【正文】 February 2023Dr. Shane TedjaratiManaging DirectorDeloitte Consulting ChinaChina – An Executive Overview169。 2023 Deloitte Consulting 2“The next 3 to 5 years may represent the most attractive window of opportunity for MNC’s to win in China”McKinsey Research169。 2023 Deloitte Consulting 3Contents1 China Overview Market Trends2 Industry Overview3 Lessons from the Field169。 2023 Deloitte Consulting 4China has expedited economic reform in the past decade, fueling increase in GDP per capital at a rate of over 13% between 1978 to 2023From 1978 when China adopted the Open Door policy, Chinese economy has experienced astonishing growthLaunch of China’s Open Door PolicyBees a member of IMEApplies to join GATTEliminated its dual exchange rateAccepted full convertibility for current account transactionAnnounced an overall restructuring of SOE sectorSubmitted new tariff and services offersConcluded bilateral market access agreement with USAConcluded bilateral market access agreement with EUBees a member of WTOWork in GATT Working group is suspended for two yearsCAGR=%YearRMBFor the first time in history, China’s GDP per capita exceeded US$1000 (year 2023)A Brief HistorySource: China the race to market169。 2023 Deloitte Consulting 5China’s economic growth in 2023 is estimated to be %, outpacing the government expectationGDP Grows Trend? 2023 GDP % breakdown: % industry, % agriculture and 33% services ? China’s GDP is expected to grow by % in 2023 and % in 2023? The growth is boosted by an upturn in OECD growth and the continued relocation of manufacturing capacity from highercost locations? Exports will continue to grow by more than 15% a year throughout the forecast period. However, this will still represent a slowdown from the unusually high rate of growth achieved in 2023? Investment growth is likely to slow sharply in 202305 as the PBC seeks to tighten the supply of credit and the government begins to rein in its policy of using publicsector infrastructure spending to boost GDP growthActualThe Economist Intelligence Unit estimates and forecastsSource: The Economist Intelligence Unit (EIU) Note: The data of 2023 is estimated by National Bureau of Statistics of ChinaSustained economic growth is foreseeable, and is forecasted to be between 78%World GDP CAGR (9706)Economic Environment GDP169。 2023 Deloitte Consulting 6As China transitions from a centrallyplanned economy to a market economy, it faces many challenges, leading to major structural changeDrivers of Transition? Accelerated privatization and restructuring of strategically important SOEs focused on operational efficiencies? Liquidation/sell off of distressed assets of small and medium SOEs ? Growth and management initiatives for domestic Chinese panies to pete against increasing number of foreign panies in China ? Entrance of foreign panies in newly deregulated industries, especially in the services sector? Consolidation in deregulated industries where there is overcapacity ? Access to capital will continue to be an issue for SOEs and domestic private panies particularly in the short to medium term ? Increasing acquisition of stateowned and private Chinese panies by foreign entities as foreign ownership laws are relaxed? Improved corporate governance, transparency of information and a stronger regulatory environment to protect investors and private firms will be requiredStructural Changes of the Economy? Accession to WTO has accelerated market deregulation impacting almost every aspect of the economy across industries, creating new challenges and increasing petition ? Key shifts in structure . less state control requires access to capital creating a liquidity crunch? Banking and other macro level changes will occur? Privatization, restructuring and closure of State Owned Enterprises (SOEs) have recently accelerated in response to both market and government pressures ? As a result, the structure of the economy is changing rapidly with the nonstate sector being a more prominent part of the economyEconomic Environment SOE Reform* SOE = State Owned Enterprises169。 2023 Deloitte Consulting 7Joint VenturesThe structure of the business landscape is shifting towards the nonstate, private sectorEvolution/Future View*Increasing economic importance of nonstate sector Gross Domestic ProductCollective CompaniesNonState SectorState SectorPrivate CompaniesPrivate AgricultureDomestic Private CompaniesListed CompaniesCentrally controlled State Controlled Industry Service (Private Companies)State OwnedLocally controlledSharp decline expectedModerate decline expectedStrong growth expectedNo real visibility in trendsWholly Owned Foreign CompModerate growth expected*short to medium term Domestic Private SectorEconomic Environment SOE Reform169。 2023 Deloitte Consulting 8As a government priority, SOE reform policy will focus on profit making in preparing SOEs for the inevitable petition against foreign entrants*Limited publicly available data on the nonstate sector 1 As defined by the Chinese government based on a plex classification system 2 Source: State Economic and Trade Commission3 Per the 1999 4th Plenum DecisionState Sector NonState Sector*? Declining state sector but still represent a relatively large % of GDP –34% decline in number of SOEs as a result of privatizations, mergers and bankruptcies between 19972023–Approx 174,000 SOEs at end of 2023 (5% classified as large1 SOEs)? Most of the large SOEs in strategic industries centrally controlled? Decentralized approach – 90% of SOEs administered by local governments ? “State Controlled” panies refer to publicly listed panies (some