NPV China Outlook 2009

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CHINA OUTLOOK

2009

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2009 – China Outlook

China Outlook, by NPV China

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AGENDA

Executive Summary China at a Glance

Political Structure

National Accounts

Balance Trade

China Diversity

National Economic Plan

Business Organization

Legal Structure for Foreign Enterprise

Business District Map

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China, with its 1.33 billion population, is the country with the largest potential for growth in the world and thus must represent an essential part of each company’s strategy, either as a production base or as a final market

The economy has been growing at average rates of 10.8% between 2001 and 2008 and is now 3rd largest in the world, accounting for 6% of global GDP; foreign trade has been growing dramatically (an average of 25% CAGR between 2004 and 2008), and foreign investment has kept pouring in to the country with actually utilized foreign capital of 92.4 billion in 2008, up by 23.6%

For Italian companies, China represents an extremely important opportunity on any of the following 3 fronts: Sale: as a final market with more than 1.33 billion consumers Delocalization: as a low cost production base Purchasing: as a sourcing base

Exchange rate: RMB/USD stood at 6.83 at the end of 2008, with a 6.9% appreciation of the end of 2007 RMB/EUR stood at 9.61 at the end of 2008, with an 9.8% appreciation of the end of 2007

Inflation: CPI in 2008 surged to 5.9% mainly due to the soar of food price. Other factors such as increase of energy price and excess liquidity in the financial market may keep the momentum of CPI

Stock Market: SSE composite index plunges 2/3 from the beginning of the year; whether the government should intervene is under intense debate

The new LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON EMPLOYMENT CONTRACTS came into effect in 1st Jan, 2008 towards more protection of the employees

The 29th Olympic Games was held successfully in Beijing in August, 2008.

EXECUTIVE SUMMARY

Source : China Statistical Yearbook , China National Statistics Bureau, NPV analysis

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AGENDA

Executive Summary

China at a Glance Political Structure

National Accounts

Balance Trade

China Diversity





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By 2050 it is expected that China will be the world’s number one economy

Source : BRIC Report , Goldman Sachs

CHINA AT A GLANCE

2025 USD bn

2050 USD bn

The largest economies in Asia in 2025

The largest economies in the world in 2050

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Territory

- 9.6 million km2 , 1st in Asia, 3rd largest in the world

Population

- 1,328 billion in 2008 (51,5% male, 45.7% urban)- Annual growth rate of approximately 0.53%

Capital

- Beijing

Government System

- Communist

Administrative Divisions

- 4 level : Province (34) / Prefecture ( 333 ) / County ( 2860 ) / Townships (41040 )

Currency

- RenMinBi (RMB) or Yuan, semi-flexible exchange rate

Languages

- Mandarin, with Cantonese as the second most common language

Ethnicities

- Han (92%) and 55 minorities (8%)

Religion

Buddhism, Islam, Taoism, Christianity

Source : China Statistical Yearbook, NPV analysis

Country profile CHINA AT A GLANCE

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AGENDA

Executive Summary

China at a Glance

Political Structure National Accounts

Balance Trade

China Diversity





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POLITICAL STRUCTURE

Source : http://afe.easia.columbia.edu/china/gov/chart.htm, NPV analysis

Government and Communist Party Structure

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BEIJING

SHANGHAI

TIANJIN

CHONGQING

HONG KONG

MACAU

XINJIANG

TIBET

QINGHAI

GANSU

SICHUAN

YUNNAN

INNER MONGOLIA

GUIZHOU

GUANGXI

HUNANI

HUBEI

SHAANXI

SHANXININGXIA

HENAN

HEBEI

GUANGDONG

JIANGXI

FUJIAN

ANHUI

ZEJIANG

SHANDONG

HAINAN

LIAONING

JILIN

HEILONGJIANG

TAIWAN

JIANGSU

Municipality Autonomous region Special administrative region

Source : China Statistical Yearbook, NPV analysis

Administrative Division

23 ordinary provinces (including Taiwan)

4 Municipalities : Beijing Chongqing Shanghai Tianjin

5 Autonomous regions : Guangxi Inner Mongolia Ningxia Tibet Xinjiang

2 Special administrative regions : Hong Kong Macau

POLITICAL STRUCTUREChina administrative divisions

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10Source : Chinese Government, NPV analysis

Central Government

Municipalities Provinces, Autonomous Regions Special Administrative Regions

Districts Counties

Cities Autonomous prefectures Counties, Autonomous Counties

Districts Counties

Cities Counties Autonomous Counties

Townships Ethnic townships Towns

POLITICAL STRUCTUREChina administrative divisions

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AGENDA

Executive Summary

China at a Glance

Political Structure

National Accounts Balance Trade

China Diversity





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China is the 3rd largest economy in the world in 2008, 6% of gross world product (2007)

Considering the GDP per capita, China is the 106th in the world in 2008 ( at $3,315 )

Chinese economy grows consistently reaching a 10% annual growth rate during the latest five years.

China’s urban households’ per capita disposable income growth has consistently been higher than CPI inflation, indicating a positive real growth in the people’s living standard.

China GDP 2004 - 2008

People’s Income and CPI¹ 2001-2008

RMB Bn

NATIONAL ACCOUNTS

Source :China National Economic and Social Development Report, China Statistical Yearbook, NPV analysis

9.2%

12.3%

10.0%11.2% 11.4%

12.1%

17.2%

14.5%

0.7%

-0.8%

1.2%

3.9%

1.8% 1.5%

4.8%5.9%

-2%

2%

6%

10%

14%

18%

2001 2002 2003 2004 2005 2006 2007 2008

Nominal Growth of Per Capita Disposable Income of Urban Households CPI

15987

18386

21087

24661

30067

10.1%10.4%

11.6%

9.0%

13.0%

0

5000

10000

15000

20000

25000

30000

35000

2004 2005 2006 2007 20088.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%Nominal GDPReal Growth Rate

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Secondary industry is the dominant force in driving economy forward accounts for almost 50% of GDP, with CAGR 18.12% from 2000 - 2008

Tertiary industry grows with CAGR 17.61% from 2000 -2008

GDP – Breakdown 1978-2008

Source : China National Economic and Social Development Report, China Statistical Yearbook, NPV analysis

NATIONAL ACCOUNTS

28.2% 25.1%

15.1% 11.3%

47.9%

42.8%

45.9%48.6%

23.9%32.1%

39.0% 40.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1978 1989 2000 2008

TertiarySecondaryPrimary

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GDP Per Capi ta 2008 (USD)

0

2000

4000

6000

8000

10000

12000

14

Average GDP per capita in 2008: 3,315 USD Shanghai 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 provinces 43.1 % of population’s GDP per capita is higher than average China has reduced 62 million, 53% extreme poverty during the past 20 years. In 1985 China had 116 million people living

under $1 dollar-a-day poverty level.(*)

GDP per capita ( USD )

(*) MGI China consumer demand model

NATIONAL ACCOUNTS

Source : China National Economic and Social Development Report, China Statistical Yearbook , NPV analysis

Over 4,000 USD/person 464 million

Below 2,500 USD/person347 million

Over 2,500 USD/person489 million

Average

NPV China Outlook 2009

Business

social development

china statistical

china national

3rd largest

final market

largest economies

china

gdp