The two parties are planning a rapid commencement of the cooperation, in order to create synergies that can further develop CCB’s credit card business and expedite its robust growth. The MoU proposes that the cooperation be implemented in two stages:

 

　　The first stage centers on the establishment of a credit card business unit – CCB will establish an independent and centralized credit card business unit and set up a consultationan advisory committee with  representatives from both parties to plan and oversee the establishment and operation of the business unit. Bank of America will dispatch personnel to provide consulting services to the credit card business unit.

　　The second stage involves the creation of a joint venture – the credit card business will be converted into a Chinese Sino-foreign credit card joint venture, registered in China, when certain legal and regulatory and other conditions are satisfied. CCB will contribute to the joint venture the credit card business unit at a value to be determined by an independent third party, and Bank of America  will contribute a cash amount based on the appraised value of the credit card business unit. Both parties will appoint representatives to the board of directors and the senior management of the joint venture. CCB will hold an interest of 63% in the joint venture and Bank of America  will hold an interest of 37%. Both parties’ interest will be subject to a lockup period of no less than three years.

　　“CCB’s credit card business is continuing to show strong growth momentum, and is well positioned as one of the leaders in this initial stage of the country’s credit card market, creating an excellent foundation for our future development in this sector. Bank of America enjoys the leading position in the global market of the credit card business, and can help CCB accomplish its strategic goal of developing its credit card business and enhance CCB’s core competiveness in this line of business. We are pleased to cooperate with such strategic investor in this field ”, said Mr. Guo Shuqing, Chairman of CCB.

　　“To Bank of America, this is a strategic cooperation in one of the fastest-growing economic systems in the world. The project has strengthened our partnership with CCB, and simultaneously has made it possible for Bank of America to participate in the future development in this particular market as it adopts a new regulatory regime. We are both helping CCB satisfy customers’ increasing needs for a variety of financial services, as well as boosting the revenue of both corporations” , said Kenneth D. Lewis, Chairman and CEO of Bank of America.

　　The Strategic Cooperation Agreement between CCB and the Bank of America signed on June 17, 2005 stated that “both parties are obliged to, in good faith, discuss the possibility of diverting CCB’s credit card business to a new joint venture in an appropriate timeframe”. Since March 2006, the two parties have been taking part in ongoing discussions on potential cooperation in the credit card business.

　　Since CCB first launched its dual-currency credit cards in 2003, its credit card business has been developing rapidly.  As part of the company’s overall strategy to “become a world-class retail bank”, CCB’s credit card business has demonstrated a continuous upward trend in market influence, product competitiveness, customer satisfaction and risk management. The scale of the business has also risen rapidly, leading to improvements in quality and efficiency. The number of new cards issued, the card spending and the overdraft balance in 2006 were double those of the preceding year. As the second largest credit card issuing bank in China, with a market share of  about 20%, CCB has issued a total of 6.34 million credit cards, of which 3.22 million cards were newly issued in 2006. Total card spending was RMB40.467 billion and the average card spending per card was the highest among its competitors nationwide. 

　　Bank of America’s credit card business has an extended and illustrious history. In 2004, the bank issued the third largest number of credit cards in the world, and its credit balance was the world’s fourth largest. Bank of America today sets the standard for credit card business management in the United States.  The total number of credit cards issued by Bank of America reached 122.4 million after the completion of the acquisition of the MBNA Corporation, the largest independent credit card issuer in the world in 2005. The bank maintains 73.4 million accounts and a credit balance of US$189 billion. Its consolidated return on assets was 2.4%. Revenue was US$18.5 billion and profit before tax was US$4.6 billion in 2005, both the highest in the U.S market. Impairment loss of assets was 4.4%, 1.1 percentage points lower than the industry average of 5.5% in the U.S. Bank of America has become the world largest service provider of credit cards and payment businesses. Bank of America also owes its competitiveness to the core competence of MBNA on the technology front.