China 2010 and beyond

Ilan MaorManaging Director (Israel), SHENG-BDO China B.D.

Vice President, Israel – Asia Chamber of Commerce

China Today - The Transformation

Deng

Xiao

Ping

Mao

Ze

Dong

Jack

Ma

Yao

Ming

• 9.9 million sqm

• 1.3 billion people

• 23 Provinces / 5 AR / 4 cities

• New (1949) but Ancient (5,000 years)

Country => Continuity & Nationalism

• The Era of Post Communism

• Changing & developing society: Culture,

Religion, Technology and Economy…

China – The Awakening Giant

GDP: 4.99t US$ (+ 9.1%)

WB 2010 exp.: +10%

FDI: 90b US$ (-2.3%)

1-8/10: 65.96b US$ (+18%)

Foreign trade: 2.21t US$ (-13.9)

1st Global Exporter

3rd Global Importer

Trade balance: +196b US$ (-34.2%)

1-8/10: + 104b US$

FOREX Reserves: 2.65t US$ (2006: 1t)

China – Economic Figures (2009)

China 2010 – The Industry

Strong & Developing Industrial Sector

Diversified Manufacturing Base:

* International OEM & Local brands

* Traditional & Technological products

* Targeting local market & Export

China 2010 – The Industry

The Chinese State Sector have set a list of strategic

sectors: Energy efficiency and saving

New energy

Biological sector

Information Technology

Advanced machinery manufacturing

New materials

New energy powered vehicles

* The investment in the above seven sectors grew

67% in the first half of 2010.

China 2010 – Preferred Industrial Sectors

National & local level effort to improve

technological capability through intensive

support to R&D projects.

2nd largest national investor in R&D. 15-20%

annual growth.

352,000 new engineers graduate every year.

32.7% growth in processed inventions patent

applications in 2009 (total: 194,850)

24% growth in international patent registration

requests in 2009 (total: 6,000)

9.1%

11.1%

12.2%

China’s share in the

global R&D investments:

From Global Factory to Technology

• Global corporate

R&D spending were

cut in 1.9%

• China’s corporate

R&D spending were

increased in 40%!

(EU/JRC report

2010).

Industrial R&D on the growth

Change

in 2009

R&D

expense

CompanyRank

+27.8%1.33b€Huawei Technologies45

+27.4%1.01b€Petro China54

+45.6%625m€ZTE90

+194.0%527m€China Railway Construction106

+11.4%390m€China Petroleum & Chemicals143

+43/9%213m€Dongfeng Motor232

+59.8%177m€China Communications Construction 263

+68.8%173m€China South Locomotive269

-2.6%149m€Lenovo287

+42%148m€Metallurgical Cooperation of China289

NA146m€SAIC Motor293

+15.5%130m€China Coal Energy 322

+12.1%115m€BYD361

+57.2%112m€SMIC369

+11.8%111m€Shanghai Electric Group372

+73.5%97m€Tencent406

+106%65m€China Railway551

+29.3%65m€Dongfang Electric561

+11.2%56m€China Telecom634

Inbound

FDI

63b US$

Inbound vs. Outbound Investments (2006 - 2009)

Outbound

FDI

16b US$

Inbound

FDI

90b US$

Outbound

FDI

56.5b US$

+43%

China Today – Two Ways Investments

China's No. 1 personal computer maker.

China's leading telecom vendor. 45 carriers clients

2009 sales reached 22.3b US$ (+19%)

Number 13th on the list of global highest Int’l

patent filing companies (up 24 places from 2005)

Leading manufacturer of home appliances & electronic

equipment. Largest global supplier of refrigerators. Has

30,000+ outlets around the world.

Re-Branding China

Build Your dream (BYD) was established in 1995 as a

batteries vendor with 20 workers, invested by Warren

Buffer in 2008, and is now a leading electric cars

vendor with 200,000 workers.

CompanyRank

8

11

24

27

51

75

90

Re-Branding China (cont.)

BrandZ Top 100 – 2010 Report

Millward Brown Optimor

BrandZ Top 100 identifies the

world's most valuable brands

measured by their dollar value.

(2 out of the 10 new brands

added this year are Chinese:

PetroChina & Baidu)

China 2010 – The New Consumers Market

Fast growing middle class, estimated

at 250-400 million people

Rising purchasing power, growing

awareness to brands, quality &

service

More than 130 billionaires (2nd

concentration after US).

The Consumer…

China is expected to be the world's

4th largest country with wealthy

households by 2015,(wealthy

households: having an annual

income in excess of 250,000 RMB).

.

420 million internet subscribers (2010)

120.6 million broadband users (2010)

142 E-commerce clients (2010)

39 billion US$ E-commerce sales (2009)

823 million mobile subscribers (2010)

60 million 3G subscribers (est. 2010)

The New Consumer : ICT Services

2.27 billion bank cards (twice the U.S.)

200 million credit cards (2009)

1 trillion US$ purchasing (2009)

Source: JD Power * Under 6 tons

Millions

China Car Sales

U.S.A

.China

Pre

dic

tion

• Expected auto sales in 2010: 17 million (+25%)

• 199 million vehicles on China’s roads (including more than

85 million cars).

• 144 million Chinese holds

driving license (22 million

new drivers every year).

• The number of cars in China

is expected to reach 200

million by 2020.

Car Industry – Industrial & consumer Growth

China 2010 – the challenges

The unemployment (2009: 4.6%)

Potential real-estate bubbles

Stock market reform needed

Need to constantly develop infrastructure, logistics, energy

Growing environmental issues (past and current damages)

Growing gaps between poor/rich & rural/urban (1:3.28)

Need to rebuild the social security and health systems

The color of grey…

China 2010 – Internal Issues

5 Years: +164%

2010: - 6.2%

Shanghai Index

The global financial crisis and the reduces demands

IP issues

Branding & QC

Market opening (WTO)

Yuan (RMB) exchange rate

China 2010 – External Issues

Main points for discussions:

IP in China – A period of transformation?

The Chinese business legal system – about a contract in

China a more…

Technological & investment cooperation with China –

the new main path?

China as an R&D partner.

Gateway China Panel – Myths and reality…

From an old Asian saying…

3 basic rules of doing business in China:

1. It is very difficult to do business in China.

2. With great efforts, patience, and good

connection you can succeed in China

3. If you feel you are making progress and all

goes well – please read rule no. 1 again…

A bit about cultural differences…

The rule of the Party /

Government

Stability & Security

* Duties *

Tradition, Repetition,

Slow Changes

5000 Years of History

Classmates & Guang Xi

The Rule of the Law

Freedom to Choose

* Rights *

Invent yourself…

“Time is Money”

Business X friendship

The Chinese way Western / American Concept

When East Meet West

The Boss!

Networking

Dealing with an

obstacle

Expressing

an opinion

Showing

your anger ?!

The kids...