Societe Generale (nSGo) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S) CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS AND THE STATUS OF NON-US RESEARCH ANALYSTS Macro Commodities Forex Rates Equity Credit Derivatives 23 March 2011 Economy Beyond the cycle www.sgresearch.com The new Chinese landscape: a chance for Europe An explosion in consumer demand in China The size of the urban Chinese middle class by 2015, i.e. double the level observed in 2008. Anticipated growth in demand for household goods and services by 2015, with +222% for durable goods. The rise in Chinese household consumption between 2008 and 2015, with +71% for food. At the current rate, China will become the largest export market for all European countries by 2020. Weaker competition: EMU export prices to China rose by 45% from 2004 to 2010, and prices of imported Chinese products went up 41%. Portion of European exports represented by China by 2020 Source: SG Cross Asset Research Main sector positioning relative to new Chinese landscape Beneficiaries* Protected* At risk* Automotive (high/mid-range) Automotive (premium) Telecoms equipment Clothing Luxury Electrical equipment Agri-food/Beverages Chemicals Industrial equipment Pharmaceuticals Basic materials Renewable energies media Banking/Insurance * Strong demand and easing competition * Strong demand and low exposure to competition * Strong demand but increasing competition x 3.3 x 3.3 x 2.3 x 4.5 x 2.5 x 3.3 x 3.1 x 3.5 x 1.9 0% 4% 8% 12% 16% Germany France Italy Ndls Belgium Spain EMUͲ6 UK Sweden 2009 2020 400 million +204% +94% Opportunities Pricing power Project leader Véronique Riches-Flores (33) 1 42 13 84 04 vé[email protected]With contributions from Philippe Barrier, Adrien de Susanne, Marie-Line Fort, Joseline Gaudino, Didier Laurens, Jean-Baptiste Roussille B33374
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Societe Generale ( SG ) does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S) CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS AND THE STATUS OF NON-US RESEARCH ANALYSTS
Industrials: heading for a sustainable rerating? In 2010 the European industrial stocks were trading at close to 20x earnings, a record high
level not seen since 1973. The hardcore industrials aerospace, transport, industrial
equipment and chemicals put in an even stronger performance, with median P/E touching a
high of 22 over the course of the year, bringing the gap in valuation vs the overall market to an
exceptional level of six points.
Europe - Difference in performance of industrial stocks vs the market
Source: SG Cross Asset Research
Though clearly boosted by the performance of the German industrials, a significant
improvement in the valuations of industrial companies can be observed across most European
countries. At a P/E of more than 20 in the second half of 2011, hardcore French industrials, for
example, were trading at their highest multiple since the mid-1980s.
France:-P/E of industrial stocks
Source: Datastream, SG Cross Asset Research
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B33374
The new Chinese landscape: a chance for Europe
23 March 2011 5
In the near term, there is every chance that this trend will slow down. Not only is the
consolidation of the economic recovery leading to more diversified investment opportunities,
notably in services, insurance and banking, but also high input prices continue to weigh on the
margins at this stage, for both the industrials as well as the other sectors.
Business sentiment on input prices Implicit margins in services and industry
Sources : SG Cross Asset Research, PMI Market data
Nevertheless, in the longer term, the outlook for industry has improved enough to justify
a structural rerating of many sections of the European industrial landscape with,
however, significant sector rotation in comparison to past results.
Current P/E of the European industry, long-term average (1973-2010) and anticipated effects of the Chinese transition on the valuation in the medium term (3-5 years)
Source: SG Cross Asset Research
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B33374
The new Chinese landscape: a chance for Europe
23 March 2011 6
Chinese transition Following a period of more than two decades, during which the Chinese economy has been
catching up with the developed nations, the transition from an export-led growth model to a
domestic growth model driven by private consumption is likely to have profound
consequences on the global
environment. Because we
are talking about China, and
therefore an industrial
competitor of unparalleled
proportions, whose entry
onto the global marketplace
has strongly influenced the
international competitive
environment for more than
20 years, the effects of this
transition are likely to be of
an unprecedented nature.
Aside from an incalculable
source of growth in
demand for industrial goods, the change in the Chinese growth model is likely to be
accompanied by a significant easing in the global competitive environment which is likely
to relieve producers in the rest of the world of the strain of the hyper-competition that has
weighed on them in the years that China s global market share was sky-rocketing. European
industry, which still accounts for a large portion of global production capacity, is
probably best placed to benefit from this radical change in environment characterised
by a sharp rise in opportunities and stronger profitability.
Thirty years of widespread industrial decline As the world s leading exporter of manufactured goods, Europe had the highest exposure to
increased competition from Asia in general, and China in particular, over the last three
decades. In conjunction with the extremely unfavourable currency conditions seen between
2002 and 2008 when the euro gained some 50% against the Asian currencies in real terms,
this competition ate away at the low value-added and low-technology industries that
continued to characterise various sectors of European activity. With the exception of Germany
which has been protected by a particularly high degree of specialisation in the capital
equipment sector which has accounted for half of the growth in global demand for
manufactured products in the 10 years leading up to the crisis, Europe has been heavily hit by
this situation. Since the beginning of the nineties, the portion of GDP contributed by industry
has decreased by between 5% and over 10%, depending on the country, while per-capita
growth in the value-added of the industrial sector has collapsed across the board.
While the most diversified economies have been able to partly compensate for these losses
through the development of services or through construction, particularly during the 15 years
of exuberant growth in the financial sector, Europe s structural growth potential has
substantially declined since the beginning of the 1980s, a trend that has become even more
worrying after the financial crisis, when the possibility of compensating these industrial losses
through tertiary activities looks to be largely compromised. This has understandably led to
growing pessimism over the outlook for Europe, as is reflected almost daily in downbeat
economic forecasts.
Chinese market share in global exports of manufactured goods, % in dollars
Source: SG Cross Asset Research
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 7
Contribution of the manufacturing industry to GDP, current prices in %
Contribution of finance and corporate services to GDP, current prices, %
Source: SG Cross Asset Research
However, the change in China’s influence on the international scene could be strong
enough to pull European industry away from a trajectory that has up until now been
considered unavoidable. After more than two decades of industrial decay during which the
developed countries came to rely on a single services sector as their main source of value
creation, the changes that are currently under way on the international scene are overturning
the established order.
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 8
China: from an export machine to a consumption machine
The development of
Chinese consumption has
absorbed all the efforts of
the ruling class since the
crisis erupted with
implications that are so
profound that they are
difficult to anticipate. With
the Chinese economy being
ripe for such a change,
economic policy momentum
is producing rapid and
spectacular effects on many
levels. Thus the Chinese
automotive market, barely
the size of the French
market 10 years ago, is now
nine times larger than the French market, and growing at a rate of more than 19 million
vehicles per annum, according to the latest figures. Today, the world’s largest automotive
market, China looks set to become the largest market for an increasingly large range of
products.
This new environment is already having very significant effects on the global climate.
According to our estimates, growth in consumer spending in emerging countries exceeded
the level recorded by the developed countries by 40% in 2010, with Chinese consumer
demand alone estimated to have equalled that of the US in terms of contributions to global
consumption growth.
Breakdown of global consumption in 2010, current $ Contribution to annual consumption growth in constant $ of 2008
Source: SG Cross Asset Research
Unsurprisingly, in this hierarchy we are once again struck by the export performance of the
European countries over the last 24 months of economic recovery, during which exports to
Otheradvanced
EMU
USA
Jap.
Brazil
India
China
Other EM
250
50
150
350
550
750
950
1150
1990 1995 2000 2005 2010
650
China
otherEM
USA
otherindus.
475
Car registrations
Source: SG Cross Asset Research
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 9
China have constituted the biggest almost the sole contributor to export growth in the
eurozone.
Extra EMU export breakdown of the eurozone
Source: SG Cross Asset Research
Chinese middle class set to double by 2015 Despite the progress already made, this rebalancing of Chinese consumption is probably still
only in its early stages. The increase in revenues, combined with relentless urbanisation and
major changes in the demographic structure of the country in recent years, has led to a
considerable rise in the Chinese middle class, and all indications suggest that this trend will
accelerate over the coming years (see report by Wei Hao Prosperity for the Proletariat or
Inflation for the Nation , published in October 2010).
Investigations on the subject carried out by the major research institutes mostly indicate a rise
to around 500 to 650 million people by 2020/25. However, with the definition of middle class
varying quite considerably, and verging on fantasy in some cases, we have tried to define the
income threshold at which changes in consumer behaviour become most marked. The
analysis we have carried out on the annual surveys conducted by the Chinese national bureau
of statistics (NBS) suggests that the most significant changes occurred when per-capita
income exceeded 16,000/18,000 yuan p.a. in 2008, which is equal to $2,450-2,650 at present.
When expressed in terms of purchasing power parity, based on an exchange rate of
3.8 yuan/USD in 2008 according to the IMF, this threshold equates to income of $4,200-4,700.
In 2008, 40% of the Chinese population fell into this category, characterised by average
disposable income of 27,000 yuan and average consumption expenditure of 17,900 yuan,
which is respectively 72% and 60% higher than the urban population as a whole. The
difference in the behaviour of the middle income category, compared with the low-
income population, is considerable, both in terms of savings and consumption.
The middle classes account for 75% of Chinese household savings… The propensity to save is much higher among the more well-off segments of the population,
than among the lower income categories, with the apparent savings rate ranging from less
than 5%, among the poorest urban households, to more than 38% for the wealthiest 10%.
Thus a large part of the steady rise in the Chinese household savings rate over recent years
can be explained by changes in demographic structure and the improvement in living
standards.
…and 60% of urban consumer spending Consumer spending patterns vary significantly across the different revenue brackets. Above
the threshold that we consider to be middle class, the level of household equipment
ownership (e.g. refrigerator, colour television, telephone, etc.) is generally 50% higher than for
the lower income categories. Meanwhile, vehicle ownership is 30 times higher and air
conditioning/heating system ownership is 8 to 10 times higher, etc. (see overleaf). Aside from
the changes highlighted by the analysis of mass expenditure studies which essentially point to
a reduction in the proportion of the household budget devoted to food, in favour of transport
and telecommunications, the growth of the middle class has brought about a
considerable increase, as well as diversification, in demand for consumer goods and
services, which is fundamentally changing the needs of the Chinese economy and the
way in which it functions.
Breakdown of consumer spending for the less well-off urban households (1st decile) - 2008
Breakdown of consumer spending for the wealthiest 40% of urban households - 2008
Source: SG Cross Asset Research
Food48%
Clothing9%
Residence12%
HouseholdFacil ities,Articles andServices
4%
Health CareandMedicalServices
7%
TransportandCommunication
s8%
Education,CultureandRecreationServices
9%
MiscellaneousGoods andServices
3%
Food34%
Clothing10%
Residence10%
HouseholdFacil ities, Articles
and Services7%
Health Care andMedical Services
7%
TransportandCommunications
15%
Education,CultureandRecreationServices13%
MiscellaneousGoods andServices
4%
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 11
Urban households’ per capita living expenditure breakdown by income group relative to average, in yuan (bars) and as % of total expenditure (RHS)
Source: SG Cross Asset Research
4,533 6,195 7,99410,345
13,31717,888
26,982
0
5000
10000
15000
20000
25000
30000
Firstdecile Seconddecile
secondquintile
Third quintile Fourthquintile
Ninth decile Tenth decile
Total consumptionexpenditure,yuan
0
20
40
60
2000
4000
6000
8000Food
0
5
10
15
0
500
1000
1500
2000
2500Clothing
0
5
10
15
0
1000
2000Residence
0
2
4
6
8
0
1000
2000HH facilities, articles and services
0
5
10
0
1000
2000Health care andmedical services
0
5
10
15
20
0
500
1000
1500
2000
2500Transport& communication
0
5
10
15
20
0
1000
2000Education, culture, recreational
This chart is based on survey results published by the Chinese National Statistics Bureau showing the breakdown of household spending by income group. The x axis shows average per capita spending for the entire population while the bars show the breakdown by income category. For example, transport & communication spending averages 1,358 yuan per capita per year for urban households as a whole, 424 yuan for the 10% lowest income category and 3,959 yuan for the wealthiest 10%. The right hand scale shows the percentage of total household spending represented by each item for each income group, amounting to respectively 8% (lowest income group) and 18%(highest) in the transport & communication example.
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 12
A middle class of four hundred million consumers by 2015 Based on the revenue growth projections and the expected development of the urban
population (from 600 million today to 700 million in 2015, assuming an inflexion in the
urbanisation trend in line with current government objectives), the middle class population is
expected to grow considerably over the next few years. According to our estimates, this
category will double between now and 2015, from 180-210 million people in 2008, to 380-
420 million. It is therefore expected to account for more than 60% of the urban
population within five years.
Annual growth in disposable income/cap, % Urban population repartition by income levels, 2008 and 2015 projections
Source: SG Cross Asset Research The above chart shows the estimated proportion of the middle class as a % of overall urban population. The shift to the right of the crossing point between the different areas and the grey line (between lower income population and middle class indicates the increasing share of the middle class.
Sharp rise in demand The implications of these anticipated developments are considerable.
Increase in savings capacity First and foremost the Chinese household savings rate should continue to be driven up by the
progression of an increasing proportion of the population towards the categories that have a
Breakdown of savings and consumer spending by income bracket – 2008-2015
Source: SG Cross Asset Research
Doubling of consumption, tripling of demand for household equipment Nevertheless, the most significant impact these changes are expected to have is on consumer
demand. Assuming expenditure remains constant in relation to standard of living, we estimate
that urban consumption would grow by 80% to 100% in real terms between now and 2015.
The increase will however be a lot more significant in certain specific categories of goods. The
progression of an increasing proportion of the population towards the levels of revenues that
correspond to the middle class should in particular lead to a considerable increase in demand
for household equipment, with our estimates suggesting an increase of 140% to 180% per
head, which corresponds to a potential increase of 180-220% on a national level. While
growth in expenditure on clothing, healthcare, education and leisure looks likely to be less
spectacular, at around 50-80% per head based on our preferred scenario, it nevertheless still
looks set to grow by 80-100% overall by 2015. Finally, while the food sector and transport and
communications look likely to see the least growth, they should nevertheless still record
increases of 70% and c. 50% respectively, based on current prices.
Growth in revenues and consumer spending of the urban population per capita and in total between 2008 and 2015, % Projections based on the SG central scenario* Risk scenario
Source: * see SG Monthly Country Notes – Staggered Policy Exits; SG Cross Asset Research
0
20000
40000
60000
80000
100000
120000
140000
2008 2015 2008 2015
10th dec.
9th dec.
4thQ.
3rdQ.
2ndQ.
2nd dec.
1stdec.
Savings
Consumption
0 50 100 150 200 250
Average Disposable income
Total Consumption Expenditures (yuan)
Food
Clothing
Residence
Household Facilities, Articles and…
Of which DurableConsumer Goods
Health Care andMedical Services
Transportand Communications
Education, Culture and Recreation…
Population
Ofwhich urban
Per cap.
Total urban
%
0 50 100 150 200 250
Average Disposable income
Total Consumption Expenditures (yuan)
Food
Clothing
Residence
Household Facil ities, Articles and…
Of which DurableConsumer Goods
Health Care andMedical Services
Transportand Communications
Education, Culture and Recreation…
Population
Ofwhich urban
Per cap.
Total urban
%
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 14
Auto… market set to double in size by 2020 As living standards have improved, the Chinese auto market
has enjoyed spectacular growth in recent years. At 19 million
vehicles, it has become the world s largest market in less than
10 years, and is now significantly larger than the American or
European markets. However, despite this growth, the market
is still a lot smaller than can be envisaged long term. With a
fleet of 125 million vehicles, according to our estimates, or a
vehicle ownership rate of 70 for every 1,000 inhabitants, the
Chinese market is still well away from achieving a level that
can be considered as the start of standardisation. By
comparison, having been at a similar level as China today in
the early 1990s, vehicle ownership in South Korea and Brazil
had risen to 250 and 200 respectively per 1000 inhabitants by
2007.
If we assume that the increase in the vehicle ownership rate
observed over the last 10 years were to continue to 2020, an
assumption that is probably over-conservative, the number of
vehicles for every 1000 inhabitants would reach 170, which
implies a doubling in the market (260 million) and corresponds
to average annual growth of 18 million vehicles, a level already
achieved in 2010. Under a more optimistic scenario that
extends the trend seen over the last five years, the Chinese
automotive market would exceed 300 million by 2020, to
reach a vehicle ownership rate of 270/1000.
Change in vehicle ownership rate
Source: SG Cross Asset Research
Chinese capacity is far from being developed enough to cope
with this explosion in demand. While capacity was believed to
be in excess prior to the crisis, the recent acceleration in sales
leaves no doubt: the existing and planned production capacity
cannot match the anticipated demand. In 2009 the OECD
estimated that the sector would be 45% short of the required
capacity by 2015.
Emerging market demand now represents the auto
market’s only growth source
The rapid development of car sales in the emerging market
represents a genuine growth opportunity for the entire auto
sector. In the medium term, with the outlook for the mature
markets being as it is, growth will depend mainly on the
development of new markets, justifying the production and
commercial capacity that is being established in the emerging
markets by the major auto manufacturers.
Already in 2010, 53% of light passenger vehicle sales were
generated outside of the mature countries, compared with
38% in 2006. The portion represented by China stands at
24%, compared with 10% five years ago. Based on 7%
growth per annum over 2010-2020, with more buoyant growth
of 10% per annum over 2011-2015, the emerging markets
should account for close to two-thirds of global demand by
2020, with China representing 35%, well ahead of North
America (17%) and western Europe (20%).
Growth is being driven by the emerging markets – sales registered by the European automotive market, 000s
Source: SG Cross Asset Research
If we take a closer look we can see that the luxury market,
driven by the development of the middle classes, is likely to
remain stronger. The portion of total sales represented by the
luxury car segment remains low in comparison to mature
countries, and the catch-up effect is likely to continue. In
China for example, the luxury car market accounts for around
5% of the total, compared with 15% to 20% in the rest of the
world. A partial catch-up would justify growth more than 50%
higher than the level realised by the auto market as a whole in
the medium term, with the German manufacturers remaining
products) represent the best solution for increasing milk
consumption. Danone s development potential is very strong.
Based on its experience with Bright Dairy, the group started
out in the Shanghai and Canton regions. Bio is positioned in
the health niche (publication of a clinical study showing the
benefits of Bio for women suffering from constipation); while
it is estimated that 70% of Chinese people suffer from
digestive problems. Through its R&D centre in Shanghai, the
first to be opened by the group in Asia, Danone s researchers
are adapting the products to local tastes. The Bio range
therefore includes a variety of different flavours vanilla, nut,
aloe vera, etc and is altering the way in which yoghurt is
eaten in China, i.e. with a spoon, as opposed to with a straw
which is how it is traditionally consumed in the country. Bio is
the most dynamic brand in the digestive comfort segment,
which by itself accounts for 30% of the market, thanks to
considerable investment in advertising.
Danone has also expanded its presence in clinical nutrition,
its fourth business. The group has begun with enteral feeding
systems (nutrition delivered directly into the stock via a tube,
48% market share). The group s teams are working in close
partnership with the scientific community and the medical
profession to respond to consumer needs in this domain.
There is little doubt that Danone will continue to achieve
strong growth in this market.
Joseline Gaudino (33) 1 42 13 84 32
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 19
China is losing grip – the unprecedented level of competition of the past decades has now gone
These changes are nothing new. We have ourselves largely anticipated them and detailed
their potential consequences for global consumption in the medium term. What is new is the
speed at which this transition is taking place. There is no doubt that neither China nor all of the
Asian countries combined would have the capacity to respond to such an increase in demand
at the rate at which it is taking shape. The faster the improvement in the standard of living, the
higher consumer demand is for quality and the higher the appetite is for branded products.
Thus the additional Chinese demand, which we had previously expected to be of limited
benefit to the developed nations, offers new opportunities based on the current
conditions.
From international hyper-competition to an asymmetrical demand shock Refocusing of Chinese manufacturers on their own market With a thriving domestic economy, Chinese companies no longer need to look beyond their
own borders to grow and seem to have already started to refocus on the home market. In
order to prevent bottlenecks the Chinese government has also recently eliminated a certain
number of export subsidies that were previously granted to companies. Their capacity to
conquer new market share in the developed countries has also gradually eroded as a result of
the increase in production costs and the rising quality requirements set by western
consumers. The period in which each new day brought consumers the world over a host
of new low priced products to replace their existing ones has now gone, and with it the
hyper-competitive conditions that came to characterise the last two decades.
The boom in Chinese demand seems to have already triggered a significant reduction in
international competitive pressure on European companies, a trend reflected both in the
export markets and on the domestic market.
EU 27 export prices of manufactured goods, indices EU 27 import prices of manufactured products by origin
Source: SG Cross Asset Research
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 20
Thus, not only did global trade of manufactured products become tight between 2005 and
2008, but also, in spite of the impact of the crisis on demand, prices returned to their upward
trend very soon after the crisis. In this respect, the recovery in EU27 import prices of
manufactured products, regardless of whether they were of American, Japanese or Chinese
origin, is quite surprising. Another unexpected trend is the price increases implemented by
exporters on most of their markets, notably the Chinese market, which indicates a very
marked recovery in pricing power.
China’s grip has already weakened, and so too has the extraordinary level of
competitiveness that has characterised the global trade environment for the last 20
years. This constitutes an unexpected opportunity for European industry which still
accounts for a large portion of global manufacturing capacity.
European industry: a good deal has survived! In 2009 the eurozone still represented 35% of global manufactured goods exports. Europe as
a whole, including the Scandinavian countries and the UK, supplied up to 40% of international
demand.
Breakdown of the global manufactured goods market, 2009, %
Source: SG Cross Asset Research
Regardless of the business sector, eurozone manufacturers still hold prominent positions in all
regions in terms of world trade, representing:
More than 30% of global exports of industrial equipment, a sector that itself accounts for
more than 50% of global trade in manufactured goods;
More than 50% of the global chemicals market the weight of which was equal to more
than a sixth of all manufacturing exports in 2009;
More than 40% of all international automotive exports and over 35% of the global iron
and steel markets, with each recording considerable rates of expansion;
Others: 9.9
Brazil: 0.8Russia: 0.8
India: 1.4
ChinaMainland: 14.9
Hong Kong: 4.0
Jap.: 6.7
S. Korea: 4.3Ger.: 12.8
Fra.: 5.1
Ndl: 4.1
Bel.: 3.8Ire.: 1.3
Ita.: 4.5Spa.: 2.1
Por.: 0.4
Fin.: 0.7
Swe.: 1.4Den.: 0.8
UK: 3.4
USA: 10.6
Canada: 2.1
EMU : 34.8%
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 21
25% of global textiles and clothing exports, sectors that have been by far the hardest hit
by increasing competition from new Asian producers since the beginning of the 1980s, in
which the positioning of certain countries, Spain in particular, has nevertheless improved over
recent years.
Thus the European countries could actually be far better positioned than is generally
perceived, to benefit from a new economic order which should bring an increase in
opportunities and a simultaneous easing of competitive pressure, to allow stronger
profitability and a recovery in market share, both at export and in the domestic markets.
Market shares in the main global manufactured products sectors (weight of the sector in terms of global exports of manufactured goods as a % in 2009)
Source: SG Cross Asset Research, EMU5
0%
5%
10%
15%
20%
25%
30%
35%
40%
1995 2000 2005
Machinery & transport eqmt (52%)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1995 2000 2005
Textile (2%)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1995 2000 2005
Clothing (4%)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1995 2000 2005
Auto (10%)
0%5%
10%15%20%25%30%35%40%45%50%55%60%
1995 2000 2005
EMU ow ger.
USA BRICs
Jap. S. Korea
Chemicals (16%)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1995 2000 2005
EMU ow Ger.USA BRICsJap. S. Korea
Iron & steel (3%)
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 22
Seb The Chinese experience from one decade to the next Seb provides a good illustration of the change in the
functioning and influence of the Chinese economy vis-à-vis its
competitors. The small electrical household appliance market
was hit hard by competition from China and the enormous
number of 5 products that swamped the market at the
beginning of the 2000s. In 2003 the group mentioned in its
annual report that the weakness of the dollar had penalised
its competitiveness on the international level and favoured
growth in entry-range products manufactured essentially in
Asia .
Seb: Gross margin and $/€ trends
Sources: Seb, Datastream
Various companies found different ways of dealing with this
new competition. Most American and some European
companies chose to outsource their production and negotiate
with the Chinese manufacturers for their finished products. By
contrast, Seb decided to concentrate on the core and
upmarket segments where innovation rather than price is the
differentiating factor. Nevertheless the group was still forced
to conduct a major restructuring programme in its
manufacturing activities. Between 2002 and 2009, Seb
devoted 65m in revenues p.a. to restructuring or asset
depreciation.
This policy enabled the group to retain a large proportion of
its production in Europe (40% of total production) based on
highly satisfactory profitability conditions (the Rumilly
production unit manufactures 40 million saucepans, frying
pans and casserole dishes each year). This European
production aspect allows the group to stand out in the
industry as the last of the Mohicans as its chairman, Thierry
de la Tour d Artaise, likes to say.
Seb nevertheless also reinforced its presence in China when
the opportunity arose. The acquisition of Supor, negotiated in
August 2006 and finalised in August 2007, ranks as one of the
group s major transforming deals, alongside Rowenta, Arno,
Moulinex and All Clad. The Chinese cookware company has
market leading positions in the local small electric household
appliance market (no.4 in 2007, no.2 today) and has seen its
revenues triple since 2007. Supor still offers various synergies
as the Chinese middle class develops, generating new
consumer needs.
Seb: production capacity by region
Source: SG Cross Asset Research
Currently the second most important market in terms of
revenues (13% behind France which accounts for 19%),
China will most probably become the group s largest market
before long. Small electric household appliance penetration is
still very low in China, at 10 times lower than the level
observed in the developed countries. In China and in the
emerging markets in general, the sector is on the verge of a
very strong surge in development, similar to that seen in the
developed countries in the 1960s (growth of 11% p.a. in the
French market between 1959 and 1973). The Chinese small
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
38.0%
39.0%
40.0%
41.0%
42.0%
43.0%
44.0%
45.0%
46.0%
Gross margin $/€
Sourced products; 30%
Europe; 40%
China; 20%
SouthAmerica; 8% US; 2%
Sales of small household electricals, France
Source: INSEE
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
-1000
-500
0
500
1000
1500
2000
1959 1966 1973 1980 1987 1994 2001 2008
Consumption: small hhold elecs (€m in € 2000 terms), LH scale% change, RH scale
+5% p.a.+3% p.a.+11% p.a.
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 23
electrical household appliance market currently consists of
rice cookers, pressure cookers and soya milk extractors but,
with Seb s help, Supor is gradually expanding its offering into
kettles and blenders, and hopes in time to introduce irons and
vacuum cleaners.
The development of the Chinese subsidiary has led the group
to invest heavily in its production capacity. We estimate that
the group has invested around 60m in its production sites in
China and effectively doubled its production capacity. By
2012 the Chinese production sites should have reached a
capacity of 70 million units (vs 100 million for the European
sites), which means that the proportion of total production
represented by China (currently 20%) is expected to steadily
grow.
Aside from the period in which the company was rocked by
emerging market crisis, Seb stands out for its good record in
terms of underlying EBIT (see graph on next page), having
recorded steady growth of 7.9% p.a. on average, compared
with 6.7% growth at the top-line, between 1995 and 2010. In
our view this growth reflects the group s capacity to generate
value added through innovation regardless of competitive
Simulated weight of China in the exports of the various sectors in 2020*
*Assuming that the rate of export to China and the rest of the world remains unchanged vs the average level observed over 2001-2009 Source: SG Cross Asset Research
0%5%
10%15%20%25%30%35%40%45%50%
Agricultu
re,live
animals,
mea
t,freshfood
Processedfoods,
beveerages,tob
acco
Fuels&chem
icals
Tann
ing,essentialopils,
perfum
es,cosmetics,
soap
s
Leathera
ndleather
good
s,skins,furskin
s
Woo
d,pu
lpofwood,
cork,pap
er,books
Textile
s
Appa
reland
footwear
Basicmaterials,cem
ent,
glass,iro
n&steel,
precious
Machine
ry,electrica
ndelectroniceqmt,nu
clear
reactor
Tran
sport,railw
ay,
aircraft,spacecraft,
ships,boats
Furnitu
re,prefabrica
ted
build
ings
Others
Germany
20202009
0%
5%
10%
15%
20%
25%
30%
Agricultu
re,live
animals,
mea
t,freshfood
Processedfoods,
beveerages,tob
acco
Fuels&chem
icals
Tann
ing,essentialopils,
perfu
mes,cosmetics,
soap
s
Leathera
ndleather
good
s,skins,furskins
Woo
d,pu
lpofwood,
cork,pap
er,books
Textile
s
Appa
reland
footwear
Basicm
aterials,cem
ent,
glass,iro
n&steel,
precious
Machine
ry,electric
and
electroniceqmt,nu
clear
reactor
Tran
sport,railw
ay,
aircraft,spacecraft,
ships,boats
Furnitu
re,prefabrica
ted
build
ings
Others
France
0%2%4%6%8%
10%12%14%
Agricultu
re,live
animals,
mea
t,freshfood
Processedfoods,
beveerages,tob
acco
Fuels&chem
icals
Tann
ing,essentialopils,
perfu
mes,cosmetics,
soap
s
Leathera
ndleather
good
s,skins,furskins
Woo
d,pu
lpofwood,
cork,pap
er,books
Textile
s
Appa
reland
footwear
Basicm
aterials,
cement,
glass,iro
n&steel,
precious
Machine
ry,electric
and
electroniceqmt,nu
clear
reactor
Tran
sport,railw
ay,
aircraft,spacecraft,
ships,boats
Furnitu
re,prefabrica
ted
build
ings
Others
Italy
0%5%
10%15%20%25%30%35%
Agricultu
re,live
animals,
mea
t,freshfood
Processedfoods,
beveerages,tob
acco
Fuels&chem
icals
Tann
ing,essentialopils,
perfu
mes,cosmetics,
soap
s
Leathera
ndleather
good
s,skins,furskins
Woo
d,pu
lpofwood,
cork,pap
er,books
Textile
s
Appa
reland
footwear
Basicm
aterials,
cement,
glass,iro
n&steel,
precious
Machine
ry,electric
and
electroniceqmt,nu
clear
reactor
Tran
sport,railw
ay,
aircraft,spacecraft,
ships,boats
Furnitu
re,prefabrica
ted
build
ings
Others
EMU 6
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 29
Rail equipment: shattered dreams China continues to make substantial investment with the aim of
expanding its rail network from 80,000km in 2008 to 120,000km
by 2020. There are currently many infrastructure projects under
way as well as rail equipment orders (track equipment and
rolling stock). China is favouring its own industries as much as
possible, but awarding some contracts or parts of contracts to
international companies, where it lacks the technological
capability and/or production capacity.
Nearly two years ago in our first report on the rail equipment
sector (“China and environmental concerns: two powerful
growth drivers”), we said that China was likely to constitute a
powerful growth driver for the rail industry. A year ago, we
brought out a new report (“A more cautious stance on the
growth outlook for railway equipment stocks”) in which we
expressed fears that China would not represent the opportunity
it was hoped to be and that it could even constitute a threat in
the medium term. It is still difficult to work out how much of a
risk/opportunity China represents. Although the country’s needs
are immense and it will need to call on western expertise to
some extent (technology, production capacity), it is also
showing a strong desire to compete in the international
markets. Thus CRCC (China Railway Corporation Corp.) and
two major rolling stock manufacturers (CSR and CNR) have won
a number of international contracts in 2009.
Does China still represent an opportunity?
This question is a legitimate one, given that the National
Commission for Development and Reform published a circular
in mid-2009 indicating that “domestic products must be
purchased for the government investment programme, unless
there are no such products available…”. The railways minister
thus indicated that he would be favouring Chinese companies in
the first instance. This explains why the European Chamber of
Commerce in China became alarmed about the contract award
procedures in markets which are in fact reserved for Chinese
companies.
We believe that to a certain extent the products produced by
the companies we cover still enter into the category of products
not available from Chinese suppliers. For example, it would
seem likely that the Chinese could fairly quickly develop air
conditioning systems, a domain in which a number of players
are present (Faiveley, world number one) and which doesn’t
carry an important safety implications. By contrast, developing
a breaking system seems a more distant threat (Faiveley, world
number two), as this feature is critical for safety and the
competition is less dense. Despite everything, this field of
opportunity could become limited fairly quickly.
Call on western companies for internal needs, if necessary
TGV Bombardier, Knorr-Bremse machinery, Vossloh
fastenings… Having imported Japanese and German
technology to develop the first generation of high-speed trains
(CRH2 and CRH3), the Chinese signed a contract with
Bombardier Transport in the autumn of 2009 to develop a new
generation (speed 380km/h), which the Canadian constructor
must split 50/50 with its Chinese partner CSR. Meanwhile,
Knorr-Bremse, Faiveley’s main competitor, won the biggest
contract in its history in 2009, valued at €500m. Finally, Vossloh
signed a contract for the Beijing-Shanghai line (€180m) in June
2009 and a further major contract (€140m) in August 2010,
which attest to the strength of its Chinese positioning.
Investment on the decline?
Regardless of our questions over the appetite (or otherwise) of
the Chinese for western products we also need to bear in mind
the time-line for the Chinese investment programme. We could
see investment peak over the coming years, before starting to
decline (in 2015? towards 2020?) as the investment programme
draws to a close. This explains why the Chinese companies
have already started to prepare for international expansion (in
search of growth sources beyond 2015).
Some investors believe that the Chinese railway companies do
not represent a threat to the western companies on the
international markets because their production capacities will
be saturated by domestic demand. We fear this may be a little
too hasty and we note the involvement of several Chinese
players on a number major projects (see table below).
The two major Chinese rail manufacturers, CSR and CNR, are
very active abroad. Also, it seems significant that Saudi Arabia
didn’t hesitate to place an order for the Mecca underground
with CNR, even though China doesn’t have a reputation for
quality and Saudi Arabia probably doesn’t have the toughest
budget constraints.
No export competition yet on “me too” products
The reluctance of some western manufacturers to produce
products in China for the Chinese market is attributable to the
risk that they might then find themselves competing against
Chinese players who would subsequently produce similar
products on the international markets. We thought that China
could start to export products based on western technology as
early as 2010. However, this did not turn out to be the case.
A more competitive environment in the strategic sectors Chinese industry has considerably improved in recent years as reflected by the almost
systematic progress achieved by Chinese exporters in terms of their level of specialisation in
the high technology sectors, and their simultaneous withdrawal from activities characterised
by a lower technology content. Often considered as strategic, high tech sectors currently
benefit from conditions which support their very rapid development and which are increasingly
preventing foreign companies from penetrating in the energy and transport segments of the
capital goods sector.
Degree of specialisation of Chinese exporters and technology content (*) 1995-2009
(*) The number of asterisks is representative of the technological intensity of each sector based on the CTCI classification Source: SG Cross Asset Research
-15
-10
-5
0
5
10
15
Man
ufac
ture
s
Tele
com
. equ
ipm
ent
Clot
hing
Elec
troni
c dat
a pr
oces
sing a
nd o
ffice
equ
ipm
ent
Mac
hine
ry a
nd tr
ansp
ort e
quip
men
t
Offi
ce a
nd te
leco
m e
quip
men
t
Texti
les
Phar
mac
eutic
als
Food
Auto
mot
ive p
rodu
cts
Iron
and
stee
l
Chem
icals
Inte
grat
ed ci
rcui
ts a
nd e
lect
roni
c com
pone
nts
Tran
spor
t equ
ipm
ent a
nd o
ther
mac
hine
ry
Oth
er M
anuf
actu
res
2009
2000
1992
****
****
****
****
***
** ***
***
***
*** ****
*
EMU6: Top 10 sectors for exports to China (80% of total sales), 2009
Source: SG Cross Asset Research
35%
17%12%
7%
6%
6%
5%
4%3%
3%
2%Machinery, nuclear reactors,boilers, etc
Electrical, electronicequipment
Vehicles other thanrailway, tramway
Optical, photo, technical, medical, etc apparatus
Aircraft, spacecraft, and parts thereof
Plastics and articles thereof
Copper andarticles thereof
Organic chemicals
Pharmaceutical products
Articles of ironor steel
Iron and steel
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 33
The new players are in the consumer goods sector New Chinese demand for consumer goods is huge and the sun that has shone on the best
performing sectors of the last few years now looks likely to shine on the consumer goods
sector. The European companies whose specialisations are more in line with the new
requirements of the Chinese population, namely a middle class looking for quality and
branded goods, look a lot more likely to benefit from the current transition.
In this area, those that look likely to benefit from the surge in Chinese demand are not limited
to just a couple of segments, such as cars and luxury goods. Behind these two major
beneficiaries, a whole range of sectors should see growth over the coming years, including
middle-sized companies in sectors ranging from the small household electrical equipment
discussed earlier in the report (see page 22), to clothing, food and pharmaceuticals, i.e. most
of the sectors of European industry that have suffered over the last two decades.
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 34
Outlooks in terms of growth and profitability are now becoming more mixed European companies are likely to see significant changes in the conditions they encounter on
the Chinese market, depending on their sector of activity. Our analysis had led us to divide the
50 European countries with the greatest exposure to the Chinese market into three categories.
The “protected” group of stocks which includes growth sectors whose activities are
structurally supported by the Chinese demand trend and whose results are less sensitive to
the competitive context. In this group we find companies in the chemicals, metals and utilities
sectors, for which the outlook in terms of earnings growth on the Chinese market remains very
solid, with profitability set to remain the same as that generated in other markets. The luxury
companies and the top-of-the-range auto markets also benefit from very solid growth
prospects and from the protection that their branding brings in terms of pricing power. By
contrast the profitability they generate in the Chinese market is higher than in their domestic
markets. The majority of these sectors are already trading at relatively high levels which may
be justified, but it implies limited additional upside.
The “exposed” group, made up of companies whose golden era of Chinese
development is probably now over, i.e. companies that are facing the emergence of new
competitors in all sectors that are considered strategic by the Chinese authorities. This group
consists of the capital goods, transport – rail transport in particular – aerospace and
renewable energies sectors, but also cement. Although the demand outlook for these sectors
remains relatively solid in the short term, thanks to the exceptionally strong growth in demand,
the competitive context is weighing on their profitability outlook, both on the Chinese market
and internationally where the major Chinese players have now become formidable rivals.
These sectors are generally overvalued and are likely to derate towards their historical
averages.
Positioning of European companies relative to the new China landscape (*) PROTECTED AT RISK
Structural growth in demand and low exposure to competition Strong demand growth but increasing exposure to competition % rev. 2010 % rev. 2015 % rev. 2010 % rev. 2015
Automobiles BMW 12% 15% Communications Equip. Ericsson 7% 8%
Source: (*) Among the 50 companies the most exposed to the Chinese market according to their 2010 revenue origin as defined in Emerging markets, the benefit for small & mid-
Gains should be more evenly balanced between the different sectors and European countries
Estimating the potential gains to be derived from the change in the influence of the Chinese
economy on the European economies would be very hazardous at this stage. Nevertheless
this report draws a number of conclusions:
Easing competition. The competitive pressure exerted by China on the low and medium
value-added segments of European industry over the last 10 years have eased considerably
since the mid-2000s and even more since the financial crisis of 2008, notably due to the
emergence of a new source of demand.
Real exchange rate adjustment. From this perspective, the recent rise in inflation in the
emerging Asian countries constitutes a relatively encouraging trend for Europe and to a
certain extent: the longer the inflation differential lasts, the more significant the rebalancing will
be in terms of real exchange rates and therefore competitiveness.
Rotation in demand. Having mainly focused on capital goods and transport, the demands
of the Chinese economy is gradually likely to shift, as the middle classes expand, towards
consumer/household products. By 2015 real consumer spending is expected to double
spending on cars and household equipment could triple, while spending on clothing or
pharmaceuticals will probably rise by more than 50%.
Opportunities. Given what has been observed over the last 10 years, the predominance of
European industry in the global export of manufactured products and the positioning of
European industry across the broader field of consumer segments, the Chinese market seems
to offer considerable development potential for European exporters. The chances of seeing
China rise to become the leading export market for every European country by 2020 are very
high.
More evenly balanced gains between European countries The range of companies that
can be expected to benefit from this environment now seems a lot wider than in the past. In
this context, the advantage enjoyed by Germany as a result of its high degree of specialisation
in the capital goods, transport and telecommunications sectors could gradually fade.
Meanwhile, other European economies should see their relative positioning improve.
Support to structural growth. These changes in the environment are encouraging for
European growth in the medium term. In the present context of great uncertainty over the
future of the monetary union, even a modest improvement in the region s growth potential
should not be ignored. The improvement in potential growth is in reality the only hope Europe
has to dispel its sovereign issues in the long run and to reduce the growth distortions that
currently exist between the various countries of the eurozone, which is ultimately what is
needed for the European monetary union to be preserved.
Over the last two decades few occasions have given rise to hopes of a structural consolidation
of growth in Europe. The conclusions of this report are undeniably welcome. According to our
estimates, annual structural growth in the eurozone could be boosted by a contribution of
between 0.25 points and 0.40 points from China over the 2010-2020 period. This is quite a
substantial support in proportion to current estimates of potential GDP growth accounting for
between one-sixth and one-third higher than the level of potential growth that is typically
indicated.
By noting the importance of specialisation, our analysis allows us to put into perspective the
disappointment expressed as a result of the EU competitiveness pact which was considered
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 38
by many as an agreement at best. In actual fact, in view of the factors highlighted in this
report, the objectives sought by the advocates of such a pact probably already seem a lot less
imperative than is generally considered.
What are the risks? Having relied heavily on the American economic environment, the outlook for Europe now
largely depends on the economic development which is taking shape on the opposite side of
the planet. This transition significantly alters the risks. In this respect, questions over the future
of Chinese growth in a context of rising inflation are very much a current concern. This
situation justifies the risk scenario presented in this report. We note however that the inflation
risk should not have much of an impact on the expected growth in the Chinese middle class
by 2015. Nevertheless, it is possible that inflation could lead the government to step up its
revenue redistribution policy at some stage. Thus, high inflation over a long period would be
more of a threat in terms of its impact on the breakdown of expenditure or its impact on the
savings trend. Such a scenario could weigh on discretionary household spending, especially
luxury goods. All else being equal, these changes are likely to take time to emerge.
B33374
The new Chinese landscape: a chance for Europe
23 March 2011 39
IMPORTANT DISCLOSURES Air Liquide SG is acting as sole consultation coordinator on Air Liquide's consent solicitation on four bonds.
Air Liquide SG acted as Joint dealer manager of Air liquide's bond exchange offer.
Alstom SG acted as joint bookrunner in Alstom's senior bond issue.
Alstom SG acted as financial advisor to Alstom for the acquisition of Areva T&D.
Alstom SG is a lender to Alstom Group.
Anheuser-Busch InBev SG acted as co-manager of ANHEUSER BUSH IN BEV's HG bond issue.
Anheuser-Busch InBev SG acted as joint bookrunner of Anheuser-Busch Inbev's bond issue (4% 26/04/18 EUR).
Anheuser-Busch InBev SG acted as co-manager of Anheuser-Bush Inbev's senior bond issue
Arkema SG acted as joint bookrunner in Arkema's senior bond issue.
Assic Generali spa SG makes a market in Generali Assicurazione warrants
Danone SG acted as Joint Dealer Manager and Joint Bookrunner in Danone's combined exchange offer and tender offer.
Etam Développement SGSP was managing a liquidity contract on behalf of Etam Developpement
Faurecia SG acted as sole lead manager and sole bookrunner for the placement of Faurecia's shares by One Equity Partner
Faurecia SG was sole bookrunner and sole global coordinator for the placement of Faurecia's shares.
Michelin SG acted as joint lead manager in Michelin's rights issue.
Pernod Ricard SG is acting as Mandated Lead-Arranger and Bookrunner for the financing of the acquisition by Pernod Ricard of Vin & Sprit Group
Peugeot Citroen PSA SG acted as joint bookrunner in PSA Peugeot Citroen's bond issue (4% 28/10/13 EUR & 5% 28/10/16 EUR).
Peugeot Citroen PSA SG is acting as sole lead manager and sole bookrunner for the placement of Faurecia shares by One Equity Partner
Pirelli SG acted as joint bookrunner in Pirelli's bond issue (5.125% 22/02/16 EUR).
Renault SG acted as joint bookrunner in Renault's bond issue (tap) (5.625% 30/06/15 EUR).
Renault SG acted as exclusive financial advisor to Renault in the financial restructuring of Avtovaz.
Rhodia SG holds between 5% and 10% of Rhodia as a result of its trading activites
Rhodia SG holds a 50% stake in Orbeo, a joint-venture active in emissons markets equally owned by Rhodia
Sanofi-Aventis SG is acting as joint bookrunner in Sanofi-Aventis' USD bond issue.
Sanofi-Aventis SG is acting as financial advisor to Sanofi Aventis in its take over of Genzyme and initial mandated lead arranger in the acquisition
credit facility.
Schneider SG acted as Joint Dealer Manager in Schneider's bond tender offer.
Schneider SG acted as financial advisor to Alstom for the acquisition of Areva T&D.
Standard Chartered SG acted as joint bookrunner of Standard Chartered's bond issue.
Total SG provided an opinion to Total as to the fairness of the planned disposal of one of its businesses.
Veolia Environnement SG acted as joint bookrunner of VEOLIA Environnement's bond issue (2021)
Veolia Environnement SG is acting as joint dealer manager of Veolia Environnement's bond exchange offer.
Veolia Environnement SG is acting as financial advisor to CDC for the merger of Transdev with Veolia Transport.
Vestas SG acted as Joint Lead Managers and Bookrunners of Vestas' inaugural bond issue (4.625 23/03/15 EUR).
Vivendi SG will act as joint lead manager and joint bookrunner in Canal + France's potential IPO.
Vivendi SG acted as sole Structuring advisor and Joint Dealer Manager in Vivendi's bond tender offer
Vivendi SG acted as joint bookrunner of Vivendi's senior bond issue (4% 31/03/17 EUR).
Volkswagen (Pref.) SG acted as co bookrunner for Volkswagen's right issue.
SG and its affiliates beneficially own 1% or more of any class of common equity of ING Group, Nokia, Rhodia.
SG or its affiliates act as market maker or liquidity provider in the equities securities of ABB, Adidas, Air Liquide, Alcatel-Lucent, Alstom, Anheuser-Busch InBev,
Assic Generali spa, Atlas Copco, BASF SE, BMW, Beiersdorf, Clariant, Daimler, Danone, Ericsson, Essilor, Gamesa, Hennes & Mauritz, ING Group, Inditex, K&S,
SG or its affiliates expect to receive or intend to seek compensation for investment banking services in the next 3 months from Air Liquide, Alcatel-Lucent, Alstom,
SG or its affiliates have received compensation for investment banking services in the past 12 months from Air Liquide, Alstom, Anheuser-Busch InBev, Arkema,
SG or its affiliates managed or co-managed in the past 12 months a public offering of securities of Alstom, Anheuser-Busch InBev, Arkema, Faurecia, Michelin,
SGAS had a non-investment banking non-securities services client relationship during the past 12 months with ABB, Alcatel-Lucent, Anheuser-Busch InBev,
Arkema, BASF SE, BMW, Daimler, Faurecia, HSBC, ING Group, LVMH, Michelin, Nissan Motor Co, Nokia, Peugeot Citroen PSA, Renault, Rhodia, Rolls-Royce,
SGAS had a non-investment banking securities-related services client relationship during the past 12 months with Assic Generali spa, HSBC, ING Group, Standard
Chartered.
SGAS received compensation for products and services other than investment banking services in the past 12 months from ABB, Alcatel-Lucent, Anheuser-Busch
InBev, Arkema, Assic Generali spa, BASF SE, BMW, Daimler, Faurecia, HSBC, ING Group, LVMH, Michelin, Nissan Motor Co, Nokia, Peugeot Citroen PSA,
SGCIB received compensation for products and services other than investment banking services in the past 12 months from ABB, Air Liquide, Akzo Nobel NV,
Research Associates Lydia Boussour Martin Rose Mehreen Khan Ramzi Berrima
David Tam Samuel Slama
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