Doing Business in China. Tuesday, May 3, :00 PM - 5:15 PM

Transcription

1 Doing Business in China Tuesday, May 3, :00 PM - 5:15 PM

2 The world s second-largest economy China at a glance, 2010 GDP Nominal PPP Growth rate Per capita US$5.745 US$9.872 Value 10.3% US$7,400 trillion trillion Global ranking Industrial Labor force production growth rate Imports Exports Value 780 million 11% US$1.307 US$1.506 trillion trillion Global ranking Source: CIA World Factbook.

3 Ease of Doing Business, 2011 Rankings of 183 economies Economy Singapore Overall Hong Kong United States Australia Japan Mexico China Russian Federation Brazil India Source: Doing Business 2011, World Bank Group. Starting a business Dealing with construction permits Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business

4 Major concerns of U.S. companies in China USCBC member company survey, 2010 Rank Issue 1 Human resource: Talent recruitment and retention 2 Administrative licensing, business and product approvals 3 Competition with state-owned enterprises 4 Intellectual property rights enforcement 5 Cost increases 6 Market access in services 7 Transparency 8 Protectionism risks in China 9 Government procurement 10 Standards and conformity assessment Source: The U.S.-China Business Council.

5 Consuming more. Earning even more. Urban households in China Index (2000 = 100) 300 Per capita disposable income Per capita consumption expenditure Source: National Bureau of Statistics of China.

6 Composition of household consumption, 2009 Urban households in China Health care and personal articles 9.6% Clothing 8.4% Recreation, education and cultural pursuits 9.8% Other 14.0% Transportation and communications 11.2% Food 29.4% Residence 17.5% Source: National Bureau of Statistics of China.

7 Wage growth in FIEs has fallen behind Average wage in urban units, Index (2000 = 100) 350 Total Foreign funded units Units with funds from Hong Kong, Macau and Taiwan Source: National Bureau of Statistics of China.

8 Soaring labor costs are inevitable In April 2011, more than 100 foreign-invested companies in Beijing agreed to offer at least 1.5 times the city s minimum monthly wage of RMB 1,740. In June 2010, Foxconn offered a 66 percent performance-based pay raise to RMB 2,000, following a rash of suicides in its Southern China factory. In June 2010, Honda agreed to increase pay by 24-34% to end a labor strike in Southern China. Source: Jinghua Times, Reuters, New York Times.

9 Services are gaining momentum Contribution to Chinese GDP growth by sector Percent 120 Agriculture Industry Services Sources: National Bureau of Statistics of China, CIA World Factbook.

10 Small enterprises underserved by corporate banks Percent ~5.1 million 770 million RMB 33.5 trillion RMB 34.4 trillion Large enterprises Midsize enterprises Small enterprises 0 Number of enterprises Number employed GDP Bank loans Source: McKinsey Quarterly March 2011.

11 Banking sector dominated by domestic names Top consumer brands in China Rank Bank Country of origin 1 ICBC China 2 China Construction Bank China 3 Bank of China China 4 Agricultural Bank of China China 5 China Merchants Bank China Source: Credit Lyonnais Securities Asia.

12 Beauty and the PC! Top consumer brands in China Beauty PC Rank Brand Country of origin Rank Brand Country of origin 1 Head & Shoulders US 1 Lenovo China 2 Rejoice US 2 IBM US 3 Olay US 3 HP US 4 Maybelline US 4 Dell US 5 Pantene US 5 Apple US Source: Credit Lyonnais Securities Asia.

13 Majority of China s foreign investors are Asia-based Newly approved foreign investment projects by investor region* E.U. 6.5% Other 14.8% U.S. 5.8% E.U. 6.2% Other 7.6% U.S. 8.5% Total: 44,001 Asia 70.2% Total: 27,406 Asia 80.5% * Investment made through free ports was counted by origin region in 2010 but was considered as from other regions in Source: Ministry of Commerce of the People s Republic of China.

14 Cultural and linguistic proximities matter Realized FDI by investor region* Other 38.6% Hong Kong 29.8% Japan 4.0% USA 3.8% South Korea 2.5% Other 14.1% Taiwan 3.6% Singapore 5.4% South Korea 8.6% USA 5.1% Total: US$60 billion Japan 10.8% Singapore 3.7% Taiwan 6.3% Total: US$106 billion Hong Kong 63.8% * Investment made through free ports was counted by origin region in 2010 but was considered as from other regions in Source: Ministry of Commerce of the People s Republic of China.

15 China s FDI inflows has grown in volume US$ billions FDI inflow (L) FDI inflow per capita (R) US$ Source: United Nations Conference on Trade and Development.

16 China s FDI inflows declined in share relative to other BRIC countries Percent 16 Share of Brazil, Russia, and India combined China's share China still ranked no. 2 in the world, but the gap has been widening. 09 Source: United Nations Conference on Trade and Development.

17 Sources of funds for fixed asset investment Percent Self-raising funds and others Domestic loans Foreign investment State budget Source: National Bureau of Statistics of China.

18 Soaring investment in FDI projects While the actual number of projects went down Thousands Approved FDI projects (L) Realized FDI (R) US$ billions Source: Ministry of Commerce of People s Republic of China.

19 Share of total FDI by investment type Percent 100% 80% 60% Realized FDI FDI Projects % 20% 0% Equity joint venture Contractual joint venture Wholly foreignowned enterprise Share company with foreign investment Equity joint venture Contractual joint venture Wholly foreignowned enterprise Share company with foreign investment Source: Ministry of Commerce of People s Republic of China.

20 The world s factory Half of realized FDI went into manufacturing Realized FDI, 2009 Wholesale and retail trades 6.0% Transport, storage and post 2.8% Others 13.9% Leasing and business services 6.8% Real estate 18.7% Total: US$90 billion Manufacturing 51.9% Source: National Bureau of Statistics of China.

21 Government policies on foreign investment Issued by the State Council in April, 2010 Promoting FI in high-end manufacturing, high tech, advanced services, renewable energy, energy conservation and environmental protection sectors. Preferential policies and incentives for target sectors, encouraged projects, and for regional HQs, R&D and other centers. Continued incentives for investment in central and western China. Encouraging FI to participate in and acquire Chinese enterprises through restructuring or M&A. Streamlining regulatory approval procedures for FI. Source: Hong Kong Venture Capital and Private Equity Association.

22 Taxes paid by FIEs grew faster than realized FDI Index (1994 = 100) 4100 Income tax collected from foreign investment enterprises Cumulative realized FDI Sources: Ministry of Commerce, State Administration of Taxation of the People s Republic of China.

23 Business concerns regarding intellectual property USCBC member company survey, 2010 Percent * 40% 35% 30% 25% 20% 15% 10% 5% 0% Patents Trademarks Trade secrets Product Counterfeit technology products Brands Copyrights Software * Percentage of respondents expressing concerns over each type of IPR. Source: The U.S.-China Business Council.

24 Technology transfer High risks, low royalty rates Technology piracy and theft of trade secrets are rampant PRC Regulations on Technology Import and Export Administration An achievement made in improving the technology concerned belongs to the party making the improvement (Article 27) Prohibits contracts from restricting the receiving party from obtaining technology similar to that supplied by the supplying party from other sources or from obtaining a competing technology. (Article 29) No formal rules cap licensing royalty rates, but regulatory practice may set restrictions. Most rates fall around 2-6 percent. Source: China Business Review.

25 Impact on film and cinema growth Number of screens in China 40,000 20,000 5,801 Source: Screen Digest, EntGroup.

26 Impact on film and cinema growth Number of domestic films produced Source: Screen Digest, EntGroup.

27 Impact on film and cinema growth Total China box office US$ millions $3,102 $2,197 $1,512 $640 $915 Source: Screen Digest, EntGroup.