CHINA

Juncheng Wang

07/06/2012

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Contents

▪ POLITICAL FACTORS

▪ ECONOMIC FACTORS

▪ SOCIOCULTURAL FACTORS

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Political Factors

▪ 22 provinces

▪ 5 autonomous regions

▪ 4 directly administered municipalities (Beijing, Tianjin, Shanghai and Chongqing)

▪ 2 highly autonomous special administrative regions (SARs) (Hong Kong and Macau)

▪ Capital is Beijing

▪ Ruled by the Communist Party of China (CPC)

▪ The political system is much decentralized with limited democratic processes internal to the party and at local village levels

▪ “The level of support to the government is among the highest in the world(85%)”

– Pew Research Center survey (2008)

SOURCE: China National Bureau of Statistics; Team analysis

▪ As the most important source of fiscal revenue, tax is a key economic player of China’s macro-economic regulation

▪ In an effort to encourage inward flow of funds, technology and information, China provides numerous preferential treatments in foreign taxation

Taxation Policy

Social Welfare PolicyForeign Trade regulation

▪ The second largest poverty population among the world(250million)

▪ 1999-2004 China experienced the greatest decrease its poorest population(2.9million)

▪ 2008 China had 159.89 million people(12%) aged 60 or above , will reach 0.28 billion(18%) in 2015

▪ Social welfare/fiscal revenue will take from the current 27% (2009) to 35% the coming 12 years

▪ Late 1980s China started import/export

▪ 1991 China joined in APEC (Asia-Pacific Economic Cooperation)

▪ 2001 Created SCO(Shanghai Cooperation Organization)

▪ 2001 Has been approved to WTO

▪ 2004 "PRC Foreign Trade Law“

▪ 2004 proposed an entirely new East Asia Summit (EAS) framework

924847713543

5,8784,9914,5203,4942,713

2006 07 08 09

1,191

2010

TAX(bnUSD)

GDP(bnUSD)

0.0

0.1

0.2

0.3TAX(growth rate)

GDP(growth rate)

TAX/GDP

Government Stability

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Mid China - 中原

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North east China

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North west China

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South east China

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South west China

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Tibet

|

Foreign Exchange Reserves and Exchange Rate

Money Supply

Disposable income

GDP per capita

GDP

10 SOURCE: International Monetary Fund; National Bureau of Statistics of China

Economic Factors

USD

4,3823,7373,4042,6452,064

7,5196,7866,1895,554

4,749

2006 07 08 09 2010

GDP per capita current prices

GDP based on PPP per capita

12.7%14.2%

9.6%9.2%

10.3%GDP Growth rate

5.0

-0.7

5.94.81.51.8

Year Reserves (tnUSD)

Change (%)

Exchange Rate(USD:Yuan)

Change (%)

2005 0.8189 25.5 0.000788 2.56

2006 1.0663 23.2 0.000785 3.35

2007 1.5282 30.2 0.000779 6.9

2008 1.946 21.5 0.000774 6.9

2009 2.3992 18.9 0.000773 0.1

2010 2.8473 15.7 0.00077 5.04

bn USD

5,8784,9914,520

3,4942,713

10,0869,057

8,2197,3396,242

GDP currentprices

GDP basedon PPP

5.5%6.3%

7.4%

8.6%9.3%

Percentage (China/World)

19,10917,17515,78113,78611,75910,493

0

10,000

20,000

2005 06 07 08 09 2010

72.6060.6247.5140.3434.5629.87

0

50

100

Annual Inflation rate of China (consumer prices)

tn RMB

RMB

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Real estate industry

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660 956792

969762

0

1,000

2,000

3,000

2005 06 07 08 09 2010

1,2211,431

1,133

1,202

1,006

1,578

1,395

Export

Import

Import Data Comparison

Fixed Asset Investment

12 SOURCE: International Monetary Fund; National Bureau of Statistics of China; Team analysis

Economic Factors – International Investment & Trade“China is the world's most preferred investment destination.“

– Ernst & Young’s <2010 report of the European

investment attractiveness>

2009 China absorbed 90 bn USD, ranked NO.2 all over the world

First half of 2010, approved 12,000 new established foreign companies, increased 19%

½ of 2010,Used 54.1 bn USD foreign investment, increased 21%

The robust economic growth

▪ The world's second largest economy

▪ Average growth rates of 10% for the past 30 years

▪ The largest exporter and second largest importer of goods in the world

▪ Little influenced by the big crisis

▪ Active trade balanced for 30 years

1,202

0

500

1,000

1,500China

Germany

US

bn USD

1,006

0

1,000

2,000

3,000

0807062005

US

Germany

China

2009

27.81422.485

17.28313.73211.0008.877

0102030

tn RMB

Export & Import Data of China

Export Data Comparison

bn USD

bn USD

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▪ A great influence on the Chinese consumers

The Impact of Advertising

Recommen-dation

Purchasingguide On-line

advertisements

Newspaper

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Sociocultural Factors

SOURCE: China National Commercial Information Center; China Consumers Association; National Population Statistics; National Bureau of Statistics of China; Team analysis

Engel's Coefficient Population Demographics

Income Distribution

▪ GINI coefficient: 0.45

▪ Increasing income imbalance

▪ Obstacle: Unequal income distribution and poverty

Average41.25%Japan 24.12%USA 16.45%2000 02 04 06 08 2010

20

30

40

50

Urban Residents

Rural Residents

Percent

51%MediaAdver-

tising

24%

18%7%

other ways

65%

Television

21%

15%

mn

0

500

1,000

1,500

Total Population

20101953 64 78 1990 2000

5.84%16.80%

27.70%

35.60%23.60%

11.60%

Population Growth Rate(%)

Education Level & Social Mobility

th

1964 1982 1990 2000 2010

Junior Collegeand Above

Senior SecondarySchool and Technical Secondary School

0

12

15

3

6

9

33.6%

22.8%

15.9%

6.7%4.1%

Illiterate Rate (%)

▪ Huge population & decreasing growth rate

▪ Demographic dividend and speeding aging

▪ Imbalanced gender ratio & reducing family volume

The rest

Last 10%

54%Top 10%

1%

45%

Household property income distribution

▪ Developing urbanization & living situation

▪ High working load & Increasingly affluent leisure activities

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People’s living