【正文】 rate1Over/Under Valuation against the dollar, %*BigMac IndexThe probability of RMB revaluation in the near term is rather low, as….?China economy is hardly overheating at present, given the CPI inflation rate is only %?Economic policies in China are geared toward fostering conditions that will prevent a rapid rise in the ranks of the unemployed, which could lead to social instability。 2023 Deloitte Consulting 11Foreign investments have been concentrated along the coastal regions of China, particularly in the economic zones of the Yangtze River Delta (YRD) and the Pearl River Delta (PRD)0 – 100100 – 300300 – 500500 – 1,0001,000 – 2,0002,000 – 4,0004,000 – 5,00010,000FDI Total Value(US$ million)Year 2023 Foreign Direct Investment (FDI) by ProvinceHeilongjiangJilinLiaoningHebeiBeijingTianjinInner MongoliaShandongJiangsuShanghaiZhejiangFujianGuangdongGuangxiHainanHunan JiangxiAnhuiHubeiHenanGuizhouYunnanSichuanChongqingGansuNingxiaShaanxiShanxiQinghaiXinjiangTibetEconomic Environment FDI169。 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 2“The next 3 to 5 years may represent the most attractive window of opportunity for MNC’s to win in China”McKinsey Research169。 Dongfeng (DF)。 US and EU turn into bigger partnersImport Will Increase Significantly and A Trade Deficit will Happen in 2023?The import volume will rise with more alignment under WTO?A trade deficit will happen in 2023?China will has a more interactive trade relationship with advanced economies, . US and EUMore Dependence on Global Economy?Problem in Balance Payment of international trade?Face more risks of the world economy fluctuation?Allocate resources to export more capitalincentive and technologyincentive products, instead of laborincentive productsSource: The Economic Intelligence Unit (EIU)Note: 1 US$ = yuan ( Year 1990), Figures for year 0206 are forecast by EIUInternational Trade will Continue to Increase and a Deficit is foreseeable in 2023Chief export markets, 2023% of totalChief import markets, 2023% of totalSource: National Bureau of Statistics of ChinaEconomic Environment International Trade169。 2023 Deloitte Consulting 17Accession to WTO has entailed onerous mitments on China, with gradual but inevitable changesSource: The Economist Intelligence Unit (EIU)。s 100,000 stateowned enterprises (SOEs)? The current call to develop China39。 2023 Deloitte Consulting 26%Source: National Bureau of Statistics, PRC。? Industry integration and FDI exclude the cheap labor? Internal population migration reshape the job market, aggravating unemployment in urban areasChallenges and Threats?Government’s statistics normally neglect the “rural surplus labors” and “early retirees”, which amounts to 14 million in total?Unemployed workforce are rather limited in their skills and knowledge。 also needs to respond to the demands of the many urban dwellers who have bee wealthier as a result of economic reformPresidentHu JinTao (Age: 59)PremierWen Jiabao(Age: 59)Vice PresidentZeng Qinghong(Age: 62)Social Political Environment Chinese LeadershipThe new leaders are expected to continue reforms and international relations in a more aggressive manner than their predecessors169。100€ (Year End)Source: The Economist Intelligence Unit (EIU)。 2023 Deloitte Consulting 10Foreign Direct Investment will continue to be an important driver of economic growthLess Control of FDI After WTO?A gradual opening of previously protected area of the economy in line with WTO mitments will take place?Estimates are that entry into the WTO could bring China $100 billion of new investment annually, pared to $45 billion last year, and add one percentage point to its economic growth?Keep aggressive investment in western regionGovernment Will Still Put Its Hand On?Government state bond refund?Control over important sectors of China economy?New rules and provisions for foreign investment since China entered WTOEconomy Growth Is Acpanied By Increased FDISource: Oxford University Press, EIUNote: Figures for 2023 are forecast by Oxford University Press,0406 are forecasted by EIUEconomic Environment FDI169。 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 foreig