stand out at 20 % and 14 %, respectively. Different from the flow of goods, however, Singapore and Hong Kong are also important destinations of direct German investments in Asia (13 % and 10 %, respectively). 3.2 Helaba Financial Center Ellipse Asia Rankings by Mastercard, Corporation of London, and the Securities & Futures Commission Hong Kong confirm the uncontested leadership position of Hong Kong and Singapore as international economic and financial metropolises, and Japan’s position as one of Asia’s premier financial cen- ters. However, in the wake of the economic boom, the competition among the region’s financial centers is becoming more and more intense. Many Asian cities see themselves as ‘the” financial center and are emphatically wooing participants in the financial market. Helaba Financial Center Ellipse Asia: Categories of the potential of Asian metropolises as financial centers\* Ho Chi Minh Seoul Bangkok Tokyo Singapore Hong Kong Shanghai Kuala Lumpur Mumbai Manila Jakarta Potential of Asian Financial Centers \* The closer to the center a city is located, the greater its projected potential as a financial center: The innermost, dark blue area around the core of the ellipse forms the first category of financial centers that will be internationally successful in the future, the second category of financial centers that continue to have only national importance is medium blue, and the outer, light blue ring comprises cities without a pronounced characteristic as a financial center also in the future. Source: Helaba Research But which countries in Asia have financial centers with potential and are attractive to the nucleus of the financial center Frankfurt? The Helaba Financial Center Ellipse Asia answers this ques- tion by offering a concrete vision of what the Asian financial center region will look like in the future. From this one can derive the following ranking of Asian’s various financial centers: we continue to see Hong Kong, Singapore, and Tokyo as top international locations. Next are the dynamic newcomers Shanghai and Kuala Lumpur as well as Mumbai, followed by Seoul in the middle of the pack. Ho Chi Minh with its long-term potential for advancement is placed in front of the cities with the lowest potential as financial centers, which include Bangkok, Jakarta, and Ma- nila. Alongside large trading partners, Singapore and Hong Kong also important recipients of direct investments Intense competition among Asia’s financial centers Ranking according to long-term success potential of the various centers Financial Center Frankfurt and Asia – A Growing Relationship 17 Helaba Research · March 2008 · © Helaba 3.3 Ranking of the attractive banking and stock market locations in Asia The general ranking from the ellipse is concretized and modified in the Helaba Smiley Table Asia by means of special assessment criteria.5 Alongside business considerations specific to various in- stitutions, this represents an important decision-making basis for actors of the German financial center on their way to Asia.6 In the case of the Deutsche Börse this is more a long-term prospect, for while a process of opening has begun in the Asian stock market system, real consolidation is for now still impeded by the national perspectives that prevail at the various stock exchanges. Helaba Smiley Table Asia Banking location Ranking Helaba Financial Center Elipse Asia Stock Market\* Quality of the banking sector Latitude for foreign banks Economic and supply aspects Hong Kong ☺ ☺ Singapore ☺ Top international locations Japan ☺ ☺ ☺ China ☺ ☺ ☺ Malaysia Dynamic newcomers India ☺ ☺ ☺ Nationally important financial center Korea Rise to a national financial center Vietnam ☺ Thailand ☺ Indonesia ☺ Lowest potential as a financial center Philippines The detailed analysis of the various banking and stock market locations which leads to the smiley assessments can be found in the expanded German version of the study. ☺ indicates that an Asian economic location is well positioned for this criterion and is thus highly attractive to actors in the Frankfurt financial center. indicates that deficits in a certain area are pronounced at this time, which means that the attrac- tiveness is rather low in this area. indicates a ranking in the middle of the range. Source: Helaba Research 3.3.1 Hong Kong Thanks to its strong competitiveness, good strategic location, and importance to Chinese compa- nies for capital procurement, this flourishing regional hub is a top international location in the financial system – and is likely to remain so. Starting from its growing reputation and roots in the global financial activities, Hong Kong is likely to be a preeminent financial center of world rank also for the long term. This also makes Hong Kong attractive as a cooperation partner for the 5 The Helaba Smiley Table Asia is sorted in accoradance to the ranking list of Asian financial locations. 6 The various countries are given as synomyms for their financial capitals, since the latter are relevant to a foreign actor’s entry into the market and are under the influence of the country-specific general economic conditions. World class financial center – limited opportunities for German banks Financial Center Frankfurt and Asia – A Growing Relationship 18 Helaba Research · March 2008 · © Helaba Deutsche Börse (☺). However, to date these two international stock market heavyweights are linked only technologically via Clearstream: this international securities administrator and pro- vider of post-trade services with an international focus launched its business in Asia at the begin- ning of the 1990s with a branch in Hong Kong. The banking sector of the renowned financial cen- ter is considered healthy (☺). As a result, many foreign banks are already represented here, which points to rather limited leeway for credit institutions that are new to Hong Kong ( ). The econo- mic and supply indicators also suggest only average opportunities for institutions entering the mar- ket ( ). Because of limited possibilities of expansion in the Chinese Special Administrative Zone, even banks that are already present in Hong Kong are increasingly directing their business activi- ties toward mainland China. Market share foreign banks Share of the assets of the banking system in %\* 0 5 10 15 20 25 30 Hong K on g Sing apor e Kor ea Malaysia Indonesia Philippines Th ailan d Vietna m Ind ia Japa n\* \* Chi na 0 5 10 15 20 25 30 70% 90% \* various points in time (2004-2007), \*\* survey-based value Sources: National Central Banks and Banking Organisations, BIS, Fitch, World Bank, Helaba Research 3.3.2 Singapore Like Hong Kong, Singapore is already a successful financial center of world rank and is likely to retain that role also in the future. The city state’s acknowledged status as a regional hub with ex- tensive connections in the financial world and its prominence in certain areas, ship financing and private banking, for example, make it attractive. Still, Singapore is of limited interest to the Deut- sche Börse, since its stock market has only a fairly small volume and there is no recourse to any meaningful contacts ( ). Singapore’s banking sector is characterized by high stability and a com- petitive orientation, which makes it next to Hong Kong the “healthiest” in the region (☺). Never- theless, the chances of success for newly arriving foreign banks are not likely to be all that good at this offshore location, either. This is indicated by the limited leeway for new foreign banks ( ) as well as the good supply of bank-specific services ( ). 3.3.3 Japan In addition to the two regional hubs of the region, the Japanese financial center will also be among the top international locations in the future. Its weight as an international stock market location and as the financial center of the world’s second-largest economy guarantee that Tokyo will be highly important in global financial activities. The better the opportunities will be used or politically sup- ported, and the more Tokyo opens itself to international market currents, the greater the impor- tance of the Japanese financial center for Asian and international financial activities will be. The stock market heavyweight Tokyo is thus an attractive partner for alliances (☺), although to date the Deutsche Börse maintains only a technological link via Clearstream – exactly as it does with the other top financial centers of Hong Kong and Singapore. The chances of success for German banks should be slightly better overall in the Japanese capital than in the two regional hubs, with a comparable quality of the banking sector (☺) and bank-specific services ( ). The crucial differ- ence is, however, that the penetration of foreign banks is less pronounced in Japan than in Hong Comparative assessment of Singapore and Hong Kong Financial center Tokyo with good future prospects also for German banks Financial Center Frankfurt and Asia – A Growing Relationship 19 Helaba Research · March 2008 · © Helaba Kong and Singapore. This points to maneuvering room for foreign banks in Japan’s highly devel- oped financial system (☺), especially since the interlocking shareholding in that country’s banking and corporate sector is being dismantled. Assessment of Asian banking systems Rating classes Ranking of Asian countries according to per capita GDP $ in purchasing power parities, 2005\* EIU S&P China B 6 Hong Kong A 2 India BB 6 Indonesia B 8 Japan A 3 Korea BBB 4 Malays ia BBB 4 Philippines B 8 Singapore AA 2 Thailand BB 6 Vietnam B 9 0 10.000 20.000 30.000 40.000 50.000 Si ngapore Ho ng Ko ng Japan Korea Ma laysia Thailand Ch ina Indones ia Philip pines Vietnam India 0 10.000 20.000 30.000 40.000 50.000 Sources: EIU “Banking Sector Risk”, S&P “Banking Industry Country Risk Assessment” (both August 2007), Helaba Research \* new assessment basis available only for 2005 (see Section 1.2) Sources: World Bank, Helaba Research 3.3.4 China The emerging location of Shanghai has good chances to become a future newcomer among Asia’s internationally important financial centers, as its position in the Helaba Financial Center Ellipse Asia at the boundary to the top 3 of the region indicates. Its vigorous “domestic” competititon with the Chinese special administrative zone of Hong Kong, given a concentration on a division of labor, harbors advantages for both locations, in keeping with the principle “One country, two sys- tems”. Finally, promising possibilities of development exist for both Shanghai and its economi- cally potent hinterland, and for Hong Kong with its international focus. These prospects of the financial center Shanghai are part of the reason why a stronger link between the Chinese and the German stock markets seems attractive. The Frankfurters have already taken steps in that direc- tion. For one, various cooperation agreements were signed (including the trading system Xetra in Shanghai), for another the intensive advertising of the Frankfurt stock exchange in China has led to Chinese IPOs on the Main. All this leads to the positive overall assessment for the stock market location China from a German perspective (☺). Global market capitalization of the main stock markets Share in %, end of 2007 Volume of traded stocks worldwide Share in %, end of 2007 Rest of the world 28% Euronext 7% Tokio 7% NYSE 26% London 6% Bombay 3% Shanghai 6% Hong Kong 4% Deutsche Börse 4% Korea 2% Rest of Asia 2% NYSE 29 % Hong Kong 2 % Korea 2 % Shanghai 4 % Tokio 7 % Deutsche Börse 4 % Euronext 6 % London 10 % Rest of the world 31 % Rest of Asia 5 % Sources: World Federation of Exchanges, Helaba Research Sources: World Federation of Exchanges, Helaba Research Something similar holds for China’s attractiveness as a location for German banks, as the three bank-specific criteria indicate: crucial to the rather good prospects for German banks are the lim- ited availability of banking services (☺) in the “growth giant”, and the relatively low market share of foreign banks, which means that there is room for more foreign institutions (☺). Although that Opportunity for advancement as a financial center, promising prospects for German stock market and banks Financial Center Frankfurt and Asia – A Growing Relationship 20 Helaba Research · March 2008 · © Helaba can also be attributed to negative structural aspects, over the medium term improved competitive conditions in the banking sector are foreseeable, provided the reform process that has already been initiated is consistently continued. Thus there is still need for improvement in the quality of the banking system ( ). China is the only one of the eleven countries in question that is fairly well po- sitioned in all three assessment categories as a financial, stock market, and banking location, and it thus has promising potential overall in the medium term for actors in the Frankfurt financial world. 3.3.5 Malaysia The positive outlook for the financial location Malaysia overall must be separated from the limited attractiveness it holds for German actors in the foreseeable future: like Shanghai, Kuala Lumpur has significant potential to catch up to Asian’s financial centers of international importance, which is why it is located in the Helaba Financial Center Elipse Asia on the border to the the region’s three leading financial centers. Among other reasons, Kuala Lumpur is quite high on the ranking of Asian financial centers because of its international connections, and both in ethnological and geographic respects it provides a fundamentlly good starting point in terms of a financial penetra- tion of the region. The critical advantage that the Malaysian financial center has over many others in the region is a clear focus: Kuala Lumpur has committed itself to the strategy of specializing in Islamic Banking and is resolutely pursuing its goal of developing from a regional into a global center in this area. To that extent Malaysia as a business area offers few prospects to the majority of German banks, especially since the assessment of the three bank-specific criteria is only average ( ). At the same time, Malaysia holds only average attractiveness as a partner for the Deutsche Börse ( ), whereby the still small-volume stock market is somewhat upgraded as a whole through the very promising prospects of the financial center. 3.3.6 India Even though it will rank only as a nationally important financial location also in the future, India offers interesting prospects for German financial players. Mumbai (formerly Bombay) clearly needs a thorough modernization in terms of economic policies and infrastructure before it can attain greater importance in the Asian financial world. Nevertheless, the Bombay Stock Exchange (BSE) is an interesting partner for the Frankfurt exchange. The share that Deutsche Börse has of the BSE and its role as the exclusive world-wide distribution partner for all indices of the main Indian stock exchange form a good basis for a stronger collaboration in the future (☺). And the prospects are also promising for German banks over the medium term. The dynamic, populous economy has only limited banking services (☺) and room for more foreign banks (☺). However, there are aspects of the domestic banking system that are in need of improvement ( ). Availability of banking services Branches ATMs total per 100,000 population per 1,000 km2 total per 100,000 population per 1,000 km2 China 17,083 1 2 49,000 4 5 Hong Kong n.a. n.a. n.a. n.a. n.a. n.a. India 67,097 6 23 n.a. n.a. n.a. Indonesia 18,107 8 10 10,387 5 6 Japan 12,692 10 35 144,700 114 397 Korea 6,419 13 65 43,133 90 437 Malaysia 2,427 10 7 4,074 16 12 Philippines 6,381 8 21 4,328 5 15 Singapore 388 9 636 1,612 38 2,643 Thailand 4,452 7 9 10,572 17 21 Vietnam n.a. n.a. n.a. n.a. n.a. n.a. Sources: World Bank (2001-2005), Helaba Research Nationally important financial center – potential for Frankfurt stock market and banks Strategy of specializing in Islamic Banking is promising for Malaysia – but it reduces the atttractiveness for German credit institutions Financial Center Frankfurt and Asia – A Growing Relationship 21 Helaba Research · March 2008 · © Helaba 3.3.7 Korea The Korean financial center ranks behind the leaders and newcomers of the region, but at the same time it stands out positively against the other Asian metropolises: Seoul should remain a financial location of only national importance for the foreseeable future, even if reforms in the financial market are undertaken. With respects to the possibility of a more intense collaboration with the Deutsche Börse, the industrialized countries receives an average ranking as a result of the “Memo- randum of Understanding” it has already entered into with Frankfurt ( ). At the same time, Korea receives consistently average ratings also on the banking-specific criteria of the Helaba Smiley Table Asia ( ), which does not really suggest an entry into the market by German banks. The rating of the banking system is modest, foreign penetration of the market is already strong, and the availability of banking services is quite extensive. All in all, the Korean financial center appears to have limited attractiveness for players in Frankfurt’s financial market. 3.3.8 Vietnam So far, Vietnam is not a financial center and still has a long way to go before it can carve out to identity as one. However, the good overall economic development, in tandem with political stabil- ity, entails a growing global importance for Vietnam, and, if the process of regulatory adjustment continues, promising prospects for the financial industry of this “rising star” over the long term. In contrast to the metropolises of Indonesia, the Philippines, and Thailand, the chances are fairly good that Ho Chi Minh City (or possibly Hanoi) could emerge as a nationally important financial center within Asia. Since this is a long-term forecast, the country’s “young”, small-volume stock market is for now not an attractive cooperation partner from a German perspective ( ). For newly arriving foreign credit institutions there is still room in the Vietnamese banking sector (☺), since its foreign penetration to date is limited. However, one must not neglect the high default risk in the banking sector ( ) and the fundamental factors that are moving forward only to a limited extent ( ). Foreign presence\* of German banks in various Asian countries German banks overall Top 10\*\* of Branch Subsidiary Representative office German banks China 10 0 16 9 Hong Kong 7 0 4 7 India 3 0 8 6 Indonesia 2 1 4 4 Japan 6 1 4 8 Korea 0 0 0 4 Malaysia 2 1 1 2 Philippines 1 0 1 1 Singapore 9 5 2 8 Thailand 1 0 4 2 Vietnam 1 0 9 5 \* presence defined as a branch, a subsidiary, or a representative office; \*\* as measured by Tier One Capital end of 2006 Sources: Deutsche Bundesbank, The Banker, Homepages of banks, Helaba Research 3.3.9 Thailand Up to now, there are no indications that Bangkok will boost its importance and gain a foothold in the financial sector in the future. Given this outlook and the low market capitalization of the Thai stock exchange, a cost-benefit analysis suggest no active partnership with the Deutsche Börse ( ) beyond the already existing technical linkage. Since the foreign penetration of the Thai banking system is limited to date, there is still room for new foreign banks (☺). However, this must be Nationally important financial center Korea: average rating Bangkok: room for banks, but default risks exist Vietnam: good prospects for growing importance in the financial system, room for foreign banks with risks Financial Center Frankfurt and Asia – A Growing Relationship 22 Helaba Research · March 2008 · © Helaba balanced against the high default risk the banking sector ( ), and the fundamental environment is also not sufficiently ( ). As a result, the sensible approach for German banks is a careful weighing of the opportunities and risk of conducting business in Thailand. 3.3.10 Indonesia The Indonesian capital, as well, shows no pronounced character as a financial location and is thus among the region’s financial locations that are not likely to stand out as a financial center in the future. Indonesia does fairly poorly both in the Helaba Financial Center Ellipse Asia and in the Helaba Smiley Table. With Jakarta a small stock market location without international reputation, the “cost-benefit analysis” does not exactly suggest active ties with the Deutsche Börse ( ). There are certain opportunities for Frankfurt banks, though against a backdrop of appreciable risks. Indo- nesia does well on the economic and services indicators (☺), since the size of the population and the GDP, as well as the limited availability of credit points to customer potential for foreign banks. However, the fairly high possibility that the Indonesian banking system will fail must not be ne- glected ( ). Moreover, there are visible shortcomings in the background conditions of the banking markets, including the evident corruption, which has a negative effect on the opportunities for foreign banks ( ). Pronounced state influence, esp. in India, China, and Vietnam Share of assets of banking system held by state banks, in % Corruption Index Transparency International\* Index 2007 0 10 20 30 40 50 60 70 80 Vietnam\* India China Ind on es ia Korea Th aila nd Ph ilipp ine s Hong Kong Malaysia Singapore Ja pa n 0 10 20 30 40 50 60 70 80 n.a. 0 2 4 6 8 10 Si nga po re Hon g Kong Jap an Korea M alay sia China In dia Tha iland Viet nam Philipp ine s Indo nesi a 0 2 4 6 8 10 Sources: World Bank (survey-based data bank “Bank Regulation & Supervision”, end of 2005), \* Fitch, Helaba Research \* The lower the index value (scale of 0-10), the more strongly corruption is perceived as a problem in the respective country. Sources: Transparency International, Helaba Research 3.3.11 The Philippines Similar to Thailand and Indonesia, the Philippines is among the locations with the least potential as a financial center. Because the small stock market in Manila is not a particularly interesting partner for the Deutsche Börse ( ), not even technical linkages have been established to date. The banking system of the Philippines is characterized by a fairly high default risk ( ) and average economic and services aspects ( ). In addition, negative background conditions (including cor- ruption) limit the maneuvering room for foreign banks ( ). For all these reasons, the Philippines are in last place on the rankings. Philippines ranks at the bottom Indonesia: market potential for banks with appreciable risks Financial Center Frankfurt and Asia – A Growing Relationship 23 Helaba Research · March 2008 · © Helaba 4 Recommendations The positive perception of the financial center Frankfurt from the Asian perspective and the ties it has already established with Asia constitute a good foundation for a growing, continent-spanning relationship among the financial centers. The chances that this bond between Germany and Asia will intensify is the better, the more actively the Main metropolis pursues it. After all, the per- ceived strengths of Frankfurt as noted by Asian bank representatives do not guarantee a permanent attractiveness; rather, there is need for a continuous development in the competition. Market play- ers and politicans therefore need to preserve the strengths of the German financial center and take on the weaknesses. The following seven recommendations should be front and center. • A consistent internationalization strategy is a crucial precondition for the success of a fi- nancial center. The global position of the financial location Germany is tied direcly to the suc- cess of its center on the Main. Frankfurt is the central financial location of the largest Euro- pean economy and the world’s largest export nation. To that extent, the efforts within the fed- eral system of West Germany, which are also supported by federal policy, to replace the paro- chical intra-German competition with a division of labor focused on specific themes and ac- tively marketed internationally are very significant. • The bundling of the essential forces for a uniform marketing of the financial center is starting to happen and represents a welcome new approach with high potential. After all, it requires the active and focused location marketing by all players in the financial market to make a broad public aware of Frankfurt’s multifarious strengths: with the unique advantage of being the seat of the European Central Bank, Frankfurt is an important location for financial market players who operate internationally, especially against the backdrop of the Euro’s growing ro- le as an investment and reserve currency. The globally important Deutsche Börse AG with its many activities is also an essential asset of the city. • In view of the economic dynamism and high liquidity of the Asian continent, the financial center Frankfurt should pursue a focused Asia strategy: in the process, preference should be given to those Asian countries that are active in Frankfurt and at the same time constitute at- tractive expansion targets for domestic players. The previous advertising activities (events, visits by delegations, informational brochures) should be intensified and focused especially on Japan, China, and India. Moreover, Korea and the “rising star” Vietnam could be included in this kind of marketing strategy. Another target of Frankfurt’s marketing should be Asian in- vestors, who are becoming increasingly important in international financial markets. • For the sustained development of the German financial center and its international attractive- ness, further promotion of its finance-related education and research is indispensable. In this regard, Frankfurt is already on the right track with the House of Finance (incl. the Center for Financial Studies) and the Frankfurt School of Finance and Management. • The more German financial market place legislations deals with international trends in a timely fashion and adjusts the regulatory framework to market needs in a flexible manner, the greater Frankfurt’s innovative power will be. The future division of labor in banking oversight recently agreed upon by BaFin and the Deutsche Bundesbank also strengthens the financial center Frankfurt. • As an international hub, the Frankfurt airport is linked to many Asian countries, and a num- ber of air routes were further expanded last year. That thrust needs to be sustained. After all, the excellent transportation infrastructure of the Main metropolis is a crucial foundation for the growth of ties between Germany and Asia in the financial market. Good prospects for growing relationship Financial Center Frankfurt and Asia – A Growing Relationship 24 Helaba Research · March 2008 · © Helaba • Many Asians appreciate the quality of life in Frankfurt. The metropolis on the Main can make itself even more attractive also to Asians through further architectual projects, the promotion of a vibrant life in the heart of the “City of the Euro”, and active marketing of its manifold cultural and recreational offerings. Given the great success of the Frankfurt Book Fair’s con- cept of emphasizing one particular country every year, it is worth considering how to give Asian themes broader cultural prominence. For example, one could organize “Asian cultural weeks” focusing on different countries. If these measures are consistently implemented, there is reason to believe that the financial center Frankfurt can further boost its attractiveness to Asian market participants and that more players from that dynamic economic region will head for the city on the Main. ■ Financial Center Frankfurt and Asia – A Growing Relationship 25 Helaba Research · March 2008 · © Helaba Notes Financial Center Frankfurt and Asia – A Growing Relationship Helaba Volkswirtschaft/Research · March 2008 · © Helaba 26 Head Offices Frankfurt am Main MAIN TOWER Neue Mainzer Strasse 52-58 D-60311Frankfurt am Main Phone +49 69/91 32-01 Fax +49 69/29 15 17 Erfurt Bonifaciusstrasse 16 D-99084 Erfurt Phone +49 3 61/2 17-71 00 Fax +49 3 61/2 17-71 01 Branches Dublin PO Box 3137 5 George’s Dock IFSC IRL-Dublin 1 Phone +3 53 1/6 46 09 02 Fax +3 53 1/6 46 09 99 Kassel Ständeplatz 17 D-34117 Kassel Phone +49 5 61/7 06-60 Fax +49 5 61/7 06-8 65 72 London 3rd Floor 95 Queen Victoria Street GB-London EC4V 4HN Phone +44 20/73 34-45 00 Fax +44 20/74 89-03 76 New York 420, Fifth Avenue USA-New York, N.Y.10018 Phone +1 2 12/7 03-52 00 Fax +1 2 12/7 03-52 56 Representive Offices Madrid (für Spanien und Portugal) General Castaños, 4 Bajo Dcha. 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