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DOING BUSINESS IN THE PRCHINA Daniel KC Liu Managing Director Dynamic Resources Asia Beijing, DOING BUSINESS IN THE PRCHINA Daniel KC Liu Managing Director Dynamic Resources Asia Beijing, Guangzhou, Hong Kong, Shanghai, Vancouver, Wuhan

SUMMARY OF PRESENTATION (A)Entry Strategy of Enterprises (i) Business Starting Up (ii) Organization Management SUMMARY OF PRESENTATION (A)Entry Strategy of Enterprises (i) Business Starting Up (ii) Organization Management (iii) Business Expansion (iv) Health Check (B)China and its economy (C) Q&A

RAPID GROWTH OF THE COASTAL ZONE Snow Desert / Mountains Industry now upto 1000 RAPID GROWTH OF THE COASTAL ZONE Snow Desert / Mountains Industry now upto 1000 mi inland eg Chengdu Hangzhou/Ningbo is the new garment area Chengdu Beijing • • Tianjin • Suzhou • • Shanghai • Hangzhou/Ningbo Guangzhou • • Hong Kong

STATISTICS China Population Average Age GDP Growth Reserves Income per head Inflation Savings rate STATISTICS China Population Average Age GDP Growth Reserves Income per head Inflation Savings rate 1. 4 bn 32 US$2 tn 7. 7% (2013) 7. 5% US$1. 8 tn US$ 6770 (PPP basis) 4. 0% 40%

BUSINESS STARTING UP IN CHINA Options § Representative Office (a lot of restrictions and BUSINESS STARTING UP IN CHINA Options § Representative Office (a lot of restrictions and limitations to business scopes) § WOFE Wholly-owned Foreign Enterprise (Capital Injection, revised regulations wef March 1, 2014) § Joint-Venture § Transition through 3 rd party

ORGANIZATION MANAGEMENT § Finance – funding, project finance, investment, taxation, compliance, etc. § Operations ORGANIZATION MANAGEMENT § Finance – funding, project finance, investment, taxation, compliance, etc. § Operations – System, Policy, Rules & Regulations, Accountabilities, Transparency. § People – Human Capital Costs, Localization, Leadership Development, Succession

BUSINESS EXPANSION Options § § Generic – Geographic Acquisitions – Vertical/Horizontal Partnership – Overseas/Local BUSINESS EXPANSION Options § § Generic – Geographic Acquisitions – Vertical/Horizontal Partnership – Overseas/Local Franchise

HEALTH CHECK § Have legal entity & correct Licenses & Permits § Infrastructure, Systems, HEALTH CHECK § Have legal entity & correct Licenses & Permits § Infrastructure, Systems, Procedures, Ground Rules § People: Talents Acquisition, Development Transparency Reward System § Career & Succession Management § Costs: Human Capital, Social Liabilities, Taxes § Image: Branding, Marketing, Networking § Ethical, Compliance, Governance § Risk Management & Business Contingency

CHINA 2009 - 2013 • • • Growth 7/8%! 270 m class buying luxury CHINA 2009 - 2013 • • • Growth 7/8%! 270 m class buying luxury goods; cars etc Reconstruction of Sichuan Building 40000 km of Roads; 19800 km of Railway Permitting Exporters to start to sell internally China/SEA Trade – US$650 bn Large labor supply – Urban More Industrial Parks – taxbreaks, rent free setup High Tech & Bio Parks – half market rentals

CHINA 2009 - 2013 Suzhou wins the 2014 Lee Kuan Yew World City Prize CHINA 2009 - 2013 Suzhou wins the 2014 Lee Kuan Yew World City Prize The city of Suzhou in China clinches the biennial Lee Kuan Yew World City Prize for balancing sustainable economic development with cultural conservation, showing cities in China and other developing countries that urban challenges can be addressed responsibly.

CHINA 2009 - 2013 30 Nuclear Plants by 2020 (11 built) (Tech mostly from CHINA 2009 - 2013 30 Nuclear Plants by 2020 (11 built) (Tech mostly from France which generates 70% elec from nuclear, and worlds safest) Waste Water Treatment Plants – US$42 bn Energy saving technologies in China saw consumption drop - Steel: -6. 49 % - Construction material producers: -7. 84% - Chemicals: -5. 17% - Power companies: -2. 57 % Reducing VAT (17%)rebates (13%) on low tech/high energy manufacturing eg Steel Pipe 0%; S/S Housewares 5%;

SALARIES IN CHINA Management, Sales & Marketing, Manufacturing HONG KONG (7. 8) HK$ Annual SALARIES IN CHINA Management, Sales & Marketing, Manufacturing HONG KONG (7. 8) HK$ Annual SHANGHAI (6. 2) RMB Annual Gen Mgr – Country (sales focus) 10+yrs Reg Sales Dir 10/15 Reg Sales Mgr 8/10 1. 3 M- 2 M 1 M – 1. 4 M 715 K – 1. 1 M 800 K – 1. 5 M 600 K – 800 K 250 K – 700 K Marketing Dir 10/15 Marketing Mgr 8/10 825 K – 1. 1 M 715 K – 880 K 600 K – 1. 2 M 300 K – 1 M Tech Sales Mgr 5+ Manufact Dir 8/10 Manufact Mgr 5/10 Engineering Dir 10+ Engineering Mgr 4+ 495 K – 990 K 880 K – 1. 32 M 770 K – 880 K – 1. 1 M 660 K – 770 K 230 K – 400 K 500 K – 900 K 300 K – 500 K 320 K – 450 K 200 K – 400 K

SALARIES IN CHINA Manufacturing & Industrial HONG KONG SHANGHAI Gen Manager Asia (Regional) 10+yrs SALARIES IN CHINA Manufacturing & Industrial HONG KONG SHANGHAI Gen Manager Asia (Regional) 10+yrs HK$ Annual (7. 8) 1. 5 M – 2 M RMB Annual (6. 2) 1. 5 M – 2 M Hd of Procurement 10+ Purchasing Mgr 8+ 920 K – 1. 7 M 575 K – 978 K 450 K – 500 K 250 K – 350 K Reg Quality Dir 10/15 920 M – 1. 38 M 600 K – 800 K Ops Director 8/15 Plant Manager 10/15 Logistics Director 15+ Logistics Mgr 7/10 Supply Chain Mgr 8+ 880 K – 1. 32 M 920 K – 1. 38 M 575 K – 920 K – 1. 38 M 400 K – 700 K 500 K – 800 K 200 K – 350 K 250 K – 500 K

SALARIES IN CHINA Accounting & Finance HONG KONG HK$ Annual (7. 8) SHANGHAI RMB SALARIES IN CHINA Accounting & Finance HONG KONG HK$ Annual (7. 8) SHANGHAI RMB Annual (6. 2) CFO Small Firm 15+yrs Med/Lge Firm 15+ 1. 5 M – 1. 8 M 1. 6 M – 3 M+ 600 K – 800 K 900 K – 2 M Regional Finance Director Small Firm 12+ Med/Lge Firm 13+ 900 K – 1. 2 M 1. 1 M – 1. 8 M 550 K – 700 K 650 K – 850 K Regional Financial Controller Small Firm 12+ 600 K – 800 K Med/Lge Firm 13+ 800 K – 1. 2 M 350 K – 450 K 500 K – 800 K Finance / Accounting Manager Small Firm 8+ 350 K – 450 K Med/Lge Firm 8+ 450 K – 600 K 150 K – 200 K – 350 K

HONG KONG vs SHANGHAI HK Population Profits Tax Office Rents Salaries (see slides) Hotels HONG KONG vs SHANGHAI HK Population Profits Tax Office Rents Salaries (see slides) Hotels Housing Co Set Up Manuf Incentives Duty Free Zones Major Ports Major Intl Airport Currency Dble Tax Agts Air Cargo Hub Stock Mkt Skill / Education Base SHA 6. 8 m 17% 100% 10 days Minimal Yes HK Yes Convertible China, Limited as lo–tax) Yes US$1. 8 tn 25 m 25% 33% 50 – 75% 70% 33% 40 days Many N/A SHA & Ningbo Yes Non Convertible USA, UK, EU, HK Entrepreneurs Professionals Commercial Industrialists Engineers Skilled Labour Yes US$1. 7 tn

Hong Kong § § § § Western legal system, robust More expensive than a Hong Kong § § § § Western legal system, robust More expensive than a lot of China cities More efficient than a lot of China cities Duty Free HK base provides access to S China & HK have Double Tax Agreement CEPA (Closer Economic Partnership Agreement)

Shanghai § § § § Chinese legal system Cheaper than HK Less efficient than Shanghai § § § § Chinese legal system Cheaper than HK Less efficient than HK Alternative of Ningbo (Cheaper than SHA!) Free Trade Zone (Duty Free Zone: Wai Gao Qiao) SHA/Ningbo base provides access to Central China & HK have Double Tax Agreement Road & Air (Rail is more efficient)

MINIMUM MONTHLY WAGES MALAYSIA HONG KONG SHANGHAI GUANGZHOU/BEIJING RM HK$ RMB 900/800 5, 280 MINIMUM MONTHLY WAGES MALAYSIA HONG KONG SHANGHAI GUANGZHOU/BEIJING RM HK$ RMB 900/800 5, 280 1, 820 1, 560 676 293 Conversion to USD 280/248 251

DYNAMIC RESOURCES Executive Search & Selection Service Organization Development Consulting Business Management Consultancy DYNAMIC RESOURCES Executive Search & Selection Service Organization Development Consulting Business Management Consultancy

Company Profile Company Profile

Company Profile Company Profile

Dynamic Resources Consultants The Pan Pacific Region (Beijing/Guangzhou/Hong Kong/Shanghai/Vancouver/Wuhan) n n n n Consulting Dynamic Resources Consultants The Pan Pacific Region (Beijing/Guangzhou/Hong Kong/Shanghai/Vancouver/Wuhan) n n n n Consulting Director Managing Consultant Senior Consultant Associate Consultant Researcher Admin/IT/Finance/Counsel Total: 5 8 10 15 8 15 4 65

DYNAMIC RESOURCES Executive Search & Selection Service Organization Development Consulting Business Management Consultancy DYNAMIC RESOURCES Executive Search & Selection Service Organization Development Consulting Business Management Consultancy