【正文】 y hurdles still remainTotal drug market2023: 15 18 bn US$NonWTO related Chinese walls? Certification and Admission Procedure (State Drug Administration)? Provincial and municipal reimbursement lists? State Economic and Trade Commission permissions/licenses for pharmaceutical retail/wholesales? Price173。and173。Profit173。control173。regulations? Institutional/Legal environment– State news Medicine Examination and Approval Committee– State Pharmaceutical Administration of China (SPAC)– State Drug Administration (SDA)Source: MOTT, State Administration of MedicineImports1,800 foreign invested co39。s in China4,600 Domestic manufacturesMarket growth: 15% .Sales capita: 1215 US$Market by 2023: 60 bn US$40 45%presentation173。CEMS173。xLines40Price pressure in china39。s drug market will increase unrelated to WTO and make it difficult to generate profits? state subsidized health care system? widespread drug over173。prescription? pharmaceutical’s 60% of total health care costs? imported drugs enjoy often higher prices than domestic? but domestic counterfeits are much cheaper? all drug prices are controlled by the state on a provincial/municipal levelStatus? state subsidy173。system will be replaced by a system which includes individual contributions? introduction of import price caps! Benchmark: price of domestic equivalents? or: price in others developing countries lower price ceilings? same applies to drugs manufactured by foreign JV’ sUping new regulationspresentation173。CEMS173。xLines41And the WTO accession will trigger a concentration process in manufacturing and distribution? 6,400 drug manufacturers ? 1,800 Sino173。foreign JV39。s? 4,600 domestic drug manufacturesManufacturing? 16,000 state owned pharmaceutical distributors? 120,000 pharmaceutical retailers? 15,000 hospitals? 80% of drugs sold over hospitals and clinicsDistributionToday? 8 173。 10 larger domestic research based drug manufactures backed by government? Others merge, close or play niche roles in TCM1)? Foreign percentage will further increase (to 70%?)? 40 173。 50 large regional/national distributors will account for 70% of sales? foreign distribution specialists among the main players? regional pharmacy173。chains will develop? percentage of pharmaceutical distribution will increase (to 40%?)Tomorrow1) Traditional Chinese Medicinepresentation173。CEMS173。x42E.Bankingpresentation173。CEMS173。xLines43Financial Institutions under the People’s Bank of ChinaSource: PBOC, . Harner and Company presentation173。CEMS173。xLines44Recent trends: Declining overall volumes of foreign bank loans? The withdrawal of many foreign banks from lending to Chinese borrowers due to perceptions of increased risks and regulatory restrictions? The loss of market to Chinese banks as the market continues to follow a “de173。depolarization” trend? Ongoing restrictions on RMB lending and difficulties in securing stable funding of RMB liabilitiespresentation173。CEMS173。xLines45Trends in Foreign Bank Loan Assets Source: PBOC[US$ bn]presentation173。CEMS173。xLines46What opportunities will the WTO changes bring for foreign institutions?? Immediately upon accession, foreign banks will be able to open accounts and do business in foreign currency with Chinese panies and individuals, without limitation? Within two years of accession, foreign banks will be permitted to conduct local currency business with Chinese corporation? Within five years of accession, foreign banks will be permitted to conduct local currency business with Chinese individuals? With five years of accession, all geographic restrictions will be removed? Upon accession, foreign nonbank finance panies may be established to conduct automobile financing activitiespresentation173。CEMS173。xLines47The following nonWTOrelated developments are expected to take place:? Gradual relaxation of restrictions on Chinese corporations with regard to holding foreign currency (FCY)? Chinese capital market developments, including new or augmented bills, NCD, and bank debenture markets that will help foreign banks manage funding issues? Expansion of PBOC bills rediscount and other refinancing mechanisms? Relaxation or elimination of such restrictive PBOC policies toward foreign banks (as the current requirement to maintain at least 50 percent of liabilities in FCY and the restriction on lending RMB outside of specific Central Bank districts)? Opening of a forward RMB/FCY FX market and interbank FX market? Opening of government bond trading to foreign banks? Further development of financial leasing and financial leasing panies? Establishment of financial group holding panies that will hold insurance, securities, asset management, consumer finance, credit cards, and banking subsidiaries? Opportunities to invest in Chinese banks and consumer finance paniespresentation173。CEMS173。x48F.Securities and Asset Managementpresentation173。CEMS173。xLines49Performance of the Shanghai (SSE) Securities Exchanges (2023) Source: Shanghai Securities News, December 30, 2023[RMB bn]presentation173。CEMS173。xLines50Performance of the Shenzhen (SZE) Securities Exchanges (2023)Source: Shanghai Securities News, December 30, 2023[RMB bn]presentation173。CEMS173。xLines51Development of China’s Domestic Securities Exchanges 1991 2023Source: Shanghai Securities News, December 19, 2023[RMB bn]presentation173。CEMS173。x52G.Insurancespresentation173。CEMS173。xLines53Life and Property Casualty Insurance by Premiums (1999)Source: CIRC quoted in Shanghai Insurance, April 2023[%]presentation173。CEMS173。xLines54[%]China Nonlife Insurance Market Share (1999)Source: CIRC and Industry presentation173。CEMS173。xLines55China Life Insurance Market Share (19