羅蘭貝格關(guān)于中國(guó)加入WTO的分析報(bào)告

presentation-CEMS-xStrategicImpactofChina’sentryintotheWTO

OnChineseandForeignCompanies

PresentationforCEMSUniversitiesinSt.Gallen,Stockholm,Bergen,MilanoNovember,2001presentation-CEMS-xContent PageA. ThemacroeconomicimpactofChina’sWTOentry 3B. Automotive 11C. Apparel&Textile 22D. Pharmaceuticals 36E. Banking 42F. SecuritiesandAssetManagement 48G. Insurances 52presentation-CEMS-xA.

ThemacroeconomicimpactofChina’sWTOentrypresentation-CEMS-xAlreadythetariffshavecomedownconsiderablyinthelastdecadebuttheystilldifferstronglybetweenindustriesWeightedaveragetariffratesofmanufacturedproductsWeightedaveragetariffswithandwithoutWTOaccessionSource:WorldBank,1999OilseedsMeat&livestockDairyOtherfoodBeverages&tobaccoTextilesApparelWood&paperPetrochemicalsMetalsAutomobilesOthermanu.Totalmanu.TotalWithoutWithpresentation-CEMS-xTheimpactofChina’sWTOentryhasamacroeconomicaswellasindustry-specificmicroeconomicimpactMeasuresTariffreductionsAbolishmentofnon-tariffbarriersQuotas(imp./exp.)LicensesLocalcontentrequirementsDistributionrestrictionsInvestmentrestrictionsetc.IntroductionoflegalprotectionCopyrightsAuti-dumpingMicroeconomicimpactMorecompetitorsPricepressureNewsourcingstrategies,lowerfactorcostMoreproductvarietyIncreasingproductivity,restructuringConcentrationprocessinsomeindustriesMacroeconomicimpactMoreimport&exportAcceleratedgrowthofGDPAcceleratedgrowthofincome(EDP/cap.)andwealth/capMoreforeigninvestmentEmploymentincrease/decreaseStructuralchangetowardsmorecompetitivenesspresentation-CEMS-xTradingshorttermpainagainstlongtermgainisawalkonthewireShorttermpainLongtermgainSource:Dev.&Res.Ctr.OftheStateConnect,GoldmanBuck,WorldBankCorporateprofits(ROI)Employ-

mentSocialcapitalGDPWealthTradeForeignInvestment(direct)Price&qualitycompetitionDecreaseofprofitmarginsIncreaseinbankruptcies1%additionalgrowthp.a.34%until2010Highlossoflabor/jobsinsomeindustries(e.g.agriculture,automotive),butnewjobscreatedinotherindustries(e.g.apparel)IncreaseofskilledlaborRural-urbandiscrepancyinwealthandincome(+4.6%p.a./2.1%p.a.)1.15%additionalGDP/capp.a.60%ofpopulation>6000USDincomeby20101.7%additionalexportgrowthp.a.1.3%additionalimportgrowthp.a.50bnannuallypresentation-CEMS-xThemacroeconomicimpactofChina’saccessiontotheWTOwillbeespeciallystronginapparel,automobilesandelectronicsSomecategoriesasexampleWithoutaccessionWithaccessionWithoutaccessionWithaccessionWithoutaccessionWithaccessionFoodgrainsOtheragricultureBeverages/tobaccoExtractiveindustriesTextilesWearingapparelPetrochemicalsMetalsAutomobilesElectronicsUtilitiesTrade/transportTotal13.119.654.667.5910.376.874.715.191.802.562.512.383.1818.3014.716.8611.6513.238.577.108.423.474.413.643.494.9518.1014.444.4511.2513.7518.406.687.951.054.663.533.434.820.302.302.491.688.1919.522.543.370.134.965.851.703.700.180.740.860.168.3418.232.814.850.457.685.012.434.580.200.790.880.2010.1743.953.225.930.779.485.742.706.345.872.590.851.4913.140.973.914.111.853.481.121.893.2115.7415.830.974.605.081.724.921.652.274.7515.278.7314.427.8722.3007.425.601.412.056.14Table10.Output,ExportsandImportsasaShareoftheWorldEconomyOutputExportsImports199520051995200519952005Source:,WorldBankanalysis2000presentation-CEMS-xWithsomedramaticconsequencesforemployment(1)Source:WorldBankandDev.Res.Ctr.oftheStateCouncilEmploymentofskilledlaborgrowth:1995~2005FoodgrainsMeat&livestockBeverages/tobaccoExtractiveindustriesWearingapparelWithoutaccessiontoWTOWithaccessiontoWTO29.1130.2569.8265.29-32.852.8860.5562.95116.460.21MetalsAutomobilesElectronicsOthermanufacturesBusiness/finance23.0426.5550.5936.5439.9142.1825.5224.8-48.1148.07presentation-CEMS-xWithsomedramaticconsequencesforemployment(2)Source:WorldBank,1999Jobslost/newlycreated(inm)CommerceApparel&TextileCoHonWheatRiceAutomotivepresentation-CEMS-xElect.mediatelecomMediapublishers1)FastmovingconsumergoodsHIGHMEDIUMLOWLowHighLowHighDegreeofglobalizationProtectionistbarrierstodayConstructionPharmaceuticalsConsumerelectronics/durablesBrandedFMCG1)(e.g.Coke)ApparelAutomotiveAgriculturalproductsTrans-portationCommoditysteelProtectionistbarriersTariffsin%QuotalicensesInvestmentrestrictions

-equity

-regionalDegreeofglobalizationMarketshareofglobalbrandsProductionrelocationcostsin

%oftotalturnoverDomesticcompaniesinglobalindustrieswhichenjoyedhighprotectionwillsuffermostImpactpresentation-CEMS-xB.

Automotivepresentation-CEMS-xIntheyear2010ChinawillbethelargesttruckmarketinAsiaandpassengercardemandwillhavegrownto1.6mcars200020042009200020042009hipricemidpricelowprice+10%p.a.+14%p.a.6409601,650150150250+0%p.a.+10%p.a.heavymediumlightSource:DaimlerChrysler,RBPassumptions1302105004306501,00080100150PassengercarsTruckspresentation-CEMS-xSource:ChinaPassengerCarProspect2001,

RolandBergerStrategyConsultantsSantana1)Jetta1)

Totalsalesvolumebyuser,2000GovernmentcarsBusinesscarsPrivatecarsTaxiTaxiBusinesscarsPrivatecars1):SantanaandJettamakeupfor50%ofpassengercarsin2000In%oftotalIn%oftotalPrivatebuyersarebecomingtheultimatemarketdriverpresentation-CEMS-xThecontractedcutsindutiesandofnon-tariffbarriersareconsiderableReductionoftariffsAbolishmentofnon-tariffbarriersImmediateincreaseofimportquotasto6bnUS$,growing+15%p.auntileliminationin2005AbolishmentofspecialtaxesandlicensesystemforimportedcarsAbolishmentof“index”systemandanyrestrictionsinpreductpolicy(type,categorymodel)twoyearsafteraccessionAbolishmentoflocalcontentrestrictionsAbolishmentofanyrestrictionstooperateanownsalesandmaintenancenetworkfrom2003onwardsAbolishmentofforeignownershiprestrictionsandvaluelevelforautomotiveJV’stobeapprovedwillincreasefrom30milUS$to150milUS$Introductionoffinancingoptions,e.g.leasing,operatedbyforeignnon-bankinstitutionsunderChineseregulationsuponaccessionSource:US-ChamberofCommerceCar-manufacturersComponentsuppliers010304050602%001000002030405060110%presentation-CEMS-xAfurtherdecreaseofcarpricesispredictable1002004008001,6003,2001001502002501993199419951996199719982003Price

[RMB‘000]Until2003pricewillbebelowRMB80,0002000=120,000RMBCumulatedProductionSource:RBcalculation,VolkswagenproductionfiguresVolume

[‘000]Example:VW-SantanaGLSSlope19%presentation-CEMS-xSmallscaleproductionisamayorreasonforthelowefficiencyandprofitabilityofChinascarmanufactures1997199819992000VWSantanaVWSantana231TAICDaihatsu100VWJetta76Chongqing

Suzuki

50Dongfeng

Citroen40OthersBuick

20Guangzhou

Honda10Source:ChinaInfobankMarketshareofcarmanufactures1999[productionin1000units]504030494035550MarketShare%presentation-CEMS-xTAICCharade2000NanyaPalioYunqueChanganLingyangChangheQinchuanZhonghuaChanganAltoTAICCharadeGeelyHaoqingRetailprice[1,000RMB]Engine[l]MiniStandard(Economy)Lower-mediumHigh-end1.82.02.53.0QinchuanXiaofuxinExistingmodelsandnewlaunches,2001Source:RolandBergerStrategyConsultantsUpper-

medium:Newlaunches ExistingmodelThisdevelopmenttrendhasbeenanticipatedbycarmakersthroughnewproductlaunches

BMW3seriesSAWBluebirdBrillianceZhonghuaHondaAccord2.0VWAudiA6TurboVWPassatCitroenPicassoMazdaPremacyVWSantana2000CitroenEMVWBoraVWJettaRenaultScenicDingoFordIkonVWSantanaGLGMSailSAICCherryYuejinEncore/uniqueVWPoloCitroenDCKIAPrideToyotaVitzGeelyToyotaPlatzFAWRedFlagGMBuickHondaAccordVWAudiA6presentation-CEMS-xInstalledcapacityanditsenlargementforpassengercar[1’000units]InstalledCapacityProduction(2000)Utilization(%)PlannedEnlargement(yr)

ModelSantanaPassatPoloJettaAudiA6BoraCitroenAltoAccordBuickSail(compactcar)Vitz/YarisDaihatsuCharadePremacy(minivan)IkonCherokeeGeelyCherryEncore/UniquePalioRedFlagBMW3or5seriesZhonghuaVWPeugjeotSuzukiHondaGMToyotaMazdaFordDaimllerChryslerJiliSAICNanyaFAWBMWBrillianceTotalProductSiteShanghai(SVW)Shanghai(SVW)Shanghai(SVW)Changchun(FAW)Changchun(FAW)Changchun(FAW)WuhanChongqin(CMC)GuangzhouShanghai(SGM)Shanghai(SGM)Tianjin(TAIC)TianjinHainan(FAW)Chongqing(Chang’anMC)BeijingZhejiangAnhuiNanjingChangchunShenyangShenyang300600150300120803010000150--10010060605020030ca.1,44025030090170545330300082--57050130067883%50%-60%57%-45%66%100%30%--55%--5%7%-8%-65%--<50%-40(03)100(02)--50(05)50(02)-20(01)--30(02)-20(04)50(02)--40----+400OEMSource:ChinaAutomotiveIndustryyearbook,AutomotiveIndustryofChinaTheaveragecapacityutilizationisbelow50%,andanadditionalcapacitybuild-upisplannedpresentation-CEMS-x1Forsmallscalecar-manufacturers,itwillbecomeevenhardertoreachthebreak-evenpointunlesstheydonotgainmarketshareTodayandin5years(WTOimpact)Source:RBestimatesCost/revenuesinRMBRevenues(-30-50%)pricedecreaseVariablecost(-20-30%)lowercomponentpricesFixedcost(±

0)UnitsOutput(+50%)LossLoss+5BEPBEP+523principleMarketincrease+50%1)presentation-CEMS-xThecarmanufacturerswillreconsidertheirdistributionandmaintenancenetworkstrategySource:RolandBerger&Partners;DeutscheBaneAlex.Brow.Sales,Leasing,MaintenanceStrategicimplicationsforforeign

carmakersAfterWTO…SalesanddistributioninthesoleresponsibilitypartnerofaChinesefirmNodirectcontactwithcustomersFewinfluenceondistributionandmaintenancepolicyandqualityNocarleasingpossibleForeignfirmsareimmediatelyallowedtoformJVforsales,distributionandmaintenanceoftheirproducts,in2002theycanownamajorityintheJVandin2004allrestrictionswillfallawayOnethirdofcarmakersplanstosetupitsowndealernetwork(e.g.GM,Honda,Suzuki)ordistributionJVwiththeirpartners(e.g.VW)BeforeWTO…Directcustomercontact/influenceBrandingandqualitycontrolMaintenancemarginsInvestmentsExistingcontractsRegionalcoveragepresentation-CEMS-xThecomponentmanufacturersandpartsupplierswillfeelthepressuremostCustomersGrowingdemandExpectmorevarietyAtlowerpricesComponentmanufacturersHavetolowerpricesby10%p.a.IncreasetheirqualitycontrolTrytoincreasescale,valueaddedorcustomerbaseLookforexportmarketsOrseekforinternational/nationalalliancepartnersOrdropoutofmarketIndustryconcentrationof>50%overthenext5~10yearsCarmakersPressureforcostreductionsIntroducenewmodelsReconsiderglobalsourcingPressureforlesssuppliers(modules)CompetitorsNewentriesofglobalsuppliersLowerpricesaggressivelyIncreasequalitypresentation-CEMS-xC.

Apparel&Textilepresentation-CEMS-xTheWTOagreementwillopenthedevelopedmarketstoapparelandtextileimportsfromChinaTariffreductionSuccessiveincreaseofquotauntilabolishmentSafeguardsagainstsuddentradingimbalancesChinalowersaverageimporttariffsfrom25.4to11.7%DevelopedcountrieslowertheirimporttariffsaccordinglyPhasingoutofimportquotasofotherWTO-membersuntil2005PhasingoutofexportquotasofChinaAntidumpingregulationsSafeguardmechanismsincaseofsuddenimbalancespresentation-CEMS-xThequotawillbegraduallyabolishedQuotaabolishmentExplanationSource:-ATC,RolandBergerStrategyConsultantsTimetable-quotaabolishmentStageImplementationdateMinimumintegrationrateAdditionalgrowthrate12341.Jan,19951.Jan,19981.Jan,20021.Jan,200516%17%18%16%25%27%FullintegrationoftextileandapparelquotaIntegrationmeansremovaloftextileandapparelproductsfromquotacoveragethustobeintegratedintotheATC(agreementoftextileandapparel)AdditionalgrowthratereferstotherequirementofATCtoaskWTOmemberstoincreasethequotagrowthrateformajorsupplyingcountries.Themethodologyistoaddanannualadditionalgrowthrateonthehistoricalquotagrowthrate.presentation-CEMS-xSourcingstructureofmajorimportingcountries1999[%]USAEUJapanOthersOthersEasternEuropeEurope(Esp.Turkey)ChinaRestofAsia1)OthersOthersTheAmericasChinaRestofAsia1)RestofAsia1)ChinaEUUSAJapanCAGR96-99+2.1%+10.7%-5.9%Majorimportingcountries/regions1999[%]MajorimportingregionsandsupplierregionsSource:WTO,RolandBergerStrategyConsultants1):HongKongincludedinrestofAsia:EU5.2%;USA7.7%;andJapan0.6%AsiaisthebiggestsupplierforUSandJapan—secondbiggestforEuropepresentation-CEMS-xValueofclothingimportsintoJapan[US$bn]19,67216,72714,69016,367ChinaMarketShareofChina59%63%65%70%Source:WTO,RolandBergerStrategyConsultantsChinahasincreaseditsmarketshareinJapanto70%despiteashrinkingmarketpresentation-CEMS-xBasedonproductioncostChinaiscompetitiveonaglobalscaleCostsofgivenminutesforclothingproduction[$]BasedonasurveyofKSAforamodelproductionsiteincluding…WagesandauxilliarywagesProductivityWorkingdaysandtimeCostsformanagementandadministrationOverheadsCheaperproductioncostthanChinaSource: KSA,RolandBergerStrategyConsultantsAmericaAsiaWesternEurope+MediterreanEasternEuropeU.S. 0.228CostaRica 0.123ElSalvador 0.105DominicanRepublic 0.103Jamaica 0.099Guatemala 0.092Honduras 0.092Mexico 0.091HongKong 0.176Taiwan 0.163Korea 0.136Pakistan 0.104Malaysia 0.102Philippines 0.080SriLanka 0.079Thailand 0.079China 0.079Indonesia 0.078India 0.076Vietnam 0.075Cambodia 0.075Germany 0.358Italy 0.291France 0.262U.K. 0.218Israel 0.188Spain 0.178Greece 0.178Portugal 0.158Turkey 0.117Tunisia 0.099Morocco 0.094Egypt 0.075Slovenia 0.167Poland 0.127Croatia 0.126CzechRepublic 0.121Hungary 0.116Estonia 0.113Lithuania 0.107Slovakia 0.104Latvia 0.097Bulgaria 0.091Romania 0.090Russia 0.086Ukraine 0.082Usbekistan 0.079Moldavia 0.077presentation-CEMS-xVolume,distanceofpriceandgrowthinChinarelativetoaverageofEUimportsSource: RolandBergerStrategyConsultants,CITH,CIRFS,

EuropeanCommissionNote:BubblesizerepresentsmarketsharebyvolumeoftotalEUimportsinthiscategoryRelativeprice

toaverage[%]Relativegrowth

toaverage

[%]TrousersWomen’s

overcoatsWomen’s

suitsMen’sshirtsT-shirtsPulloverWomen’sblousesWomen’sdressesWomen’sskirtsTotalEUimportgrowth

ofselecteditems,CAGR1993-99[%]T-Shirts +9.2%Pullovers +13.5%Trousers +10.5%Men’sshirts +0.7%Women’sblouses +6.2%Women’sovercoats +8.9%Women’sdresses +3.9%Women’sskirts +10.2%Women’ssuits +4.0%HighquotacostinrelationtoproductpriceIntheEU,Chinahasstrongcompetitiveadvantagesinwomen’ssuits,overcoatsandskirtssectorwhilepulloversandT-shirtsaremoreexpensivethantheaveragepresentation-CEMS-xChinahasbasedonitsstrengths—thepotentialtoincreaseitsmarketshareinEuropeKeyfindings“SuppliercountryChina”Source: RolandBergerStrategyConsultantsinterviewsServiceEspeciallytheSouthernpartofChinademonstratesacompetitiveadvantageintermsofReliabilitycomparedtotheAmericasCreativitycomparedtoCentral/EasternEuropeLeadtimeChinaisnaturally(seafreight)facingadisadvantageconcerninglead-timecomparedtotheAmericas(US)andEastern/SouthEurope(EU).Increasingpressureontimetomarketbasedonshortercollection-cyclesisdrivinglesspricesensitivecustomerstoalsouseairfreightDistancetorawmaterialmarketsChinaisexpandingitscompetenceinfabricproductionespeciallyintechnicalfabricsandisthereforebuildingupacompetitiveadvantagetowardsotherAsiancountrieswithoutfabricproductionorpoorfabricproduction(e.g.SriLanka,Cambodia)CostpositionBasedonproductioncostsChinaiscompetitiveonaglobalscale.However,relativehighquota

costsinlow-pricedproductcategoriesandthestrongdollarhavepartlyresultedinashiftinsourcingtotheAmericasandEasternEuropeProductionknowhow/qualityChinaisbroadlyacceptedasacountrywithexcellentproductionknow-howacrossallproductcategorieswithcorecompetenceincoats,suitsandshirts12345presentation-CEMS-xTheimpactoftheWTOagreementdiffersstronglybetweenthedifferentmarketparticipantsTextileManufacturersMoreexportstoChinaIncreasinginvestmentsinChinaFewcompetitiveadvantages(capitalintensive)ApparelManufacturersStrongincreaseinexportstoEurope,USandJapanMorelicenseagreementswithEuropean,USandJapanesebrandandnonbrandapparelmanufacturersandretailfirms(laborintensive)StateTradingFirmsRiskingtoloosetheirquota-sellingbusinessandprofitsHavetodevelopintoregionalagentsortobecomemanufacturersPrivateTradingFirmsIncreasingmarketsharethroughglobalsourcingnetwork,morevalueaddedandbetterclientrelationshipsNewmarketentrantsinChinapresentation-CEMS-xTheadvantageofstate-ownedtradingcompaniesingettingcheaperquotawillgraduallydisappearAdvantageofstate-ownedtradingcompaniesExample-Quotastructureofastate-ownedcompanyImpactsThestate-ownedtradingcompaniescurrentlystillowntheadvantageofgettingquotafromthegovernmentfreeofchargeoratlowercostHavingreliedonthequotaprotectionforalongtimeofperiod,mostofthestate-ownedtradingcompanieshaven’testablishedenoughcompetitivenessforafreemarketcompetitionThederegulationistheabsolutetrendandstate-ownedcompanieswillgraduallylosetheiradvantagesinquotaacquisitionAfterChina’saccessiontotheWTO,theabolishmentofquotawillpushthestate-ownedtradingcompaniesintoaveryunfavorablesituationFreequotaCheaperquotaMarketpricequotaProfitcontributionfromsubsidizedquota:US$20mExamplepresentation-CEMS-xApparelexportisstillthemostimportantbusinessofOIEintermsofsalesandprofitcontributionSource：OIE,RolandBergerStrategyConsultants1)IncludingHolding,Minhang,Baihe,Gaonan,apparelbusinessofRongheng,Pudong2)Jiada+Jingmao 3)IncludingHolding,RonghengSalesstructurebybusiness2000[US$m]Operatingprofitstructurebybusiness2000[US$m]Apparel1)exportLogistics2)forwardingPharmaceu-ticalexportTextile3)exportOthersTotal252.962.326.424.913.066.7%16.4%7.0%6.6%3.3%379.3Apparel1)exportLogistics2)forwardingPharmaceuticalexportTextile3)exportOthersTotal11.176.3%Example-0.314.5presentation-CEMS-xTakingintoaccounttheupcomingmarketliberalization,OIEwillloserapidlyitscompetitiveadvantagebasedongovernmentalprotectionAssessmentofcompetitivenessBusinessMarketsharedevelopmentProfitability/costpositionGovernmentalprotectionBusinessmodelsMatchofcorecompetenceandsuccessfactorsOverallassessmentApparelexportPhar.ExportTextileexportLogisticsforwarding(sea)Logisticsforwarding(air)HighMediumLowSource: RolandBergerStrategyConsultantspresentation-CEMS-xTheapparelbusinesswillneedtoimproveitsprofitabilityconsiderablytooffsetthelossofthequotabusinessAdjustmentofreportedprofitofapparelbusinessbasedon“Economicprofit”[US$m]ReportedprofitFY2000Eliminationofnon-sustainableprofitsCurrencygainsProfitsprotectedbyquota“Sustainable”netprofitCostofequity“Sustainable”EconomicprofitIIValueofapparelbusinessisdeclining!Source：OIE,RolandBergerStrategyConsultantsIRequirementtoimproveprofitabilitypresentation-CEMS-xTherearetwostrategicoptionsforOIEintheapparelbusiness:“Service-orientedmanufacturer”or“Full-serviceregionalagent”Strategicoptionsinapparelbusiness“Full-serviceregionalagent”“Service-orientedmanufacturer”CustomerfocusForeignretailers(esp.verticalchains)Chineseretailers(privatelabel)BigretailerswithownbuyingofficesLow-mediumadvancedagentsRegionalcoverageofsuppliercountriesforproductioninAsiaNationalcoverage(e.g.SeveralproductionplantsindifferentlaborcostareasofChina)SuppliercountrycoverageAllapparelproductcategoriesandqualitiesFocusonone/fewproductcategoriesand/orqualities

ProductcategoriesServices/competencesSupplychainpartnerwithcorecompetencesinfabricsourcing(worldwide),factorysourcing1)andqualitycontrolAdditionalinnovativeservicesinDesign(owncollection)Productdevelopment(flexibleandquickprototypingthroughownproductioncapacity)Fabricresearch&developmentCore

competences:ProductionQualityassuranceAdditionalservices:

Productdevelopment(patternmaking,prototyping)Fabricsourcing121):Noownproductionsitespresentation-CEMS-xD.

Pharmaceuticalspresentation-CEMS-xChina'sWTOentrywillhaveastrongimpactonthepharmaceuticalsectoranddistributionTariffreductionToday1/2003Non-tariffbarrierabolishmentTradingrights(import)phasinginDistribution/retailrestrictionsphasedoutwithinthreeyearsuponacc.Betterintellectualproperty(brand)protectionTransparency(publicationofregulations)Nationaltreatment(abolishmentoftaxprivileges,fairparticipationinpublictenders4.2%-60%drugsAverage15%-20%10%MedicalequipmentandcrudedrugsSource:Trade/agreementChina-US9.6%presentation-CEMS-xInfacttheconsumerpricesofforeignimporteddrugsareusually90%to100%higherthanthemanufacturingpricemainlyduetoaninefficientdistributionsystemDrug-price-componentsDistributionmarginsin%ofturnover1000100[priceindex]200110120150165193+17%VATManufacturerpriceCustomsClearingchargesdruginspectionDistributionHospitalmark-upVAT25%10-12%3-5%0%10%20%30%ChinaJapanEuropeSource:Interviews,EIU,RB-infocenter16,000distributors/wholesalers200distributors/wholesalers10-20distributors10-20distributorspresentation-CEMS-xThoughthemarketshareofforeigndrugmanufacturersisrelativelyhighmanymarketentryhurdlesstillremainTotaldrugmarket2000:15-18bnUS$Non-WTOrelated"Chinese"wallsCertificationandAdmissionProcedure(StateDrugAdministration)ProvincialandmunicipalreimbursementlistsStateEconomicandTradeCommissionpermissions/licensesforpharmaceuticalretail/wholesalesPrice-and-Profit-control-regulationsInstitutional/LegalenvironmentStatenewsMedicineExaminationandApprovalCommitteeStatePharmaceuticalAdministrationofChina(SPAC)StateDrugAdministration(SDA)Source:MOTT,StateAdministrationofMedicineImports1,800foreigninvestedco'sinChina4,600DomesticmanufacturesMarketgrowth: 15%p.a.Salescapita: 12-15US$Marketby2010: 60bnUS$40-45%presentation-CEMS-xPricepressureinchina'sdrugmarketwillincreaseunrelatedtoWTOandmakeitdifficulttogenerateprofitsstatesubsidizedhealthcaresystemwidespreaddrugover-prescriptionpharmaceutical’s60%oftotalhealthcarecostsimporteddrugsenjoyoftenhigherpricesthandomesticbutdomesticcounterfeitsaremuchcheaperalldrugpricesarecontrolledbythestateonaprovincial/municipallevelStatusstatesubsidy-systemwillbereplacedbyasystemwhichincludesindividualcontributionsintroductionofimportpricecaps!

Benchmark:

priceofdomesticequivalentsor:priceinothersdevelopingcountrieslowerpriceceilingssameappliestodrugsmanufacturedbyforeignJV’sUpcomingnewregulationspresentation-CEMS-xAndtheWTOaccessionwilltriggeraconcentrationprocessinmanufacturinganddistribution6,400drugmanufacturers1,800Sino-foreignJV's4,600domesticdrugmanufacturesManufacturing16,000stateownedpharmaceuticaldistributors120,000pharmaceuticalretailers15,000hospitals80%ofdrugssoldoverhospitalsandclinicsDistributionToday8-10largerdomesticresearchbaseddrugmanufacturesbackedbygovernmentOthersmerge,closeorplaynicherolesinTCM1)Foreignpercentagewillfurtherincrease(to70%?)40-50largeregional/nationaldistributorswillaccountfor70%ofsalesforeigndistributionspecialistsamongthemainplayersregionalpharmacy-chainswilldeveloppercentageofpharmaceuticaldistributionwillincrease(to40%?)Tomorrow1)TraditionalChineseMedicinepresentation-CEMS-xE.

Bankingpresentation-CEMS-xFinancialInstitutionsunderthePeople’sBankofChinaSource:PBOC,S.M.HarnerandCompanypresentation-CEMS-xRecenttrends:DecliningoverallvolumesofforeignbankloansThewithdrawalofmanyforeignbanksfromlendingtoChineseborrowersduetoperceptionsofincreasedrisksandregulatoryrestrictionsThelossofmarkettoChinesebanksasthemarketcontinuestofollowa“de-depolarization”trendOngoingrestrictionsonRMBlendinganddifficultiesinsecuringstablefundingofRMBliabilitiespresentation-CEMS-xTrendsinForeignBankLoanAssetsSource:PBOC[US$bn]presentation-CEMS-xWhatopportunitieswilltheWTOchangesbringforforeigninstitutions?Immediatelyuponaccession,foreignbankswillbeabletoopenaccountsanddobusinessinforeigncurrencywithChinesecompaniesandindividuals,withoutlimitationWithintwoyearsofaccession,foreignbankswillbepermittedtoconductlocalcurrencybusinesswithChinesecorporationWithinfiveyearsofaccession,foreignbankswillbepermittedtoconductlocalcurrencybusinesswithChineseindividualsWithfiveyearsofaccession,allgeographicrestrictionswillberemovedUponaccession,foreignnon-bankfinancecompaniesmaybeestablishedtoconductautomobilefinancingactivitiespresentation-CEMS-xThefollowingnon-WTO-relat