【正文】 2023 Deloitte Consulting 24There are a vast disparities between East and West, with most of the economic development taking place in coastal regions. However, the government is increasing its attention to developing the poorer western regions (unit: 12 million US$)10,000 and above4,000 10,0002,000 4,0002,000 and belowShanghaiSICHUANBeijingHUBEILIAONINGGUANGDONGHEBEISHANXISHAANXI JIANGSUANHUIJIANGXIFUJIANYUNNANGANSUHEILONGJIANGJILINXINJIANGSHANDONGNINGXIAQINGHAINEIMENGGUHENANZHEJIANGGUANGXITIBETHAINANHong KongGuangzhouXiamenNingboNanjingDalianQingdaoQinhuangdaoHUNANGUIZHOUHangzhouSource: China Statistical Yearbook 2023Gross Output value rangeProvincial gross outputSocial Political Environment East West Divide169。 2023 Deloitte Consulting 20China is determined on unification but is not likely to take military actions. However, Chen Shuibian’s actions is likely to put further test to China’s patience.TaiwanUSChina? Taiwan Parliament approved on Nov 27 the Referendum Law, which will for the first time provide a legal basis for referenda? President Chen Shuibian said on Dec 4, 2023 that he would keep his pledge not to declare independence or change the island’s official name ? The overwhelming majority of people still favors maintaining the ‘status quo’, but there is now a strong sentiment that the island should be accepted as an independent country with its own identity? China Prime Minister Wen Jiabao met with US President Gee Bush on Dec 9, 2023? China has chosen to respond Taiwan not by a display of force, but by persuading the US to try and curb Chen’s Action? There is a strong desire in China not to play Chen’s chosen game, however it doesn’t mean the new leadership is any less determined than its predecessorsSocial Political Environment MainlandTaiwan Relationship? US pressure and Chinese opposition have forced Chen to back down for plans to hold referendum on the issue of independency from China, however, the introduction of the Referendum Law has added a new element of volatility to Taiwanese political life in the run up to crucial presidential elections? In many areas (. direct crossstrait flight), China publicly emphasizes the independence between political relationship and economic relationship, but China is likely to leverage politics in economic negotiations? US treated China as a partner in the “war against terrorism”, and this overarching framework has facilitated a wideranging improvement in the relationship, which the White House is keen to secure and advance? In this context, Washington has viewed China’s new diplomatic activism in a positive light, notably its role in bringing North Korea to the negotiating table in the form of the sixparty talk? But human rights, IP rights, weapon proliferation and trade issues remain as lingering problems169。 while currency revaluation would raise the price of exports, makes it more difficult to achieve a robust growth to create job opportunitiesEconomic Environment Currency169。 2023 Deloitte Consulting 12Foreign Direct Investment 2023(by industry, Percentage)Foreign Direct Investment 2023 (by country, US$ bn)The investments mainly e from several countries and are directed into several key industriesSource: Ministry of Commerce, PRC Source: Ministry of Commerce, PRCEconomic Environment FDI169。 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 listed on HK and NYSE), in which the State maintains control ? Private panies primary engine of growth in last two decades–Driven by privatization of SOEs, growth of individually/familyowned and foreign funded enterprises (FFEs)–Estimated to be increasing 15%50% per annum–Approx 2 million+ nonstate owned enterprises at end of 2023 2? Initially foreign panies entered the China market primarily through joint ventures due to legal restrictions? Whollyowned foreign subsidiaries growing due to recent relaxation of foreign ownership laws? SOE reform is a government priority – faced with large portfolio of under performing SOEs –51% of SOEs unprofitable in 2023? Accelerated privatization of locallyadministered, small/medium SOEs–Government mandate to “grasp the large [SOEs] and let go the small [SOEs]” 3–Majority of the lossmakers are inefficient small/medium SOEs ? Continued privatization of large, unprofitable SOEs in nonstrategic industries? Government promotion of the private sector to generate jobs economic growth? Increase in foreign joint ventures in the short term as selected industries slowly open to foreign petition? But longer term shift to whollyowned foreign enterprises (based on recent FDI trends) when selected industries bee fully deregulated ? With liberalization of the banking sector, domestic private panies will be able to access much needed funds for growth? Potential difficult listing in near future due to recently announced domestic IPO restrictions and lack of sound regulatory system