HSBC 2009 Annual Report Download - page 113

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the operations of The Chinese Bank Co., Ltd (‘The
Chinese Bank’) in Taiwan.
In an effort to improve operational efficiencies
and reduce costs, an increased number of
transactions were completed through direct channels,
including internet banking, telephone services and
self-service machines compared with 2008.
Operating expenses within the Group Service
and Software Development Centres rose by 9 per
cent as the number of migrated activities and
processes increased in accordance with the Group’s
global resourcing strategy to develop centres of
excellence. All related costs are recharged to other
Group entities and the income from these recharges
is reported within other operating income.
New outlets, the launch of a new jointly-
owned life insurance company and a
planned card joint venture with Bank of
Communications consolidated HSBC’s
position as the leading foreign bank in
mainland China.
Profit from associates and joint ventures in the
region was 17 per cent higher as a result of the non-
recurrence of Ping An Insurance’s impairment of its
investment in Fortis in 2008, and an increase in new
business sales and investment returns which were
boosted by a recovery in equity markets. Income
from Bank of Communications remained in line with
2008.
2008 compared with 2007
Economic briefing
Growth in mainland China was steady during 2008,
although lower than in previous years. Overall GDP
growth totalled 9 per cent in 2008, down from 13 per
cent in 2007, as weakness in key export markets led
to a slowdown in industrial activity during the final
months of the year. The tightening of monetary
conditions in 2007 and early 2008 also contributed to
the slowdown, although interest rates and reserve
requirements were both reduced significantly during
the final months of the year and a significant fiscal
stimulus package was also announced. Consumer
spending continued to advance at a strong pace with
retail spending increasing by 21.6 per cent over the
course of 2008. After accelerating to an eleven year
high of 8.7 per cent in February 2008, consumer
price inflation slowed to 1.2 per cent by the year-
end, largely reflecting the movements in food and
energy prices. The renminbi appreciated by more
than 6 per cent against the US dollar during 2008,
although the exchange rate was little changed during
the second half of the year.
Japan’s economy slowed sharply during the
course of 2008, with industrial activity declining
rapidly during the final quarter of the year in
response to much weaker external demand.
Contractions were registered in both second and
third quarter GDP data, confirming a technical
recession, while the unemployment rate rose from
3.8 per cent in January 2008 to 4.4 per cent by the
year-end. Inflationary pressures increased during the
first half before subsiding during the final months of
2008, while measures of business confidence also
fell sharply.
Elsewhere in Asia, most economies followed an
uneven pattern of growth during 2008. Policymakers
focused on the rise in inflation during the first half of
the year, but the sharp slowdown in growth during
the final months of 2008 came to dominate, with a
series of monetary and fiscal policy measures being
introduced across the region to stimulate activity.
The sustained rise in inflation prompted the Reserve
Bank of India to tighten policy by raising both
interest rates and reserve requirements during the
first half of 2008, before then cutting the cash
reserve ratio by 350 basis points and the repo rate by
250 basis points during the final quarter of the year.
A recession was confirmed in Singapore after GDP
contracted for three consecutive quarters in 2008, as
an economic slowdown initially focused on specific
industries turned more pervasive. After rising to
a 26-year high of 7.5 per cent in June 2008, the
annual rate of inflation slowed to 4.3 per cent by
the year-end.
Inflation also proved the predominant concern
in Vietnam during the first half of 2008 as the
annual rate of consumer price inflation more than
doubled to 28.3 per cent, prompting the State Bank
of Vietnam to sanction substantial interest rate
increases, before these measures were rapidly
reversed during the final months of the year. Interest
rate increases were also forthcoming in Indonesia
between May and October 2008, although with
growth levels maintaining a relatively robust level
during much of the year, a tentative easing cycle was
only initiated during the final weeks of 2008. Bank
Negara Malaysia proved the exception by refraining
from interest rate increases during the year, even as
consumer price inflation accelerated to 8.5 per cent
in July 2008, before cutting the policy rate to
3.25 per cent in November. The outlook for the
South Korean economy was affected by the open
nature of the economy and the relatively high levels
of household and corporate sector indebtedness. Full
year GDP rose by 2.5 per cent in 2008, down from
5.0 per cent in 2007 and the weakest performance for
ten years, while fourth quarter GDP fell by 3.4 per