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Information on doing business in Kong Kong, presented at the International Trade Fair on 12/7/12

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Advantages of partnering with Hong Kong

Hong Kong:Helping Manage Opportunities and Challenges in ChinaBridget Lee, Director, ChicagoMcHenry, ILLINOISDecember 7, 2012

All eyes are still on China! Heres why:Annual GDP growth at 10.5% over 10 yearsAnnual trade growth at 21.1% over 10 yearsMassive annual FDI: US$105 billion (2010)Worlds 2nd largest economyThe China Opportunity

No longer just a production base:Growing middle class 300 millionProjected urban population 350 million more by 2025 Domestic consumption on the rise (18.4% growth in 2010) *According to a March 2009 report by McKinsey Global InstituteThe China Opportunity

Growing consumer market More than 900 million mobile phone usersMore than 457 million internet usersGrowing demand for imported wine average of 63% p.a. (2006 to 2010)Largest car market in the worldOne of the worlds largest luxury goods markets100 million Chinese tourists expected by 2020Growing rural consumer marketThe China Opportunity

Industry moving up the value chain Upgrading industrial processes8.4 million Mainland Private Enterprises (end of 2010) Growing demand for business services and technologies R&D expenditure increased by average of 22.8% per year from 2003 to 2010The China Opportunity

Focus on technology in Chinas 11th Five Year Programme

Hong Kong: a natural hub for technology flows to and from Chinese mainland

Hong Kong: a technology trade centre with the right location, right economy, and right people

Hong Kong AdvantagesTechnology Marketplace

Hong Kong AdvantagesTechnology MarketplaceLocationSituated next to Pearl River Delta, where 30% of Chinas high-tech production takes place

EconomyCommercially sophisticated technology platform with excellent project financing and fundraising options

PeopleWell-educated talent pool dedicated to the pursuit of innovation and technology

Hong Kong AdvantagesCEPAOne country, two systems Closer Economic Partnership Arrangement (CEPA)

Acts as a free trade agreement with the mainland

WTO-plus market access for service providers

Tariff-free access to the mainland for products

Overseas companies can easily benefit!

Hong Kong AdvantagesTechnology MarketplaceHong Kong industries technology strengths:InnovationCommercialisationApplicationIndustrial engineering

Hong Kong AdvantagesTechnology MarketplaceHK companies are engaged in different kinds of technology transfer:Sharing of proprietary know-how for system integration and software developmentEngineering servicesProviding consultancy

Hong Kong AdvantagesTechnology MarketplaceFast Facts:HKs total high tech exports exceed US$130 billion per year (2007)4,600+ HK companies undertaking R&D activities16,000 companies engaged in innovation activities

Hong Kong AdvantagesTechnology MarketplaceThe China factor

Growing demand for advanced technologies in manufacturing and management

Seeking advanced technology to meet new environmental standards

Chinese technology companies eager to explore international markets

Hong Kong a partner for foreign technology companies

Hong Kong AdvantagesTechnology MarketplaceMain driver of technology transfer in PRDThe most advanced technology comes from foreign companies using Hong Kong as a baseHong Kong Shenzhen Technology Alliance

Hong Kong Advantages:Technology MarketplaceSourcing and selling high-tech products

Hong Kong offers: International experience in technology trade Experience in selling to Chinese mainland markets Strong IP protection Funding and finance options Preferential treatment on goods under CEPA

Pacific Bridge InitiativeUS-Hong Kong Business Partnership Program Hong Kong: www.hktdc.com/pacificbridgeFind Opportunities in China & AsiaHKTDC Integrated Marketing PlatformFind the Right Partner via HKTDC Business MatchingITA Certified HKTDC Tradeshows

U.S. Partners: USDOC USEAC/ Commercial Service State Agencies - STEP Grant Funding USDA ATO FAS Hong KongUSDOC CS Hong KongTrade Associations

Creating opportunities in international tradeHong Kong Trade Development CouncilProviding InformationMatchingBusinessPartnersConnecting Customers

HKTDCProviding Information11 offices in Chinese mainland, more than 40 worldwideBeijingHong KongFrankfurtTokyoNew YorkBangkokDubai

HKTDCProviding InformationResearch publicationsAnalysis on topical issues and specific industriesExcellent sources for developing business models

HKTDCProviding InformationSubscribe for free at www.hktdc.com

Matching Business PartnersConnect with 120,000+ quality suppliersNearly 1 million registered buyerswww.hktdc.comProduct Magazines:15 titles from a variety of industriesWorldwide readership of 5 million annuallyHKTDC

Matching Business PartnersHKTDC Business MatchingA customized service tailored to your business needsHKTDC

HKTDC30+ International Trade FairsConnecting Buyers and Sellers through:Ten of the largest fairs in AsiaThree of the largest fairs in the world

Bridget Lee, DirectorTel:1 (312) 726 4515 Email: bridget.lee@hktdc.orgChicago Office

***In a globalised world, all economies will inevitably be affected by the global turmoil, and China and Hong Kong are not excluded.However, China has been relatively less affected, and most agree that it has led Asia out of further depression.

So China is still a major focus for the business world. Why is the whole world so captivated by the China story?

Annual Growth Rate 10.5% over last 10 years (2001-2010) this is unprecedented in world history. And the long-term outlook on China is good. In the first nine months of 2011, Chinas GDP grew by 9.4%.Why? Firstly, on the external economy, China is transforming its manufacturing as well as export structure, by expanding along the value-added chain.They are moving from assembly of imported parts to the production of higher value-added parts and accessories. Such development can be evidenced by (a) the rising share of electronic products in Chinas exports, (b) China turning from a net importer to net exporter in certain key electronic components, (c) and more foreign companies setting up R&D centres in China.

Secondly, domestically, China has a huge population. As the general income level continues to rise, this is turning into a huge consumer market. One of Chinas policy directions is to have more growth stimulated by domestic demand, and domestic consumption will therefore continue to grow ata faster pace.

Total trade growth average 21.1% over the last 10 years (2001-2010). ~ While Chinas exports are certainly affected by a sharp slowdown in overseas demand, forceful fiscal and monetary stimulus policies can cushion the external shock, i.e. creating effective demand to sustain output growth. Expanding bank loans is vital to sustain investment growth and China has the means to orchestrate that.

33 years ago, in 1978, China was ranked 28th in world trade. It is now the worlds 2nd largest economy.

**In the past, China was a base for production. Now, its a market for consumer goods especially branded consumer goods.

Chinese people are earning more. They want to raise their standard of living.Despite global woes, domestic consumption is still growing. Chinas domestic retail sales of consumer goods went up 15.5% in 2009 and 18.4% in 2010 in nominal terms. Continued growth in disposable income has contributed to the steady increase in retail sales. In the first nine months of 2011, retail sales grew by 17%Middle class of over 300 million & growing steadily according to a recent Deloitte report. (This is more than the entire population of Japan!). The Deloitte report also estimates that if China's GDP continues to grow by 8-9% annually, the size of middle class population can grow by as fast as 15-20% every year. (Definition of middle class = families with an annual household income of US$10,000, according to a definition by Deloitte. )

** With increasing wealth, Chinese consumers have more money to spend on the latest gadgets and technology.

There were 906 million mobile phone subscribers as at June of 2011. This is more than eight times that of Germany, which has an estimated 110 mn mobile phone subscriber base.China had some 457 million internet users, as of end 2010. This represents a rise of 73 million compared to end 2009, or a 19% increase. China became the largest car market according to the China Association of Automobile Manufacturers. As at June 2009, sales of 6.1 million automobiles, surpassed that of the US and of course Germany, representing a growth of 17.7% from the year earlier. In 2010, total sales of automobiles grew by 32% to 18 million. In the first nine months of 2011, sales of automobiles grew by 3.6% to 13.6 millionAccording to a report released in Feb 2011 by HK-based investment bank CLSA Asia-Pacific Markets, mainland consumers will snap up 44 per cent of luxury goods sold in the world by 2020, up from 15 percent in 2010. This growth momentum, driven by rising personal incomes, social aspirations and more stores on the mainland, means a compound annual growth rate of 23 per cent in the current decade. And the Chinese are travelling more prediction 100 million Chinese travelling abroad by 2020.

(Starting from Feb 2009, China has implemented the electrical household products for rural areas project, subsidizing rural households to buy electrical household products in the coming four years. The project is projected to stimulate consumption by Rmb 920 billion.)

*Rising number of MPEs mean there is a growing demand for business services and technologies especially in the PRD. Chinese Government is determined to upgrade the countrys manufacturing i