Global business attorney Vinita Bahri-Mehra, in partnership with Ohio Development Services Agency, presented "Growing through China: A Comprehensive Look at Market Opportunities" as a panel discussion on Wednesday, September 17. The panel, which brought together local industry professionals to share best practices for conducting business in China, discussed how the world's second-largest economy is increasingly playing an important and influential role in the global economy.

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2. Legal Strategies for China
September 17, 2014
Vinita Bahri-Mehra

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Key Differences -Overview
Legal
+Business Structures
+Rule of Law
+Intellectual Property Protection
+Contract Enforcement and Negotiations
+Process and Procedures Delays
+Exit Strategies

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Key Legal Strategies for Doing Business in China
+Business structures.
+Contract enforcement and negotiations.
+Understanding nuances in rule of law.
+What should be done to protect one’s IP?
+Are repatriation of investments and profits allowed?
+What law should govern the contract and what mechanism of dispute resolution is preferable?
+Do you have an exit strategy?

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Practical Advice –Identify the ObstaclesThere are some internal barriers that might provide obstacles in doing business or establishing business in China. It is necessary to be cognizant about them in order to be well prepared. For example: Corruption (FCPA) BureaucracyNegotiating style differencesReal Estate –increased cost of doing businessEvolving tax laws

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Things to Ponder
Due Diligence is the KeyKnowledge of Chinese business and legal environment leads to steady growth.

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Legal AdviceThis presentation is designed to provide an overview of a number of legal principles and considerations. As each legal issue is fact dependent, this presentation should not be used or viewed as legal advice, and your legal counsel should be consulted on the application of your particular factual situation to the current law. Copyright: 2014 Kegler, Brown, Hill + Ritter

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Thank You!
Vinita Bahri-Mehra, Director
Asia-Pacific Team LeaderKegler Brown Hill +Ritter
vmehra@keglerbrown.com
keglerbrown.com/bahrimehra
614-255-5508
614-464-2634 (fax)

9. Ohio Development Services Agency
17 September 2014
Doing Business in China

10. Pivot to Asia
Asian consumption gains increasing global relevance
•95% of the world’s consumers live outside of the U.S.
•Asia leads global GDP growthAsia is expected to grow 3% faster than the rest of the world every year for the next 10 years The region displays relative resilience to volatility in global financial marketsRespective Asian markets offer diverse investment opportunities, from high-risk to low-risk
•Domestic demand is becoming a driver for growth as the developing economies transition Contributing structural for developing factors include: UrbanizationIndustrializationDemographic shifts
Sources: IMF World Economic Outlook, Economist Corporate Network ABOS 2013, Citibank
Source: CIA World Factbook
49%
9%
11%
8%
9%
2%
12%
Composition of World GDP 2050 Forecast
Developing Asia
Europe
North America
Latin America
Others
Japan
Source: IMF World Economic Outlook

11. Country Profile
People’s Republic of China (PRC)
Capitol City Beijing
Populaiton 1.36 billion (2013)
Area 9.6 million sq km
Allocation of Population 51% city, 48% rural
Shanghai 24 million
Beijing 21 million
Tianjin 15 million
Chongqing (Area) 30 million
Sources: IMF, World Bank
• By 2030 China will have:
- 700 million middle-class citizens
- 1 billion people in the urban population
- 681 cities with middle class populations of 250,000 or more
• There is a clear shift from a manufacturing-based economy to one driven by domestic
demand for consumer goods
- PRC’s efforts to liberalize the economy make commerce with China increasingly appealing to
American companies.
Sources: China National Bureau of Statistics, Boston Consulting Group

12. Doing Business in China
China –from the world’s factory to the world’s marketIn 2013 China became the world’s largest trader with the level of imports catching up to its level of exportsChina’s increasing imports bode well for US companies selling into the Chinese marketChina’s imports from the US continue to grow
•By 2022, 75% of China’s urban consumers will earn $9,000 to $34,000 per year, or between the PPP of Brazil and Italy. In 2000 only 4% were within that range, in 2012 that figure grew to 68%
•China’s “Singles’ Day” on November 11this a major shopping holiday-in 2013 sales reached over $5.7 billion
•Ohio is geographically and economically positioned to capitalize on China’s rising imports from the USWhile many Ohio companies have grown their businesses through exporting, most Ohio businesses currently do not export to China
Sources: European Parliament Policy Dept., PwC, Taobao

13. Economic and Political Overview
From 30,000 ft.

14. China’s Evolving Economy
The landscape continues to change a rapid pace
Shanghai 1987 Shanghai 2013
•An increasing number of mid-market foreign companies are benefiting from the PRC’s efforts to liberalize the economyby decreasing interference from the central government and implementing constructive financial policy reforms
•China’s consumers are becoming more brand-aware, and with 2.8m Chinese millionaires and rising, sales of luxury goods are booming
Sources: Congressional Research Service, US-China Business Council, Bank of America Merrill Lynch, Economist

15. Trajectory of China’s Economic Development
Exploring the past, present, and future
Latest Figures2013 Economy grew 7.7% 28% of global GDP growth49% of global GDP by 2050
Expected Growth2014World Bank expects 7.7% 2015World Bank expects 7.5% China’s exports are expected to grow 15.1% annually$4.4 trillion in 2017China’s import demand is expected to grow 15.8% annually$4.2 trillion in 2017
The Recent PastNearly 10% GDP growth per annum for last 30 yearsSingle-digit growth rates expected to become the new standardChina’s economy quadrupled in the last 10 yearsChina’s economic development lifted 400 million people out of poverty between 1993 and 2013
China
United States
13
14
15
16
17
18
19
20
2012
2013
2014
2015
2016
2017
2018
2019
Percent
Source: IMF Economic Outlook Database
GDP Based on PPP Share of World Total
Sources: World Bank, Goldman Sachs, Citibank

16. Chinese Politics
Things move according to plans
China’s 12th Five-Year Plan (2011-2015)
Source: JP Morgan LLC.

17. Trade with China
What’s driving Chinese business opportunities?

18. Chinese Development
Driving challenges and opportunities
•The rapid pace of development has had a huge environmental toll
•China’s demographic shift will have knock on effects through the economy and society
•Urbanization will continue as more and more Chinese move from rural to urban areas
•There are significant increases in the number of middle-class and affluent Chinese, but this has not been evenly distributed The services sector is increasing rapidly, transitioning away from the lower value added areasMiddle and upper classes were 23% of the population in 2010 and are expected to make up 38% in 2015
•The hourly wage for labor is expected to reach USD $4.6 per hour in 2015Hourly wage + logistics and storage costs => make cost of manufacturing in China close to USUS exporters are now more competitive in Chinese market for advanced manufacturing
Sources: Wolfensohn Center for Development, Brookings Institute, Morgan Stanley Research, ING International Trade Study

19. Sector Opportunities: Environmental Sector
Clean technology is central to China mitigating pollution
Clean Tech
•The energy sector accounts for an increasingly large portion of Chinese imports so the PRC is trying to develop alternative energy to augment rising demand for electricity and subsequent dependence on foreign oil, gas, and coal
•China’s energy needs have significantly increased in recent years due to rapid economic development. The high level of state involvement in these industries can make it difficult for foreign companies to operate Grid and Transmission: China’s power consumption rose 5.2 percent in the first five months of this year, exacerbating the country’s need for energy importation and greater efficiency Efficiency: the PRC has set the goal of having green buildings account for 30% of new construction in China by 2020 In August 2013 the State Council announced that it will support 15% annual growth in the Chinese environmental industry with the goal of growing it to $743 billion by 2015, sectors include: Cleaner conventional energyRenewable energyElectric power infrastructureGreen buildingClean transportationClean water
Sources: Energy Information Administration, Communist Party of China Central Committee, UK Trade & Investment
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2008
2009
2010
2011
2012
10,000 USD
Total Investment in the Treatment of Environmental Pollution

20. Sector Opportunities: Logistics & Transportation
Logistics is one of the economic engines of China
Logistics
•With the country’s rapid economic development over the past three decades, logistics has become one of the nation’s most important industries. In 2013 the industry was valued at US$ 1.6 trillion.
•Logistics for steel, coal and other bulk commodities has been depressed due to slowing economic growth and overcapacity. However, logistics for food, FMCG, appliances, electronics industries is still rapidly increasing.
•The total value of logistics goods is increasing by 30.4% with the development of e-commerce and online shopping platforms. Taobao GMV (Gross Merchandise Volume)reached at CNY 1.1 trillion in 2013TMall GMV reached CNY 441 billion in 2013, with an increase of 120% compared with 2012’s GMV
Source: China Statistics Bureau
Sources: China Statistics, Alibaba

21. Sector Opportunities: Advanced Manufacturing
Manufacturing revolution is imperative for the government
•Today China faces new challenges as wages and other costs rise, but the complex links in the value chain continue to drive demand
•The government is exploring high-tech industries to fuel manufacturing in aerospace, new energy technologies, automotive, and advanced materials
•Supply chain solutions and for both China export and USA distribution and imports to the USA are evolving and creating opportunities.
Sources: Markit, HSBC
Advanced Manufacturing
•Whether it is the development of China’s indigenous automotive, aerospace or hi-tech sectors opportunities abound for companies able to produce advanced manufacturing technologies to the supply chain. manufacturing industry has been slowing down over past 5 years

22. Sector Opportunities: ICT
Technology development is a priority for the PRC
•SoftwareA major focus of the central government is providing incentives for domestic growth and foreign investment in software The market is diverse and fragmentedIndustries lacks core technologiesChinese software companies are interested in gaining valuable IP through acquisition and partnership
•Mobile Gaming
-China’s mobile gaming market is expected to surpass the US’s in size
-2014 expected revenue in Chinese market is $3 billion
•China’s mobile gaming industry revenue is expected to double from 2013 levels
Users
632 million
277 million
Penetration
46%
87%
E-commerce
$295 billion
$270 billion
Active buyers
231 million
128 million
SME Internet adoption ratio
20-25%
75-85%
•Intellectual Property Rights (IPR) Infringement remains a substantial risk to foreign ICT companies entering the Chinese market
•IPR infringement continues to be a point of contention between the US State Department and the PRC
Sources: US Dept. of Commerce, US State Dept., McKinsey & Co
Source: China Internet Network Information Center, Pew Research, McKinsey Global Institute Analysis

23. The Intersection of Trade and Investment

24. China’s Outbound Investment
OFDI in the United States is steadily increasing
7/15/2014 Rhodium Group
Year 2014 Cumulative Annual Fewer Options
Agriculture & Food: 16 deals / $7,202
Automotive & Aviation: 98 deals / $2,197
Basic Materials: 56 deals / $1,767
Consumer Prod. & Serv.: 86 deals / $814
Energy: 100 deals / $11,870
Entertain. & Real Estate: 63 deals / $6,605
Finance & Bus. Services: 53 deals / $743
Health & Biotech: 53 deals / $1,357
Ind. & Electronic Equip.: 109 deals / $808
Information Technology: 139 deals / $3,864
Metals and Minerals: 2 deals / $98
Transport & Construction: 45 deals / $125
State: Industry: Type: Ownership:
SC 12
HI 3
AK 2 FL 13
AL 8 GA 27
NC 43
TN 8
RI 2
CT 1
MA 18
NH 2
NY 62
PA 12 NJ 30
DE 1
DC 1
VA 21 MD 14
KY 1
OH 25
MI 54
MT 2
ID 4
WA 28
TX 73
CA 222
AZ 3
NV 9
UT 7
CO 7
NM 1
OR 6
NE 4 IA 2
MS 1
IL 51 IN 11
MN 8
WI 3
MO 6
AR 4
OK 3
KS 4
LA 1
Source: Rhodium Group

25. Ohio Development Services Agency Support in China

26. Doing Business in China Isn’t Easy
How can Development Services Agency help?
Development Services Agency provides free services to Ohio State companies to address common challenges faced by American businesses entering the Chinese market
Challenges
Solutions
How do Isell into China?
Distributor and Partner Searches
Whatare the opportunities in China?
Market Intelligence
IsmyChinese partner legitimate?
Reference Checks
Howdo I navigatetrade policiesand legal issues?
Policy and Legal Research
How do I navigatecustomsbarriers?
Advocacy
Howshould I localize my strategy for China?
Strategy Advise
Whatcompanies should I meet with?
B2B Meeting Support
Howdo I plan a trade mission?
Trade Mission Assistance
Whatabout unforeseen issues?
On the Ground Support

27. Contact information
•International Trade Specialist Celia MeyerCelia.Meyer@development.ohio.gov

28. Growing Through China: MarketOpportunities
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29. EnteringTheMarket: Keys for Success
Understand your market
Localize
Enter the right regionfor your business
Prepare staff and provide adequate support

30. UnderstandYourMarket
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We’ll do it for you.

31. Localize
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First Attempt
Second Attempt

32. Localize(2)
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33. Enter the Right Region:ChineseCitiesbyTier
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34. Prepare Your Staff
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•Internationally, the average rate for expat relocation assignment failures isunder 4%.

35. Keep in Mind
The Chinese and “Western” worldview are fundamentally different.
China is not the right market for every business.
There is tremendous market potential in lower-tiered cities.
If you decided to enter the market, consult professionals to help appropriately localize your product and brand.
Sendonlytrained and qualified personnel to China.
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36. Sino-American Business Consulting
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Columbus, Ohio 43220
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