COPYRIGHT NPV CHINACHINA OUTLOOK 2009COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaNPV CHINA Business Consultingis an opportunity maker in the SINO-EUROPEAN Gateway.Being an opportunity maker we support both multinational and Chinese companies in developing their activities in China, generating relationship, looking for investment opportunities and identifying the resources (tangible, intangible and human)they need to achieve their business goals.1COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina2AGENDAExecutive SummaryChinaataGlancePoliticalStructureNationalAccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise2COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina3China,withits1.33billionpopulation,isthecountrywiththelargest potential for growth in the world andthusmust represent an essential part of each companys strategy,eitherasaproduction base orasafinal marketTheeconomyhasbeengrowingataverageratesof10.8% between2001and2008andisnow3rd largest in the world,accountingfor6% of global GDP;foreign trade hasbeengrowing dramatically (anaverageof25%CAGRbetween2004and2008),andforeign investment haskeptpouringintothecountrywithactuallyutilizedforeigncapitalof92.4billionin2008,upby23.6%ForItaliancompanies,Chinarepresentsanextremely important opportunity onanyofthefollowing3 fronts:qSale:asafinalmarketwithmorethan1.33billionconsumersqDelocalization:asalowcostproductionbaseqPurchasing:asasourcingbaseExchange rate:qRMB/USDstoodat6.83attheendof2008,witha6.9%appreciationoftheendof2007qRMB/EURstoodat9.61attheendof2008,withan9.8%appreciationoftheendof2007Inflation:CPIin2008surgedto5.9%mainlyduetothesoaroffoodprice.OtherfactorssuchasincreaseofenergypriceandexcessliquidityinthefinancialmarketmaykeepthemomentumofCPIStock Market:SSEcompositeindexplunges2/3fromthebeginningoftheyear;whetherthegovernmentshouldinterveneisunderintensedebateThenewLAWOFTHEPEOPLESREPUBLICOFCHINAONEMPLOYMENTCONTRACTScameintoeffectin1stJan,2008towardsmoreprotectionoftheemployeesThe29thOlympicGameswasheldsuccessfullyinBeijinginAugust,2008.EXECUTIVE SUMMARYSource:ChinaStatisticalYearbook,ChinaNationalStatisticsBureau,NPVanalysisCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina4AGENDAExecutiveSummaryChina at a GlancePoliticalStructureNationalAccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise4COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina5By 2050 it is expected that China will be the worlds number one economy Source:BRICReport,GoldmanSachsCHINA AT A GLANCE2025USDbn2050USDbnThe largest economies in Asia in 2025The largest economies in the world in 2050COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina6Territory-9.6 millionkm2,1st inAsia, 3rdlargestintheworldPopulation-1,328 billionin2008(51,5%male,45.7%urban)-Annualgrowthrateofapproximately0.53%Capital-BeijingGovernment System-CommunistAdministrative Divisions-4 level:Province(34)/Prefecture(333)/County(2860)/Townships(41040)Currency-RenMinBi(RMB)orYuan,semi-flexibleexchangerateLanguages -Mandarin,withCantoneseasthesecondmostcommonlanguageEthnicities-Han(92%)and55minorities(8%)ReligionBuddhism,Islam,Taoism,ChristianitySource:ChinaStatisticalYearbook,NPVanalysisCountry profile CHINA AT A GLANCECOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina7AGENDAExecutiveSummaryChinaataGlancePolitical StructureNationalAccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise7COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina8POLITICAL STRUCTURESource:http:/afe.easia.columbia.edu/china/gov/chart.htm,NPVanalysisGovernment and Communist Party StructureCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina9BEIJINGSHANGHAITIANJINCHONGQINGHONGKONGMACAUXINJIANGTIBETQINGHAIGANSUSICHUANYUNNANINNER MONGOLIAGUIZHOUGUANGXIHUNANIHUBEISHAANXISHANXININGXIAHENANHEBEIGUANGDONGJIANGXIFUJIANANHUIZEJIANGSHANDONGHAINANLIAONINGJILINHEILONGJIANGTAIWANJIANGSUMunicipalityAutonomousregionSpecialadministrativeregionSource:ChinaStatisticalYearbook,NPVanalysisAdministrative Division23ordinaryprovinces(includingTaiwan)4Municipalities:BeijingChongqingShanghaiTianjin5Autonomousregions:GuangxiInnerMongoliaNingxiaTibetXinjiang2Specialadministrativeregions:HongKongMacauPOLITICAL STRUCTUREChina administrative divisionsCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina10Source:ChineseGovernment,NPVanalysisCentralGovernmentMunicipalitiesProvinces,AutonomousRegionsSpecialAdministrativeRegionsDistrictsCountiesCitiesAutonomousprefecturesCounties,AutonomousCountiesDistrictsCountiesCitiesCountiesAutonomousCountiesTownshipsEthnictownshipsTownsPOLITICAL STRUCTUREChina administrative divisionsCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina11AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNational AccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise11COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina12China is the 3rd largest economy in the world in2008, 6% of grossworldproduct(2007)ConsideringtheGDP per capita,China isthe106th in the worldin2008(at$3,315)Chinese economy grows consistentlyreaching a 10% annual growth rateduringthelatestfiveyears.Chinas urban households per capita disposable income growth has consistently been higher than CPI inflation, indicating a positive realgrowthinthepeopleslivingstandard.China GDP 2004 - 2008Peoples Income and CPI 2001-2008RMBBnNATIONAL ACCOUNTSSource:ChinaNationalEconomicandSocialDevelopmentReport,ChinaStatisticalYearbook, NPVanalysisCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina13Secondary industry is the dominant force in driving economy forward accounts for almost 50% of GDP, with CAGR 18.12% from 2000 - 2008Tertiary industry grows with CAGR 17.61% from 2000 -2008 GDP Breakdown 1978-2008Source:ChinaNationalEconomicandSocialDevelopmentReport,ChinaStatisticalYearbook,NPVanalysisNATIONAL ACCOUNTSCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina14Average GDP per capita in 2008: 3,315 USDShanghai is the richest province level area with a per capita GDP of 10, 922 USD in 2008.ZHEJIANG, JIANGSU, and GUANGDONG are the TOP 3 richest provinces43.1 % of populations GDP per capita is higher than averageChinahasreduced 62 million, 53% extreme povertyduringthepast20years.In1985Chinahad116millionpeoplelivingunder$1dollar-a-daypovertylevel.(*)GDP per capita ( USD )(*) MGI China consumer demand modelNATIONAL ACCOUNTSSource:ChinaNationalEconomicandSocialDevelopmentReport,ChinaStatisticalYearbook,NPVanalysisOver4,000USD/person464 millionBelow2,500USD/person347 millionOver2,500USD/person489 millionAverageCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina15AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNationalAccountsBalance TradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise15COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina16BALANCE TRADEImportExportExchangeVolumeCAGRBn USDForeign trade China Rest of world (2001-2009)+ 27%+ 25%CAGR 02-09ESource:ChinaNationalEconomicandSocialDevelopmentReport, ChinaStatisticalYearbook,*EconomistIntelligenceUnit,NPVanalysis509.7620.88511154.514221760.42173.82561.63231.8COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina17BALANCE TRADEChinas Foreign trade by region / country in 2007% of total imports65%15%8%5%4%3%100% of total exports47%24%21%4%3%2%100%Top 3 countries by regionImports: country and % of region tradeJapanKoreaTaiwanGermanyRussiaFranceUSACanadaBermudaBrazilChileArgentinaAngolaSouthAfricaSudanAustraliaNewZealandNewGuineaUSAHongKongJapan22%17%16%32%14%10%86%14%0,0%36%20%12%35%18%11%91%5%2%19%15%8%HongKongJapanKoreaGermanyHollandUKUSACanadaBermudaMexicoBrazilPanamaSouthAfricaEgyptNigeriaAustraliaNewZealandMarshalIslandJapanKoreaUSA32%18%10%17%14%11%92%8%0,1%23%22%11%20%12%10%85%10%2%14%11%7%Exports: country and % of region tradeBillion USDSource:ChinaStatisticalYearbook2008(endof2007Data),NPVanalysis17COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina18AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNationalAccountsBalanceTradeChina DiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise18COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina19Eastern RegionShanghaiBeijingTianjinGuangdongShandongZhejiangJiangsuFujianHainanHebeiCentral RegionShanxiHenanHubeiHunanAnhuiJiangsuNortheastern RegionHeilongjiangJilinLiaoningNot IncludedTaiwanHongKongMacauWestern RegionInnerMongoliaShaanxiNingxiaGansuChongqingSichuanGuizhouYunnanGuangxiQinghaiXinjiangTibetSource:ChineseNationalDevelopmentandReformCommission,NPVanalysisCHINA DIVERSITYDivision of regionsCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina20474.8 Mn352.9 Mn385.1 Mn108.5 Mn Population by Urban and Rural Residence and RegionSource:ChinaStatisticalYearbook2008(endof2007Data),NPVanalysisCHINA DIVERSITYCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina21GDP and GDP Per Capita by RegionSource:ChinaStatisticalYearbook2008(endof2007Data),NPVanalysisCHINA DIVERSITYGDP and GDP Per Capita by Region21COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina22 Annual Income and Expenditure Per Capita by RegionRMBCHINA DIVERSITYSource:ChinaStatisticalYearbook2008(endof2007Data),NPVanalysisCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina23WesternNortheasternCentralEasternUrban Household Expenditure BreakdownFoodClothingTransport and CommunicationEducation, Cultural and Recreation ServicesMiscellaneousCHINA DIVERSITYSource:ChinaStatisticalYearbook2008(endof2007Data),NPVanalysisUrban Household Expenditure BreakdownCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina24WesternNortheasternCentralEasternRural Household Expenditure BreakdownFoodResidenceTransport and CommunicationEducation, Cultural and Recreation ServicesMiscellaneousCHINA DIVERSITYSource:ChinaStatisticalYearbook2008(endof2007Data),NPVanalysisRural Household Expenditure Breakdown COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina25NotethatTier3bisalsoreferredtoasTier4.OurreferencetoTier3combines3awith3bforatotalof620citiesCHINA DIVERSITYPyramid of Chinas tier cities41 cities occupy:49.9 % of GDP23.0 % of Population56.6 % of Market Sale of Consumer GoodsBeijingShanghaiGuangzhouShenzhenChongqingTianjinWuhanHangzhouNanjingFoshanChengduShantouXianShenyangJinanDongguanWenzhouTaizhouNingboZhongshanSuzhouChangzhouWuxiZhuhaiXiamenFuzhouQingdaoChangshaYantaiPutianZhengzhouTaiyuanKunmingTangshanChangchunShijiazhuangGuiyangHuaianHarbinZiboDalianLinyiNanchangZaozhuangXuzhouXiangfanBaotouUrumchiHuizhouLanzhouJilinDaqingHuzhouQuanzhouJinhuaJiaxingDongyingJinzhouShaoxingZhoushanYueyangQuzhouNantongShaoguanLiuzhouBaodingXianyangZhuzhouPingdingshanXinxiangHengyangBaoshanHuludaoBengbuZhengjiangLangfangExample citiesTier 1 - “ Big Four”4largestcitieswithhighestincome,largepopulationbase,andlargestGDPscaleTier 2a - “ Climbers ” ( 11 cities)Largepopulationbase,highincomeandlargeGDPTier 2b - “ Niches ” ( 10 cities)Wealthyconsumer,butrelativelysmalloverallmarketsizeTier 2c - “ Mainstream ” ( 16 cities)Relativelylowincome,butlargepopulationbaseTier 3a - “ Next frontier ” ( 136 cities)Growingmarketswithpopulationlargerthan1millionTier 3b - “ Poor cousins ” ( 484 cities)Smallcitieswithurbanpopulationsmallerthan1millionSource:CityNationalEconomicandSocialDevelopmentReport2008,NPVanalysisCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina26Tier1CityTier2aCityTier2bCityTier2cCitySource:ChinaStatisticalYearbook,NPVanalysis RegionNo. of citiesEastern29Central3Western5Northeastern4CHINA DIVERSITYGeographical distribution of Chinas tier 1 and tier 2 citiesCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina27Source:CityNationalEconomicandSocialDevelopmentReport2008,NPVanalysisBreakdown of China marketCHINA DIVERSITYCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina28AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNationalAccountsBalanceTradeChinaDiversityNational Economic PlanIndustryDistrictIndustryOrganizationLegalStructureforForeignEnterprise28COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina29Source:TheOutlineofthe11thFive-YearPlan,NPVanalysisCurrent 2005Target 2010Increase/ DecreaseState of the art 2007Economic growth:GDP(trillionRMB)18.226.17.5%CAGR24.6GDPPercapita(RMB)13,98519,2706.60%18,696Economic structure:ShareofserviceindustrysvalueaddedtoGDP40.30%43.30%3%39.10%Shareofemploymentinserviceindustrytototalemployment31.50%35.30%3.80%32.40%ShareofR&DspendingoutoftotalGDP1.30%2%0.70%1.49%Urbanizationrate43%47%4%44.9%Population, resources, environment:Population(trillion)1.3081.3607.9CAGR1.320EnergyconsumptionperunitofGDP(tonstandardcoal/10000RMB)1.220.98-20%1.21(2006)Totalacreageofcultivatedland(millionhectares)122120-1.60%122Public service, peoples life:Termofeducationpercapita(years)8.595.50%NodataCoverageofurbanbasicold-agepension(millionpeople)17422328%201Coverageofthenewruralcooperativemedicalcaresystem23.50%over80%Over56.5%85.70%Percapitadisposableincomeofurbanresidents(RMB)10,49313,3905%CAGR13,786Percapitanetincomeofruralresidents(RMB)3,2554,1505%CAGR4,140THE FIVE-YEAR PLANTheFive-year planisaguidelineforChineseeconomicandsocialdevelopmentfrom2006to2010,itwasapprovedbytheTenthNationalPeoplesCongressinMarch,2006Itisbasedontwolinesofstrategicthinking:thescientificconceptofdevelopmentandthebuildingasocialistharmonioussocietyCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina30Expansion of domestic demand:Investment and exportConsumption,investment,domesticandforeigndemandcombinedinabalancedmannerOptimizing industrial structure:Industry and quantitative expansionBalanceddevelopmentoftheprimary,secondaryandtertiaryindustryandbystructuraloptimizationandupgradingEconomic GrowthResource conservation and environmental protection:Large amount of resources consumptionImprovementofresourcesutilizationefficiencySource:TheOutlineofthe11thFive-YearPlan,NPVanalysisEconomic GrowthEconomic GrowthStillheavydependenceoninvestmentandexport;butconsumptioncontributesmorethanpastyearsSecondindustrydominates;tertiaryindustrylosesitsshareWaterutilizationefficiencyincreasesconsiderably;resourceconsumptionisheavy;forestsareplantedThe basic policy orientation 1/2THE FIVE-YEAR PLANState of the art 2007COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina31Enhancing independent innovation capability:Input of capital and substance factorScienceandtechnologyadvancementandhumanresources.Deepening reform and opening up:Administrative interventionGivingmoreplaytothefundamentalroleofthemarketinallocatingresourcesunderguidanceofmacroregulationandcontrolThe people-centered approach, improving living standard:Accumulation of material wealthOveralldevelopmentofthepeopleaswellasthebalancedeconomicandsocialdevelopment.Economic GrowthEconomic GrowthEconomic GrowthR&Dexpensegrowsover20%annually;eachleveleducationenrollmentincreasesSoaringinflationandhighvolatilityinfinancialmarketsurgemoreskilledandproperlevelofmacrocontrolsIncreasinghealthinstitutionsandculturalfacilities;peoplesincomegrowswithGDP;povertyreducesThe basic policy orientation 2/2THE FIVE-YEAR PLANState of the art 2007Source:TheOutlineofthe11thFive-YearPlan,NPVanalysisCOPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina4 Trillion Yuan Investment plan to Stimulate Domestic MarketItemBrief DescriptionIndemnificatoryhouseconstructionLow-rent house building, Nomadic peoples residential stabilization, renovation of old anddilapidatedhouseinruralareaInfrastructureconstructioninruralareaSecuritybuildingoffiredampandwatersysteminruralarea,Bettertheruralgridconstruction,reservoirsecurityproject,increasethesupporttohelpthepoorRailway, highway and airport significantinfrastructureconstructionStrengthenthepassengersdedicatedline,coaltransportationlineandwesternarearailwayconstruction, better highway network, fasten the re-construction of urban grid, arrange theconstructionofmiddle-westairportMedicalsystemandeducationprogressStrengthen the medical service system in rural area, fasten the re-construction of schooldormitoryinmiddle-westruralarea,promotethespecialeducationandcomprehensiveculturestationbuildingStrengthenecologicalenvironmentbuildingFastenurbansewageandsolidwastedisposalfacilityconstruction,preventionandcureonkeyriverbasinpollution,strengthenforestsourceprotection,supportimportantenergysavingandemissionreducingproject.Fasten the self-creation and structureadjustmentSupport high-tech industry building, industrial technology progress, and service industrydevelopmentFastenthere-constructionafterearthquakeLand using plan, market service system, ecology recovery, rural area and urban systemconstructionandhousebuildingIncrease the residential income of bothurbanandruralarea.Increasetheminimumpurchasepriceofgrain,raisethecomprehensiveallowanceforfarmers,increase the social security level, continuous increasing the old-age pension, subsidy forfarmersseedsbuyingVATReformImplementtheVATreforminwholecountrycoveringallindustries,encouragetheenterprisetechnologyre-construction,reducetheenterprisedutyaccountto120billionRMBEnhance the support to Finance tocontributetheeconomicgrowthCancelthecreditscalelimitoncommercialbank,reasonableincreasingcreditscale,creditsupportonMergerandReintegrationproject,breedandstabilizetheconsumingcreditgrowthSource:www.gov.cn32COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina10 Industries Promotion Plan in 20091/3Auto IndustryFrom20th/Janto31st/Dec,impose5%purchasetaxonautolessthan1.6LemissionPromotethereintegrationofautoindustry,supportM&AofbigautogroupInfuture3years,Chinesegovernmentwillarrange10BlnRMBtosupportself-creationandtechnologyre-constructionChinesegovernmentwillarrangesubsidyfundtopromotetheenergy-savingandnew-energyautoinbigandmiddle-sizedcitiesEncourageautocompanytodevelopbrand,fastentheexportingbas,betterautoconsumingcreditSteel IndustryStrictcontrolonsteelproduction,eliminatetheprojectwithsingularpurposetoincreasetheproductioncapabilityTakeadvantageofleadingforceofbiggroup,encourageM&A,breedthehypersteelgroupwithinternationalcompetition,optimizedtheindustrialstructure,enhancethecentralization;Deepenthetechnologyreconstruction,researchandimporting,createthespecializedfundinannualbudgettopromotethesteelindustrytechnologyprogress,adjusttheproductcategoriescompositionShip buildingThepolicytopromotefinancialinstituteenlargethebuyerscreditforshipexportertill2012Textile IncreasethetextileexportingVATrefundfrom14%to15%GivecreditsupporttotextilecompanywithoperationalandfinancialdifficultyEncouragethefinancialsupportforsmallandmiddle-sizedenterprise,reducetheburdenoftextilecompanyCentralgovernment,localauthoritiesandenterpriseenlargethecottonpurchase33COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina10 Industries Promotion Plan in 20092/3Equipment productionSupportfamousequipmentproducertoM&A,andpromotethehypergroupwithcapabilitiesofengineeringcontracting,systemintegration,internationaltradingandfinancePushstructureadjustment,transformthemethodofindustrygrowthFastenproductstandardssystem,developmodernproductionserviceindustry.Light IndustryStimulatetheconsumingofbothurbanandruralareatoincreasethedomesticdemandFastenthetechnologyprogress,especiallyequipmentself-owned,keytechnologyindustrialization,paperproduction,homeelectricapplianceandplasticstechnologyreconstructionStrengthenthesecurityoffood,strictthemarketentrancequalificationandbetterthepolicyofreturningandquittingmarket.Strengthentheself-ownedbrand,supportwell-knownbrandtomergercrossingregion,raisetheindustrycentralizationStrengthentheindustrialguidepolicy,promotethespecificindustrialareaStrengthenenterprisemanagement,raisethequalityoflightindustryElectric information industryPerfectindustrymechanism,ensurethestablegrowth,strengthenthecomputerindustrycompetence,fastentheelectricelementupgradeandpromotetheindustrialtransformofaudioandvisualFocusontheestablishmentofself-ownedandcontrollableintegratedcircuit,increasethecapabilityofsoftwareself-developmentApplicationleadsthedevelopment,pushbusinesscreationandservicemodelcreation,strengtheninformationtechnologyapplicationinsociety,especiallythenewgrowthincommunicationequipment,informationserviceandITapplication34COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina10 Industries Promotion Plan in 20093/3Petrochemical KeepthepetrochemicalindustrystableoperatingGuaranteetheagricultureproductionPlanthebigprojectiondistributionandpromotethetechnologyreformControlthetotalproductionvolumeandeliminatetheoutdatedproductioncapability LogisticsActivelyenlargethelogisticsmarketdemand,promotetheinteractionbetweenthelogisticscompanies,manufacturersandtradingcompanies,pushthelogisticsservicesocializationandprofessionalizationFastenthemergerandacquisition,breedbigandmodernlogisticsenterprisewithhighlevelserviceandinternationalcompetitionPromotethelogisticsserviceinenergy,mineral,auto,agricultureproducts,medicalproductionandothercoreindustries,fastentheinternationallogisticsandnon-dutylogisticsStrengthenthelogisticsfacilitiesconstruction,enhancethestandardizationandinformationsystemNonferrous metalStabilizeandenlargethedomesticmarket,bettertheexportingenvironment.Adjusttheproductcompositiontosatisfythedemandsofelectricity,transportation,construction,machinery,lightindustryandsoson.SupporttheexportingproductcombinedwithhightechnologyandunderdeepprocessingStrictlycontrolthetotalvolume,andeliminatetheoutdatedcapacityTechnologyandresearchreformandpushtechnologyprogressPromotetheindustryre-integration,optimizethestructure,strengthentheenterprisemanagementandsecurityinspection,enhancethecompetitionTakefulluseofbothdomesticandoverseasresourcetosecurethenaturalsources.Buildtherecyclingsystemofnonferrousinwholenation,developrecyclingeconomyandincreasethecomprehensiveusageofnaturalsource.Thegovernmentarrangetheloantosupporttheenterprisereconstructionandadjusttheproductexportingtaxrefundstructure.35COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina36AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNationalAccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustry DistrictIndustryOrganizationLegalStructureforForeignEnterprise36COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaGeographic distribution of 10 encouraged industries AutoThrough merger & acquisition to create 2 or 3 hugescaleautogroups.TheFAWgroup(Jilin),SAICgroup(Shanghai),DongfengMotor(Hubei),Changan(Chongqing),Chery(Anhui)arethetop5currently.SteelMove the current factories to the coast to buildZhanjiang,Fangchenggang, Rizhao and Guangdongsteelbases.ThemainmanufacturersincludeBaosteel(Shanghai),WuGang(Wuhan),LaiGang(Shandong).Ship buildingTo build two huge ship building groups: China stateshipbuildingcorporateandChinashipbuildingindustrycorporate. The Bohai gulf, Yangtze river estuary andPearlestuarywillbe3manufacturebasesinfuture.TextileAfter increasing the VAT refund rate, Chinese textilemanufacturersgainsupportfromgovernment.Zhejiang,Guangdong,Henan,Shandongarethemainmanufactureareas.Electric informationThisindustryismainlylocatedinYangtzeRiverdelta(Suzhou,Shanghai),Bohaidelta(Beijing),Pearldelta(Shenzhen), South-eastern coastal (Xiamen) andSouth-west(Chengdu,Xian).Equipment productionUnder the promotion policy of reorganization andacquisition,Guangxi,Xuzhou,Hunan,Jilin,Shanxi,Jiangsuwillbemanufacturebases.Light industryChinese government will put more efforts tosupervise the food security and stimulate thedomestic demands. Fujian, Guangxi, Zhejiang,Jiangsu,Xinjiang,Henanwillbemoreactiveinlightindustrydevelopment.PetrochemicalUnder the policy of cancellation of capacity -enlargementprojects,thepetrochemicalindustrywillbelocatedascurrentmap.Shandong,Henan,Jilin,Shanxi, Chongqing and Xinjiang are the basescurrently.Nonferrous metalThereareseveralnonferrous-metalbasesinChina,including Jiangxi (copper), Guangxi (aluminum),Yunnan(Lead),InnerMongolia(Metalcomplex).LogisticsYangtze delta, Pearl delta, North-eastern China,ShandongPeninsulaandSoutheasterncoastalareaarethemainareas.37COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina38BEIJINGSHANGHAITIANJINCHONGQINGHONGKONGMACAUXINJIANGTIBETQINGHAIGANSUSICHUANYUNNANINNER MONGOLIAGUIZHOUGUANGXIHUNANHUBEISHAANXISHANXININGXIAHENANHEBEIGUANGDONGJIANGXIFUJIANANHUIZEJIANGSHANDONGHAINANLIAONINGJILINHEILONGJIANGTAIWANJIANGSUSource:ChinaStatisticalYearbook,NPVanalysis10 Industries Under PromotionIndustry District MapAutoSteelShipbuildingTextileElectricInformationEquipmentProductionLightIndustryPetrochemicalNonferrousMetalLogistics38COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina39AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNationalAccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustry OrganizationLegalStructureforForeignEnterprise39COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina2002-2008 Development of Business Entities in ChinaYearNo.ofEnterprise(includingsubsidiaries)No.ofIndividualIndustriesandBusinessesSumDomesticEnterpriseForeignEnterpriseState-OwnedPrivate20027,342.64,445.12,638.3259.223,774.920037,695.74,123.63,287.2285.023,531.920048,138.13,797.64,024.1316.423,504.920058,569.03,496.54,719.5353.024,638.920069,190.73,372.65,441.4376.725,956.120079,639.73,202.76,030.5406.427,415.320089,714.62,705.46,574.2434.929,173.3Unit: 1,000Source:www.saic.gov.cnYearEnterprises(includingsubsidiaries)IndividualIndustriesandBusinessesSumDomesticEnterpriseForeignEnterpriseState-OwnedPrivate200219.6712.782.484.420.38200323.2414.733.534.980.42200426.3415.734.795.830.51200528.9716.356.136.50.58200633.2518.087.607.570.65200738.6721.209.398.080.74200843.4822.8411.748.900.90Unit: 1 Trillion RMBAmount of Business EntitiesRegistered Capital of Business Entities40COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaIndustry Distribution of Business EntitiesPercentage No. of Business Entities (end of 2008)Percentage Registered Capital (end of 2008)Source:www.saic.gov.cn5 Industries with Most Business Entities (end of 2008)41COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaPrivate Enterprises in ChinaChineseprivateenterprisesmaintainedstronggrowthmomentumandcontributedsignificantlytoChineseeconomicgrowth. By the end of 2008, there were 6.57 million Chinese private enterprises in China, up by 9.02%. Actualregisteredcapital11.74 trillion RMB,upby25.02%.In 2008 newly registered private enterprises were 1.06 million (including subsidiaries), newly increased registeredcapital1.6 trillion,newlyemployedpeople9,103 million.Bytheendof2008137 millionpeoplewereemployedinChineseprivateenterprises,upby7.3%,takingup18%oftotalemployedpeopleinChina.IthelpsresolvetheunemploymentinChinatoagreatextent.Theimplementationofnew“CompanyLaw”hasloweredtheinvestmentthresholdofcorporationsandprotectedmoresmallandmediuminvestorsrights.Bytheendof2008,thenumberofprivatecorporationsreached11,200with112,700investors(upby76.37%);registeredcapital3.13 trillion RMB,upby189%.Economic Contribution of Chinese Private Equity (end of 2008)Source:www.saic.gov.cn42COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaForeign Enterprises Origination in ChinaBytheendof2008,enterprisesofothercountriesinAsiantakeup58.78%oftotalnumberofforeignenterprises.LatinAmericagrewfastestamongalltheareasin2008thenumberofforeignenterprisefirstexceededNorthAmerica,ranking2nd.Duetosoundeconomicprocessandpolicyenvironmentintimeofthecrisis,foreigninvestmentfromAsiastill maintainedits momentumin 2008. Representedby United States, investors from North AmericachosetoinvestinChina.HongKongenterprisestakeup34.3%oftotalnumber.HKinvestorslongcooperationhistoryandhighexpectationonresourcesandinvestenvironmentofmainlandChinawillkeepHKenterprisesincreaseanddominantinnumberinfuture.Investment Origin by Continent (end of 2008)6 Largest Origination Countries (end of 2008)43COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaTypes of Foreign Enterprises in ChinaThereare3organizationtypesofforeignenterprisesinChina:Wholly-owned Foreign Enterprise-100%ownedbyoneormoreforeignentitiesSino-foreign Joint VenturenEquity JointChineseinvestor(s)andforeigninvestor(s)raisepartofthecapitalrespectivelynContract ShareCooperationbasedoncontractForeign-invested Limited Liability CompanyforeigninvestorsholdpartofequityDistribution of Organization Types (end of 2008)No. of Enterprises: 257,500No. of Enterprises: 111,300No. of Enterprises: 61,600No. of Enterprises: 4,500Source:www.saic.gov.cnSource:www.saic.gov.cn44COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaIndustry Allocation of Foreign Enterprises in ChinaPercentage No. of Business Entities (end of 2008)Percentage Registered Capitals (end of 2008)5 Largest Industries in Total No. and Newly Registered No. (end of 2008)Source:www.saic.gov.cn45COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina46AGENDAExecutiveSummaryChinaataGlancePoliticalStructureNationalAccountsBalanceTradeChinaDiversityNationalEconomicPlanIndustryDistrictIndustryOrganizationLegal Structure for Foreign Enterprise46COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaCorporate & Investment.1.CorporateLawofP.R.ChinaThisLawisformulatedinordertostandardizetheconductofpartnerships,toprotectthelawfulrightsandinterestsofpartnershipsandthepartnerstherein,tosafeguardsocialandeconomicorder,andtopromotethedevelopmentofsocialistmarketeconomy2.LawofThepeoplesRepublicofChinaonChinese-ForeignContractualJointVenturesThisLawisformulatedtoexpandeconomiccooperationandtechnologicalexchangewithforeigncountriesandtopromotethejointestablishment,ontheprincipleofequalityandmutualbenefit,byforeignenterprisesandothereconomicorganizationsorindividualsandChineseenterprisesorothereconomicorganizationsofChinese-foreigncontractualjointventureswithintheterritoryofthePeoplesRepublicofChina3.LawofThePeoplesRepublicofChinaonChinese-ForeignEquityJointVenturesTheseRegulationsareformulatedwithaviewtofacilitatingthesmoothimplementationoftheLawofthePeoplesRepublicofChinaonChinese-ForeignEquityJointVentures4.WhollyForeign-ownedEnterpriseLawWithaviewtoexpandingeconomiccooperationandtechnicalexchangewithforeigncountriesandpromotingthedevelopmentofChinasnationaleconomy,thePeoplesRepublicofChinapermitsforeignenterprises,otherforeigneconomicorganizationsandindividualstosetupenterpriseswithforeigncapitalinChinaandprotectsthelawfulrightsandinterestsofsuchenterprises5.CataloguefortheGuidanceofForeignInvestmentIndustriesThiscatalogueistheguidanceofforeigninvestmentindustriesincludingpromotedindustries,restrictedindustriesandforbiddenindustries6.MeasuresforTheAdministrationonForeignInvestmentinCommercialFieldsInordertofurtherexpandtheopen-uptotheoutsideworldandimprovetheconstructionofmarketcirculationsystem.ThepresentMeasuresareherebyformulatedinaccordancewiththeLawofthePeoplesRepublicofChinaonSino-foreignEquityJointVentures,theLawofthePeoplesRepublicofChinaonSino-foreignContractualJointVentures,LawofthePeoplesRepublicofChinaonWhollyForeign-ownedEnterprises,andtheCompanyLaw,andotherrelevantlawsandadministrativeregulations47COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaFinance1.MeasuresforstrategicinvestmentbyforeigninvestorsuponlistedcompaniesThismeasuresaimstostandardizestrategicinvestmentofforeigninvestorsonA-sharescompanyafterthereformofnon-tradablesharesoflistedcompany,tomaintainsecuritiesmarketorder,tointroduceforeignadvancedmanagementexperience,technologyandcapital,toamelioratestructuralgovernanceoflistedcompany,toprotectthelawfulrightsoflistedcompaniesandtheshareholders2.ProvisionsonTheMergerAndDivisionofEnterpriseswithForeignInvestmentTheseProvisionsareformulatedinaccordancewiththeCompanyLawofthePeoplesRepublicofChinaandthelawsandadministrativeregulationsconcerningenterpriseswithforeigninvestmentforthepurposeofregulatingtheactsrelatingtothemergeranddivisionofenterpriseswithforeigninvestmentandprotectingthelegitimaterightsandinterestsoftheinvestorsandcreditors3.EstablishmentofSecuritiesCompanieswithForeignEquityParticipationRulesTheseRulesmeettheneedsoftheopeningupofthesecuritiesmarkettoforeigninvestment,tostrengthenandimprovetheoversightofsecuritiescompanieswithforeignequityparticipationandtoclarifytheconditionsandproceduresfortheestablishmentofsecuritiescompanieswithforeignequityparticipation4.ProvisionalMeasuresonAdministrationofDomesticSecuritiesInvestmentsofQualifiedForeignInstitutionalInvestors(QFII)BaseduponChinasrelevantlawsandadministrativeregulations，thisRegulationwaspromulgatedforthepurposeofgoverningQualifiedForeignInstitutionalInvestorsinvestmentsinChinassecuritiesmarketandpromotingdevelopmentsofChinassecuritiesmarket5.EstablishmentofCompanieswithanInvestmentNaturebyForeignInvestorsProvisionsInordertopromoteinvestmentinChinabyforeigninvestorsandattractforeignadvancedtechnologyandmanagementexpertise，foreigninvestorsarepermittedtoestablishcompanieswithaninvestmentnatureinChinainaccordancewiththerelevantlawsandregulationsofChinaonforeigninvestmentandtheseProvisions48COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaSpecific Industries1/21.ConcerningRegulatingtheAccesstoandAdministrationofForeignInvestmentintheRealEstateMarketForthepurposeofasounddevelopmentoftherealestatemarketandupontheconsentoftheStateCouncil,suggestionsareherebyputforwardconcerningtheaccesstoandadministrationofforeigninvestmentintherealestatemarket2.AutomotiveindustrydevelopmentpolicyThePolicyhasbeenspecificallyformulatedinresponsetotherequirementsofcontinuouslyimprovingthesocialistmarketeconomicstructureandtothenewsituationthathasdevelopedinthedomesticandforeignautomotiveindustriessinceChinasaccessiontotheWorldTradeOrganization;andinordertopromotetheadjustmentandupgradingofthestructureoftheautomotiveindustry,comprehensivelyenhancetheinternationalcompetitivenessoftheautomotiveindustry,satisfytheever-increasingconsumerdemandforautomobileproductsandpromotethehealthydevelopmentoftheautomotiveindustry.Itisanticipatedthat,throughtheimplementationofthisPolicy,Chinasautomotiveindustrywilldevelopintoapillarindustryofthenationaleconomybefore2010,thusallowingittomakeanevengreatercontributiontocomprehensivelyrealizingtheobjectiveofcreatingamoderatelywell-offsociety.3.AdministrationofForeign-fundedInternationalFreightForwardingAgenciesProceduresTheseMeasuresareformulatedinaccordancewiththeStatelawsandregulationsconcerningforeign-investedenterprisesandthePRC Administration of the International Freight Forwarding Agency Business ProvisionsinordertopromotethehealthydevelopmentoftheinternationalfreightforwardingagencybusinessinChina,andtoregulatetheestablishmentandoperationalconductofforeign-investedinternationalfreightforwardingagencies.4.RegulationonDirectSellingAdministrationThislawisenactedforthepurposeofregulatingthedirectSellingbehaviors,strengtheningthesupervisiononthedirectsellingactivities,preventingfraudandprotectingconsumerslegitimaterightsandthesocialandpublicinterests.5.AdministrationofCommercialFranchiseProceduresTheseProceduresareformulatedinordertostandardizecommercialfranchising，tosafeguardthelawfulrightsandinterestsoftheparties，andtopromotethehealthyandorderlydevelopmentofcommercialfranchise.6.RenewableEnergyLawThislawmainlyincludestheaspectsofestablishingtheplanofrenewablepowergeneration,eliminatingtheobstacleforgridrenewablepower,obtainingreasonablereturn.49COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChinaSpecific Industries2/21.AdministrationofForeign-fundedTelecommunicationsEnterprisesProvisionsTheseRegulationshavebeenformulatedpursuanttorelevantlawsandadministrativeregulationsonforeigninvestmentandthePRC,TelecommunicationsRegulations,inordertorespondtotherequirementsofopeningthetelecommunicationsindustrytoforeigninvestmentandtopromotethedevelopmentofthetelecommunicationsindustry.2.TheProvisionsonTheAdministrationofForeign-fundedAdvertisingEnterprisesWithaviewtostrengtheningtheadministrationontheforeign-fundedadvertisingenterprises,andpromotingthesounddevelopmentofadvertisingindustry,thepresentProvisionsareformulatedinaccordancewiththelawsandadministrativeregulationsgoverningthemanagementofforeigninvestmentsandadvertisements.3.ForeignInvestmentinCinemasTentativeProvisionsTheseProvisionsareformulatedinaccordancewiththePRC，Sino-foreignEquityJointVentureLaw，thePRC，Sino-ForeignCo-operativeJointVentureLaw，theAdministrationofFilmsRegulationsandtherelevantlawsandregulationsinordertomeettheneedsofreformandopeningup，absorbforeigncapital，importadvancedtechnologyandequipment，andpromoteprosperousdevelopmentofthefilmindustryinChina.4.InterimProceduresfortheExperimentofTravelServiceswithChineseandForeignInvestmentsTheseProceduresareformulatedinaccordancewiththeLawofthePeoplesRepublicofChinaConcerningChinese-ForeignJointVenturesandtheRegulationsonTravailServicesAdministrationaswellasrelevantlawsandregulationswithaviewtofurtherextendingtheopeningupofthetourismindustrytotheoutsideworldandpromotingthedevelopmentofthetourismindustry.5.InterimMeasuresforAdministrationofChinese-foreignJointVentureandCooperativeMedicalInstitutionsTheseMeasuresareformulatedinaccordancewiththepertinentstatelawsandadministrativeregulationssuchastheLawofthePeoplesRepublicofChinaonChinese-foreignEquityJointVentures,theLawofthePeoplesRepublicofChinaonChinese-ForeignContractualJointVentures,theRegulationsfortheAdministrationofMedicalInstitutionsforthepurposeoffurthercateringtotheneedsofreformsandopeninguptotheoutsideworld,enhancingtheadministrationofChinese-foreignjointequityventureandcooperativemedicalinstitutionsandpromotingthehealthydevelopmentofthemedicalandhealthundertakingsofthecountry.50COPYRIGHT NPV CHINA2009ChinaOutlookChinaOutlook,byNPVChina51NPV China ContactsNPVChinaBusinessConsulting(Shanghai)Co.,Ltd.GuangdongRoad500,Room2406,200001,Shanghai,P.R.ChinaPhone+862161528632Fax:+862161528635Infonpvchina.comhttp:/www.npvchina.comNPVS.p.AViaAndreaAppiani,1220121Milan,ItalyPhone+3902366933.50Fax:+3902366933.60Infonpvalue.comhttp:/www.npvalue.com