【正文】 nk loans are fundamentally unsound–Currently some 500 to 1000 panies are waiting to be listed on the domestic market? The attractiveness for foreign investment is in MA deals especially in the manufacturing industries (semiconductors, home appliances, machinery etc)? By acquiring or merging with a Chinese pany (which produces parably lowtech products with high growth prospects) some foreign investors have acquired capabilities to run multiple product lines.169。 2023 Deloitte Consulting 25Return on investment in China is real but will likely take a long time for most panies, particularly those that lack deep cultural understanding of the market? Fiction: Success in China requires panies to invest and forego profits today to position for the future? Fact: Success in China requires long term mitment, and the most successful panies demand a mercial returnFDI inflows and profit repatriation in China19912023? In 2023, nearly USD 30 billion in profits were repatriated.? Using accumulated FDI inflows over the previous ten years as a base, this implies a return on investment of around 8%? 2/3 of FDI is aimed at domestic consumers? Many firms are realizing China related profits outside of China? Many firms are learning to leverage China’s capabilities to enhance global performanceProfits are being madeSource: Goldman SachsCommercial Environment Return on China Investment169。 2023 Deloitte Consulting 23Increasing unemployment will bee the burden of local government and may jeopardize social stabilityUnemployment in China Is Expected to Be Severer in The Next Several YearsUnemployment Keeps GrowingThe unemployment rate will increase for 3 reasons? WTO exacerbate the short term unemployment。 2023 Deloitte Consulting 21The ine gap is growing as a result of rapid urban development, and is already causing massive migration of peopleGovernment is Narrowing down The GAP? The Chinese government is relying on individual tax policies to close the ine disparity? Labor mobility helps to reduce regional Ine disparity, this will be the trend in next 10 years? NPC is required to raise the ines of rural and urban workers through the plete implementation of a prehensive social security system? To add more wealthier elite in to the CPC, Party starts to abandon its traditional pillars of support workers and peasants Although personal economy condition is improving, the gap bees wider? Over the last two decades, some 200300 million Chinese have risen above the standard UN definition of absolute poverty (measured by an ine of 1 dollar per day)? To reduce ine disparity, Chinese government pledged to restructure the country39。 2023 Deloitte Consulting 184th Generation of Leaders They have a number of new strengths…? Young and educated? Distrust of dogma? Have tendency to democracy? Have faith in the Reform? Have records of success …they will initiate new reforms…? Continue market liberation? Extend Beijing’s influence? Improve relationship with US? Be more flexible with Taiwan? Speed up political reform…but they face challenges and threats? More plicated international situations and severe internal unrest? Continuous influence from older leaders, and the jostling within the leadership will continue and could possibly trigger political instability? Needs to address discontent among the disadvantaged (. farmers and laidoff workers)。 2023 Deloitte Consulting 16Chinese buying power is undergoing significant increase, fueling consumption of imported and luxury goods in urban areasThe Buying Power is Comparably Low?The growth speed of buying Power in rural area is relatively slow than in city and town?Because the slow increase of ine, the saving motivation strengthened?The total consumption style hasn’t entirely get rid of the pattern which concentrates on survivalBuying Power Keeps Increasing?Government keeps encouraging private consumption?Consume structure will be optimized?The buying power in city and town will keep strong increase in the future 50 yearsBuying Power Needs To Be Directed?How to drive the domestic demand?Pay attention to infrastructure construction and consumption environment improvement?Support to the lowine group Buying Power in Urban Area will Increase Dramatically, while It Keeps Stagnant in Rural AreaUrban area, disposable ineRural area, total expenditureEconomic Environment Buying Power169。vis the euro and the yenUS$165。 2023 Deloitte Consulting 13China’s international trade is steadily increasing, with WTO being an important driver for continued growth International Trade Keeps Increasing?China’s international trade volume has grown steadily in the passed 5 years and an annual trade surplus has been achieved in recent years?The surplus of balance of payment has been decreasing?China has shifted and adjusted its trade partner structure。 China Eastern?Tele: China Tele China Net (CNC) exchange assets and divided into north and south operator?Utility: State Power Corporation (SPC) was broken into 11 panies, including five independent nationwide power generation groups, two power grid panies, and four ancillary service paniesChallenges Facing SOE Reform?Increasing Small Middle SOE Will Bankrupt ? 3050 large and strong enterprise groups will lead markets and participate in international petition? Elimination of different policies between SOEs and other enterprises will remove previous protections?So far, SOE has laid off more than 45 million people, most of this unemployment labor force has difficulty to find new job and result in instability in certain areasSOE Is The Dominating Component in Chinese Industry, while FIE Grows FasterSource: The Economic Intelligence Unit (EIU), National Bureau of Statistics of China Note: The industrial o