© 2014 Blue Canyon Partners, Inc.

David G. Hartman, PhD

September 28, 2014

Western Views of Investment in China

美国眼中的中国投资价值

© 2014 Blue Canyon Partners, Inc.

How Western Views of China Have Changed Over Time

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China is very big. I wish they could

buy our products

China is where we

produce for global

markets

China is the center of

world construction

demand

China is now one of our

biggest consumer markets

China is the world’s only large, fast-

growing market

What will

China be

next?

© 2014 Blue Canyon Partners, Inc.

1. China’s growth slowdown is causing great concern

2. China is risky for individual investors but offers high returns

▫ Safer to invest in US companies that invest in China

• General Motors versus FAW, BYD, Geely

• Yahoo versus Alibaba

▫ China investments are becoming expensive and still risky for US companies

• When growth rates are high, the value of a property is determined by whether current

growth rates are maintained.

• Environment, rules etc, can change rapidly

3. Today’s big story is overcoming remaining barriers to China’s

development

▫ eCommerce

▫ New focus on services, the environment, higher value-added production

▫ Moving west for lower cost

Three Themes of US Investing of China

3

© 2014 Blue Canyon Partners, Inc.

Assessment of the Alibaba bet

4

© 2014 Blue Canyon Partners, Inc.

China’s distribution system was

very inefficient compared to

the US

Products cost more in China than the US, even when

produced in China

Infrastructure investments enabled fast-

delivery services

eCommercecompletes the

cycle by bypassing

distribution

Why eCommerce Is Such a Big Opportunity

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© 2014 Blue Canyon Partners, Inc.6

Chinese Companies Have Unique Innovation

Where China has Been and Where China is

Headed as a Global Competitor

1. Remarkable change in not much more than 20 years:

command and control to largely market-driven

2. Having created a formidable set of Chinese competitors

who are large, well-funded and tend to follow a different

business model.

3. From 11 companies in the Fortune 500 in 2002 to 100 in

2014

Early Bird Fast Follower

Electrolux Haier

Ericsson Huawei

CaterpillarZoomlion,

XCMG, Sany

Apple XiaoMi

Amazon Taobao

Facebook WeiXing

© 2014 Blue Canyon Partners, Inc.7