Market Intelligence for China

Market Intelligence
for China
Webinar presentation
April 20, 2011

The White Paper will be available for free downloading at
www.globalintelligence.com after the webinar session.

www.globalintelligence.com

Presenters

•  Ms. Stephanie Tan, GIA
◦  Marketing Manager, Asia-Pacific
◦  Webinar conferencier

•  Ms. Kim Zhu, GIA
◦  Consultant, Shanghai
◦  Webinar presenter

•  Mr. Alexandre Klimis, Global Intelligence Alliance
◦  Analyst, Shanghai
◦  Webinar presenter


Webinar content outline

This contains excerpts from GIA’s Webinar on “Optimizing MI
Deliverables”. To watch the entire webinar, please visit
www.globalintelligence.com or email info@globalintelligence.com.

•  Overview by region
•  Challenges of conducting MI in China
•  Recommended solutions
•  Business cases


Overview by region


Key facts

•  World’s largest population (20%)
•  3rd Largest territory
•  2nd spot in overall billionaire ranking with 10% of earth’s total
•  World’s widest bullet train network (4800km)
•  The second largest airport
•  World’s largest construction market
•  World’s second largest economy (and growing)
•  Second largest manufacturing country
•  World’s largest auto market


China regional overview
China is often divided
into 4 regions
Heilongjiang

Jilin

Xinjiang Liaoning

Inner Mongolia
Beijing

Tianjin
Whole country includes:
Gansu

•  4 municipalities directly
Hebei

Ningxia
Shandong
Shanxi
Qinghai

Shaanxi
Henan Jiangsu
under central gov’t
Shanghai

administration: Shanghai,
Anhui

Tibet Hubei
Chongqing
Sichuan
Jiangxi
Zhejiang
Beijing, Tianjin and Chongqing
Hunan

•  32 provinces
Fujian
Guizhou

Yunnan
Guangdong

•  5 autonomous regions
Guangxi

Hainan •  2 special administrative
Northeast China Region
Eastern China Region
regions: Macao and Hong
Central China Region
Kong
Western China Region


Eastern China
Cradle of China’s history and development, the region has all of the 3 main economic zones
Eastern region makes up 10% of the country's size but home to 30% of total population, and
generates 55% of the country’s GDP.
Bohai Rim (around Beijing)
•  Strong in aviation, logistics and shipping
(world’s busiest airport in Beijing)
Heilongjiang
•  GDP of US$1,036 billion
•  Hub to Korea, Japan and Russia
Jilin

Xinjiang
Beijing
Liaoning
Yangtze River Delta
•  Largest and most sophisticated consumer
Inner Mongolia Tianjin
Gansu
Hebei

Qinghai
Ningxia
Shanxi
Shandong market with strong services
Shaanxi
Henan
Anhui
Jiangsu
Shanghai •  GDP of US$1061 billion
Tibet

Sichuan
Chongqing
Hubei
Zhejiang
•  Home of the development of bullet-train network
Jiangxi

Hunan Fujian
•  Official financial hub of China
Guizhou

Yunnan
Guangdong

Pearl River Delta
Guangxi

Hainan •  First special economic zones: China reform
laboratory
•  GDP of US$781 billion
•  Strategic hub between mainland China, Hong
Average GDP per capita of 3 areas is US$5,213 Kong and Taiwan

China’s Northeast Region
Economic region under development
•  China’s heavy industrial center
•  Still being developed (GDP is only US$456
Heilongjiang
billion)
Jilin

Main industries
Beijing
Liaoning

•  Steel, energy, automotive, shipbuilding, airplane
manufacturing and military equipment
Inner Mongolia
Tianjin
Gansu
Hebei

Qinghai
Ningxia

Shanxi
Shandong manufacturing
Shaanxi
Henan

Anhui
Jiangsu
Shanghai
•  Important production base of agriculture, forestry
Tibet Chongqing
Hubei

Zhejiang
and livestock-breeding.
Sichuan
Jiangxi

Hunan

Future opportunities
Fujian
Guizhou

•  China’s window to the Northeast Asia (Russia, the
Yunnan
Guangxi Guangdong

Hainan
two Koreas and Mongolia)
•  Extension of the Bohai Rim thanks to the new rail
•  Rich natural resources and relatively cheap labor
and land cost.
•  With the new nuclear power plant that will be
constructed starting 2012, infrastructures will
Average GDP per capita of the region is US &2,788 improve

Central China
Heart of China, between booming Eastern China and less developed Western regions

•  Compared to other regions, Central China draws less
attention before 2006
Heilongjiang
•  Government issued “Rise of Center China plan” in 2006
•  Wuhan is most important city in Central China and acts
Jilin
as the economic and transportation center .
Xinjiang Liaoning
Beijing

Main industries
Gansu
Hebei

Ningxia

Qinghai
Shanxi
Shandong
•  Agriculture, mining and raw materials.
Henan Jiangsu
Shaanxi
Shanghai

Anhui

Hubei
Tibet Chongqing
Zhejiang
Sichuan
Jiangxi

Guizhou
Hunan Fujian •  Extension of Eastern China
Yunnan
Guangxi
Guangdong •  The newly built high-speed railway has successfully
narrowed the distance between Wuhan and Guangzhou
Hainan
from 12 hours to 3 hours.
•  The region has been designated as the future power
generator of China and has scheduled 4 nuclear plants,
6 windfarms and a solar energy farm

Average GDP per capita of the region is US &1,936

Western China
•  Makes up 70% of the country's size but home to
Least developed region
only 27% of population and generates around 14%
of total GDP
•  Sichuan province is the largest in terms of
population
Heilongjiang

Main industries
Jilin

•  Automobile and motorcycle manufacturing, mining,
energy and tourism
Xinjiang Liaoning
Beijing


•  Important base of agriculture and livestock
Gansu
Hebei

breeding.
Ningxia
Shandong
Shanxi
Qinghai

Henan Jiangsu
Shaanxi
Shanghai

Anhui
Hubei
Tibet Chongqing
Zhejiang
Sichuan

Hunan
Jiangxi

Fujian
•  Rich land resources
Guizhou

Yunnan
Guangdong
•  Strategic location with borders to 10 countries
Guangxi

•  Attracting a lot of PE investment
Hainan
•  Local government offer preferential policy to attract
foreign investment especially in terms of :
•  Tax
•  Land
•  Mineral resources
Average GDP per capita of the region is US &1,734

Future challenges and events in China (1/2)

•  Government change in 2012:

Each generation of Chinese leader has pursued a specific set of goals:
◦  Mao Zedong: Industrialization
◦  Deng Xiaoping: Open up reform and normalization of diplomacy
◦  Jiang Zemin: Establish market economy and enter WTO
◦  Hu Jintao: modernization
◦  ??? : Rebalancing the country’s development, consolidate the country’s international position
and stabilize the economy

www.globalintelligence.com - page 11

Future challenges and events in China (2/2)

•  Yuan listings and transactions in Hong Kong: first step towards (partial) floatation

So far, investment companies needed :
◦  400 million USD of proven cash flow for a year minimum
◦  A previous investment of 10 million USD in China
◦  OR, 10 previous succesfull investment to setup businesses in China
◦  Each major transaction was subjected to government approval

Yuan listing in Hong Kong will provide opportunities:
◦  RMB liquidity pool for smaller investors to access RMB denominated securities
◦  Potential RMB futures
◦  Easy access for foreign banks installed in Hong Kong but not in Mainland China
◦  More flexible access rules


Challenges of conducting MI in China


The Chinese contradiction

Fast paced and ever changing: Unlike Western countries, China can decide and
implement its programs extremely fast and are hard to track:
•  World expo: budget CNY400Bn and achieved among other things in the time
frame of 5 years, hundreds of new hotels and more than 8 full subway lines with
over a hundred stations
•  High-speed train : 0 km in 2003 and 4800km in 2011 (world’s largest network both
in operation and under construction with another 15000km on the work)

Traditional mindset : At the same time, while the numerous reforms have opened
China to modernity and market economy, decision makers and businessmen alike
have kept a very traditional mentality based on Confucian values. For this reason,
information is not easily publicly disclosed but rather given through a very tight
network of friends (guanxi) within which one needs to be accepted .


Intelligence challenges in APAC:
the challenge of data collection

•  Official information
While official information has been tremendously improved in the last 15 years in China, many organisms publishing
statistics in China still have a hidden agenda that prevents from fully trusting the figures presented.

•  Press
Because of a very strict publication channel involving the government heavily, the press is not always capable of the
same precision and reactivity as one is used in Western countries. As a result, industries relying on fast changes and
immediate information cannot rely on the media for their needs and MI practitioners have to be very careful when
handling these articles

•  Associations
Associations are still under development and mostly provide very basic information to this day. They also lack
independence and means to conduct trustworthy MI on their own sector

•  Internet
As China has a rather lax policy in terms of disclosure, few information is directly available through websites and many
companies do not really bother with maintaing an updated website.


Intelligence challenges in China:
Diversity

•  Diverse situations
at a purely geographic level, China is a mix between jungle, tundra, steppes, deltas,... Each having specific
advantages and inconvenients.

•  Diverse governments
A global market research on China is always a great challenge as each region has its own government and a high
level of independance . The picture is even more blurred by autonomous entities that can be created at each
administrative level (region, municipality, district, county, town,...)

•  Diverse legal systems
On top of the governement mosaic, China is also a mix between its historical and traditional legal system inherited
from the empire and the rise of international standards. Rather than showing a trend towards replacement, both
systems developped on top of each other, making the task of market entrants harder

•  Diverse level of development
While China is rising, the whole country is not developping at the same rate. Municipalities like Shanghai, Beijing or
Hong Kong offer a profile similar to many western metropolis but Islands on the coastline are still deserted and the
West in only starting to industrialize and develop itself in an attemp to catch up with the Eastern coast


Intelligence challenges in China
Time Factors

•  The absence of secondary data requires Cost Factors
increased time (and money) investment in primary
research
•  Need for primary research to gain full
understanding
•  Telephone interviews have limited success with
some Asian cultures so interviews must often be •  Industry experts are part of a very wealthy elite
conducted in person that requires luxurious and thus expensive
treatment.
•  Decision makers can be difficult to access
•  Real estate prices are growing higher and higher
•  Travel to and from interviews can take 1-2 hours and reaching levels similar to major Western cities
each way in many regions or even cities
•  Travel costs may be lower in price but become an
•  Survey techniqes may require large samples due important cost factor due to the frequence of travel
to demographic segmentation required to cover the whole territory

•  More focus groups must be conducted to •  Consultants cannot possibly cover the whole
research the entire market, again due to diversity territory and it is thus necessary to hire a whole
team .to hope gathering relevant data


Recommended solutions


Thank You for Your Attention

For the rest of this
presentation, please visit
www.globalintellgence.com

For additional information about Global
Intelligence Alliance and our services,
please send an email to
info@globalintelligence.com
or visit the GIA website


About GIA


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Global Intelligence Alliance (GIA) was formed in 1995
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