Doing Business in China

Doing Business in China Prepared by: Calvin Man Head of international Business HSBC China Date: 22 November 2012

Agenda China Overview Doing Business in China Banking Guidelines RMB Internationalisation HSBC in China Contact Us 2

China Overview

China in a nutshell 1.3 billion people 2 nd largest GDP (China: USD7.3tn, USA: USD15.3tn) $3.6 trillion international trade (2nd largest after USA: USD3.7tn) 1 st largest FDI recipient in 1H 2012 Sources: SWIFT, China National Statistics Bureau, IMF, HSBC internal estimates 4

Chinese companies break onto international business stage More Mainland companies entering Fortune 500 list Number of PRC companies in Fortune 500, 2012 1 50 2500 40 2000 30 1500 China has overtaken Japan with the 2nd most number (73) of Fortune 500 companies after the US (132) in 2012 Going out policy - reached USD74.65bn outward FDI in 2011 3 USD15bn of M&A between China and emerging markets in H1 2010 4 (1) Fortune 500, 2012. http://www.fortunechina.com/ (2) CEIC Data Company Limited (3) 2011 Statistical Bulletin, China Outward Investment (4) PricewaterhouseCoopers 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 Outward Investment from Mainland 2 ( USDm) 45000 35000 25000 15000 5000-5000 Revenue (USDbn) RHS 5 No. of PRC companies LHS Africa Asia Latin Oceania Europe Middle North America East America 2008 2009 2010 2011 1000 500 0 Rising demand for more internationally competitive banking services Outward FDI largest in Asia Outward FDI to emerging markets growing Outward FDI in energy/commodities, and infrastructure (LATAM, Africa, Australia) Hong Kong a key platform for outward investment

China s top trading partners... and the changing dynamics China's Top 15 Trading Partners Total Bilateral Trade Volume China s top 20 trading partners (bilateral volume) 2011 (USD'm) CAGR% (2006-2011) Growth amongst G20 partners (CAGR % 2006-11) # Country / Region 2011 (USDm) CAGR% (2006-2011) 1 US 446,708 11.2% South Africa 36% Brazil 33% 2 Japan 343,139 10.6% Australia 29% 3 Hong Kong 283,545 11.3% Saudi Arabia 26% 4 South Korea 245,632 12.8% Indonesia 26% 5 Germany 169,234 16.7% India 24% 6 Taiwan 160,025 8.2% Mexico 24% 7 Australia 116,414 28.8% Argentina 21% 8 Malaysia 89,936 19.4% Russia 19% 9 Brazil 84,506 33.0% Turkey 18% 10 Russia 77,977 18.5% Germany 17% 11 India 73,958 24.2% EU 16% 12 Netherlands 68,151 14.6% Italy 16% 13 Thailand 64,743 18.5% France 16% 14 Saudi Arabia 64,401 26.2% Canada 15% 15 Singapore 63,445 9.2% UK 14% 16 Indonesia 60,586 26.0% South Korea 13% US 11% 17 UK 58,686 13.9% Japan 11% 18 France 52,081 15.6% 19 Italy 51,303 15.9% 0% 10% 20% 30% 40% 20 Canada 47,406 15.4% Source: CEIC 6

GDP sector composition GDP sector composition (purchasing power parity) 2001 GDP ranking Country GDP (USD bn) Agricultural Industrial Services - European Union 15,650 1.8% 24.9% 73.2% 1 United States 15,290 1.2% 19.2% 79.6% 2 China 11,440 10.1% 46.8% 43.1% 3 India 4,515 17.2% 26.4% 56.4% 4 Japan 4,497 1.2% 27.3% 71.6% 5 Germany 3,139 0.8% 28.6% 70.6% 6 Russia 2,414 4.5% 36.9% 58.6% 7 Brazil 2,324 5.5% 27.5% 67% 8 United Kingdom 2,290 0.7% 21.4% 77.8% 9 France 2,246 1.8% 18.8% 79.4% 10 Italy 1,871 2% 24.7% 73.4% Source: https://www.cia.gov/ CIA Factbook, 2011 Industrial sector is China s main economic driver Compared to mature markets the Services sector trails significantly a stronger Services sector will emerge as the economy shifts to more skill oriented activities 7

China s 12th Five Year Plan Key themes Lower carbon intensity and green growth 1. Cultivate the Emerging Strategic Industries (ESIs) 2. Industry upgrading, improve energy and emission efficiency 3. Accelerate development of service sectors Urbanisation and regional development 1. Accelerate urbanisation and regional development 2. Improve agriculture/rural infrastructure and rural income. Transform China s economic growth model to focus on quality and balanced and sustainable growth Overseas development and Going out 1. Encourage and support PRC companies in Going out 2. RMB internationalisation 3. Role of Hong Kong / Taiwan. Drive domestic demand 1. Stimulate consumption through income growth 2. Establish better social safety net. Structural reforms 1. State-owned enterprise (SOE) reform 2. Financial market reform. Source : National People s Congress 8

Seven key industries under the 12th Five Year Plan ESI Energy-saving and environmental protection Next generation information technology Bio-technology High-end manufacturing New energy New materials Clean-energy vehicles Source: HSBC Global Research Main Policy Content Develop high-efficiency, energy-saving technical equipment and products Develop recycling of industrial resources and improve the overall use of resources Play a leading role in promoting environmental protection equipment and raise standards for pollution control Promote commercialization of energy-saving and environmental protection services Speed up construction of an integrated and safe broadband information network Extend R&D into next-generation mobile communication and next-generation internet equipment Develop technologies such as digital virtualization and promote development of cultural creativity Develop innovative areas of medicine such as biological medicine, new vaccines, diagnosis agents, Western medicine and modern Chinese herbal medicine Promote green agricultural products and further the development of biological agriculture Strengthen and expand the aviation industry Promote construction of space infrastructure and the development of the satellite industry Develop rail transportation Develop ocean engineering equipment for exploration of ocean resources Develop new-generation nuclear energy technology and advanced reactors Promotion and application of solar thermal energy Further large-scale wind power development Develop new materials such as rare earths, high-performance membranes, special glass, functional ceramics and semiconductor illumination materials Actively develop new structural materials such as high-quality special steel and engineering plastics Promote the use of plug-in hybrid-power vehicles and battery-only electric vehicles Develop high-efficiency, low-emission, energy-saving automobiles 9

Summary of 11th FYP achievements vs 12th FYP targets Indicators 2010 Actual 11 th FYP (2006-10) Target 11 th FYP (2006-10) Actual 12 th FYP (2011-15) Target 2015 Target Economic GDP (RMB tn) 39.8 + 7.5% pa + 11.2% pa + 7% pa 55.8 Service sectors as % of GDP 43 + 3% + 2.5% + 4% 47 Urbanisation ratio 47.5 + 4% + 4.5% + 4% 51.5 Resources and environment Arable land (bn hectares) 121.2 120 121.2 121.2 121.2 Non-fossil fuel as % of primary energy consumption Reduction of energy consumption per unit GDP Main pollutant emission reduction - sulphur dioxide 8.3 n.a. n.a. + 3.1% 11.4 n.a. ~ 20% 19.1% 16% n.a. n.a. 10% 14.3% 8 n.a. Main pollutant emission reduction - chemical oxygen demand n.a. 10% 12.5% 8 n.a. Forest coverage ratio 20.4 + 1.8% + 2.2% + 1.3% 21.7 Source: HSBC Global Research 10

Summary of 11th FYP achievements vs 12th FYP targets Indicators 2010 Actual 11 th FYP (2006-10) Target 11 th FYP (2006-10) Actual 12 th FYP (2011-15) Target 2015 Target Science and education R&D spending as % of GDP + 0.5% 1.8% + 0.7% + 0.4% 2.2 Emerging Strategic Industries (ESIs) ESI sectors as % of GDP n.a. ~3% n.a. 8 8 People's livelihood Urban disposable income (RMB) 19,109 + 5% pa + 9.7% pa + 7% pa > 26,810 Rural net cash income (RMB) 5,919 + 5% pa + 8.9% pa + 7% pa > 8,310 Urban residents covered by basic pension scheme (m) 257 223 or + 5.1% pa 257 or + 8.1% pa +100 357 Urban public housing (m units) 5.9 n.a. n.a. +36 41.9 Total population (m) 1,341 1,360 1,341 < 0.7% pa < 1,390 Source: HSBC Global Research 11

Doing Business in China

The regions China is NOT a single national market but is a varied region made up of over 30 different provinces and municipalities There are a number of regional economic hubs within China, where several cities interact to create a wider economic area The most significant ones are.. North East North West Bohai Rim Central Yangtze River Delta South West Pearl River Delta 13

The regional economic hubs Regions Pearl River Delta Yangtze River Delta Bohai Rim Western China Coverage 9 cities in Guangdong Including Shanghai Including Beijing & Tianjin Including Chongqing / Chengdu / Xi'an Population 2009 (million) 108 160 258 385 GDP per capita 2009 (USD) 9,855 7,121 6,136 2,296 Traditional manufacturing Heavy industrial Petrochemicals, automobiles, steel Heavy manufacturing Main Economic Themes Economic integration with Hong Kong; CEPA Shanghai: An international financial and shipping centre Beijing : China's domestic financial centre Mining Progressing up the value chain to cover R&D, high tech, financial services, education and medical Progressing up the value chain to cover high tech. Key source of Going Out activity Tourism & agriculture Emerging manufacturing Source: http://www.mei.gov.cn/ http://www.stats.gov.cn/tjsj/ndsj/2011/indexch.htm 14

Opportunities for foreign companies in China s inland cities Traditionally, business interest has generally focused on Tier 1 cities such as Shanghai, Beijing, Guangzhou and Shenzhen. However, they are maturing with competition from both international and local players factor input costs such as property, land and labor, are rising Chinese economy is increasingly seeking growth driven by domestic dynamism, particularly consumption and development in inland and rural areas Often the rate of development in the lower-tier cities is faster with lower international competition 15

Climate for foreign investors Incentives Tax incentives for certain enterprises or projects, e.g.: technological development environmental protection energy and/or water conservation production safety Qualified projects may enjoy certain VAT incentives Foreign exchange restrictions Foreign currency transactions regulated by the State Adminsitration of Foreign Exchange (SAFE) Restrictions relaxing gradually due to the government s substantial foreign currency reserves Anti-Trust Law impacts foreign investment Anti-monopoly law in existence since 1 August 2008 M&A involving foreign parties subject to review and can be blocked due to anti-trust reasons Acquisitions of domestic enterprises by foreign investors that may have implications for national security subject to more stringent review Labour attitude toward foreign investment Differences in management styles due more to cultural differences, language and communications rather than prejudices against foreign management Pool of talented local staff growing in major cities more training in modern management techniques greater exposure to overseas work experience 16

Key trends Increasing domestic consumption reduce reliance on foreign exports for future GDP growth 2009 saw first reduction in demand for Chinese exports in many years Alternative energy development government seeking to add energy production from sources other than coal and oil State-owned enterprises (SOEs) re-invigorated support for leading SOEs considered important to economic security fostering of globally competitive national champions Financial reforms with new regulations tighten corporate governance and control reform banking sector to enable Shanghai to become an international finance centre launching of an international board to allow foreign companies to list on the mainland for the first time (HSBC hopes to be first to list on China s international board) lay foundations for the internationalisation of the RMB 17

Typical legal structures of foreign business in China Representative office A representative office is restricted from engaging in any business for profit such as signing contracts or deals on behalf of the parent company representing any firm other than its parent company collecting money or invoicing within China for services or products buying property or importing production equipment Co-operative Joint Venture (CJV) Investment can be based merely on contracts between foreign and Chinese investors no co-operative form is necessary unless the JV meets the requirements of a legal person so it can constitute itself as an independent entity Both parties will usually set up a management committee consisting of representatives from each party The ratio for the distribution of profits can be freely set and does not need to be relative to capital contribution Wholly Owned Foreign Enterprise (WOFE) Capital provided by one or more foreign investor Can use foreign currency, machinery, IPR and technology as investment Profits can be remitted abroad Independent operation and management Equity Joint Venture (EJV) Formed by foreign investors and a Chinese enterprise (non-individual) Minimum of 25% of registered capital from a foreign investor Can use foreign currency, machinery, IPR and technology as investment whilst Chinese investor may also contribute land use rights and buildings 18

Banking Guidelines

Bank accounts Wide range of accounts available in China Foreign currency account types Inflow Outflow Comments Capital account To receive capital injections and capital increases Payments for current items and approved capital-items In principal, only one account can be opened with a bank in the same city as the company - requires SAFE* approval Settlement account Collections for current items in foreign currency Payments for current items and approved capital-items SAFE* approval not required Foreign debt special accounts To receive loan proceeds from overseas As specified in the loan agreement, but cannot be used to repay RMB loans Foreign Debt registration and SAFE approval for account opening required RMB account types Inflow Outflow Comments Basic account Receive RMB collections Cash withdrawals and salary and bonus payments can only be effected from this basic account Only one basic account can be opened (irrespective of the number of banks used) General account Receive RMB collections All RMB payments except for cash drawing Multiple accounts can be opened * State Administration of Foreign Exchange 20

Deposits RMB deposit rates are set by the central bank the People s Bank of China (PBOC) represent ceiling rate banks can offer on RMB deposits banks can take the benchmark RMB deposit rate and implement a downward float system for their own deposit interest rates minimum RMB deposit interest rate could be 0% and the maximum must not exceed the PBOC rate deposit rates under continuous review and are subject to market changes Interest rates applied to offshore accounts are not regulated by PBOC Possible to have cross-border sweeping for offshore accounts, which can maximise the deposit rates available Banks can offer a rate higher than PBOC rate for foreign currency deposits over USD3m PBOC deposit rates (last update Jul 2012) Term % 3 months 2.60 6 months 2.80 1 year 3.00 2 years 3.75 3 years 4.25 5 years 4.75 21

Borrowing RMB facilities can be provided only by licensed branches/local incorporated entities of foreign invested banks and local Chinese banks Foreign currency loans cannot be freely converted into RMB Regulations govern what proportion of total investment must be in registered capital e.g. for a total investment of USD10m to USD30m, 40% must be as capital difference between Total Investment and Registered Capital is referred to as the Borrowing Gap the borrowing gap will affect a company s ability to borrow and take security from overseas The RMB lending rate is strictly regulated by the PBOC lending base rate is fixed banks permitted to lend at no lower than 70% of the base rate with no maximum mark up Pricing of foreign currency loans is decided on a case-by-case basis, typically a function of the onshore funding cost in the relevant currency PBOC lending rates (last update Jul 2012) Term % 6 months 5.60 1 year 6.00 1-3 years 6.15 3-5 years 6.40 5 years 6.55 22

Regulation 3 Measures and 1 Guideline managing your loans In mid-2009 and early 2010, the China Banking Regulatory Commission (CBRC) issued a series of regulations referred to as the 3 Measures and 1 Guidelines regarding loan management and monitoring to ensure the bona fide nature of bank borrowings prevent funds being diverted into speculative investments following the fiscal stimulus package Continuous monitoring of bank loans, including magnitude and disbursement CBRC has been closely monitoring the implementation of these regulations through surveys and onsite inspections these regulations are viewed as material by all levels of the CBRC extensive implementation assessment expected Borrowers internal operational process/reporting must facilitate these requirements 23

Regulation Account opening Non-China incorporated entities can open offshore RMB accounts (Non-resident Accounts) can be used for RMB cross-border trade settlement Due to regulatory control, the opening of foreign currency Non-Resident Accounts for companies registered outside of mainland China may be considered on a case-by-case basis Foreign currency accounts can be opened by both offshore and onshore entities All companies registered in Mainland China must open an account in Mainland China company legal representative or authorised person must sign and present required documents at branches 24

RMB Internationalisation HSBC is always at the forefront of helping companies like ours facilitate international business. The opportunity to use RMB settlement will give us additional options when working with China-based suppliers Company founder s testimony

RMB internationalisation is the process of relaxing controls on the use of RMB across borders and outside China aims to create a role for RMB to match China s global economic significance represents a major shift in the global financial system Economy 2 nd largest GDP (China: USD 7.3 trn, USA: USD 15 trn, 2011) $3.6 trillion international trade (China: USD 3.6trn, USA: USD 3.7trn, 2011) 1st largest FDI recipient in 1H 2012 Mainland China RMB Area Cf. 50% 40% 30% 20% 10% Currency % of world payments (as of Oct 2012) 0% EUR USD GBP JPY RMB Sources: SWIFT, China National Statistics Bureau, IMF, HSBC internal estimates 26

RMB usage growing around the world 27

Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Mainland China: rapid growth and changing dynamics RMB FDI and ODI volumes Goods, services and other current account flows RMB bn 35 RMB ODI value 40% RMB bn 400 Services & Other Current Accounts 15% 30 25 20 15 10 5 RMB FDI value RMB FDI&ODI as % of all currency total 35% 30% 25% 20% 15% 10% 5% 350 300 250 200 Goods 13% 11% 9% 7% 0 0% 150 5% 2011 AVG: Average monthly RMB FDI/ODI flows Jan-Dec 2011, from PBOC annual data RMB cross-border transaction types - YTDJUN12 100 50 3% 1% 0-1% Source: PBOC data, CEIC database 28

Permitted RMB transactions Corporates can use RMB for materially all cross-border purposes that USD can be used for: PAYMENTS INTO THE MAINLAND PAYMENTS FROM THE MAINLAND 1. Trade payments for GOODS 2. Trade payments for SERVICES 3. Intercompany loans 4. Additional Capital Infusion 5. Foreign Direct Investment Mainland China RMB Area 1. Trade payments for GOODS 2. Trade payments for SERVICES 3. Intercompany loans 4. Capital investment overseas (ODI) 5. Dividend Payments / Profit Repatriation 6. Expatriates Salaries A sophisticated range of products is available offshore: Bond issuance Hedging & derivatives Equity funding RMB offshore FX Borrowing Savings & investments 29

Potential benefits of RMB trade settlement Customers switching to RMB may reap various benefits, which will depend on their trading role and commercial bargaining power Save Access best FX rates (onshore or offshore) Cheaper or more transparent pricing by paying Chinese suppliers in RMB (3%+ cost savings depending on market conditions and existing contracts) Potentially cheaper offshore RMB funding, including accessing RMB liquidity in HK (e.g. via dim sum bond) and cross-border RMB loans Hedge Payables and receivables Asset and liabilities Diversify Customer base Currency portfolio Risk exposure (can be managed centrally) Gain Potential RMB appreciation Onshore / offshore investment returns Importer/ exporter relationship 30

2012 HSBC China customer survey RMB usage is increasingly driven by commercial considerations, with half of all respondents ready to offer discounts in exchange for using RMB Confidence in RMB Willing to offer discounts for RMB? 77% believe RMB will account for one-third of China s trade by 2015 Yes Up to 3% 3-5% 5-7% (%) More than 7% Why use RMB? (RMB users) Why not use RMB? (RMB non-users) Hedge FX risk (%) Not fully considered the issue (%) Convenience RMB appreciation expectations Overseas partners unwilling Base: 692 HSBC China corporate customers; RMB users and non-users; August 2012 31

HSBC s RMB capabilities worldwide The leading international bank for RMB business worldwide Russia Canada USA Mexico Expertise in all RMB propositions, including trade, investment, funding El Salvador Costa Rica Panama Bermuda Bahamas Brazil Paraguay Uruguay Argentina UK Germany Poland Kazakhstan Luxembourg Czech Switzerland Slovakia Georgia France Italy Armenia Monaco South Korea Japan Spain Turkey Malta Greece Israel UAE Saudi Arabia Bangladesh India Hong Kong Thailand Macau Philippines Vietnam Malaysia Brunei Singapore Indonesia South Africa Mauritius RMB capability in more than 50 territories, across all continents Australia First foreign bank to do RMB in Mainland, HK/Macau & all 6 continents New Zealand 32

HSBC Award-winning global bond house HSBC has been a leader in developing RMB internationalisation globally: Recent awards confirmed HSBC s position as the #1 Global Emerging Markets Bond House and #1 Asian Bond House in 2011/2010 #1 Global Primary Bond House Emerging Markets Bond House of the Year Asian Best Debt House Best Bond House Most Impressive Bookrunner of Asian G3 Bonds Most Competitive Bank on Pricing Best Local Currency Bond House Domestic Asian Bond House of the Year 2010 2011 2010 2011 and 2010 2010 2010 2010 Euromoney commented: "For its sheer consistency across all emerging regions, in both G3 and local currencies, and the quality of its execution, HSBC has had a standout year....no other bank has as comprehensive a product offering as HSBC." IFR commented: "HSBC s global reach has paid off handsomely in the emerging markets space... 2010 proved to be the year of delivery, with market share growth of 78% achieved over the previous two years." 33

HSBC in China

HSBC China the leading international bank in China Established in Hong Kong and Shanghai in 1865 a continuous presence in mainland China for 147 years In April 2007, HSBC completed local incorporation in China with HSBC Bank (China) Company Limited becoming a local bank Over 5,500 employees (2011) with over 98% recruited locally and international staff from 15 different countries Registered Capital: RMB8bn, one of the highest for a foreign bank in China Moody s Rating: A1 (long-term) One of the largest investors in China in the growth of its own operations and selective local financial institutions, including 19% of Bank of Communications 16.1% of Ping An Insurance 8% of Bank of Shanghai HSBC s iconic headquarters by the Bund, built in 1923 35 ifc Shanghai, HSBC China headquarters since April 2011

HSBC China the leading international bank in China Largest international bank network in China Leader in products and services Locally incorporated foreign banks by branch network (as Largest international bank in China by asset and of 31 Oct 2012) capital base; 1st foreign bank to receive capital injection in RMB 104 27 31 12 80 67 25 22 48 13 1st international bank to launch rural banking and with the largest network 1st international bank to underwrite corporate bonds in China 1st international bank to be granted access to China s gold futures market 1st international bank to provide precious metal hedging services 1st international bank to issue RMB bonds in Hong Kong Recognised as best foreign bank by various industry rankings and awards HSBC Hang Seng Bank of East Asia Standard Chartered Citibank Branches Sub-branches 36

HSBC China s footprint Largest international bank network: 131 outlets in 41 cities, 20 provinces/municipalities HARBIN Tier 1 cities with HSBC outlets Other cities with HSBC outlets Province / municipality with branch presence Focus regions Data as at 16 May 12 Central & Western Regions 37 KUNMING XI AN CHENGDU TAIYUAN WUHAN BEIJING ZHENGZHOU CHONGQING CHANGSHA GUANGZHOU FOSHAN ZHONGSHAN ZHUHAI TIANJIN JINAN HEFEI HUIZHOU DONGGUAN SHENZHEN DALIAN QINGDAO NANJING SHENYANG WUXI SUZHOU KUNSHAN SHANGHAI HANGZHOU NINGBO XIAMEN Pearl River Delta Bohai Rim Yangtze River Delta

Competitive positioning among foreign banks HSBC China ranked 1 st in 10 out of 16 categories in PwC s China foreign bank peer survey Categories First Second Third 1. Retail banking HSBC SCB BEA 2. Corporate lending HSBC SCB Citi 3. Foreign exchange and treasury HSBC Citi SCB 4. Derivatives HSBC Citi DB 5. Debt capital markets HSBC Citi GS 6. Corporate finance HSBC GS Citi 7. Project financing HSBC SCB Citi 8. Trade finance HSBC SCB Citi 9. Brand awareness HSBC SCB Citi 10. Corporate social responsibility HSBC Citi SCB 11. Private banking UBS HSBC Citi 12. Credit cards BEA HSBC SCB/Citi 13. Cash management Citi HSBC SCB 14. Investment banking GS MS JPM 15. Mergers & acquisitions GS MS JPM 16. Equity capital markets GS JPM UBS Source: PricewaterhouseCoopers Foreign Bank in China survey, April 2011. Note: HSBC does not currently have an onshore investment banking license 38

Awards for excellence in China Our Competitive Positioning Among Most Foreign Banks: Awarded The Best Foreign Commercial Bank in China by FinanceAsia for 10 years Best Foreign Bank in China 2001-2006, 2008-2011 Best Foreign Retail Bank in China 2009-2010 Best Risk Management Bank in China 2010 Highly respected Awards for Excellence 2011 by Euromoney: Winner of The Best Global Project Finance and Infrastructure House Winner of The Best Global Sovereign Advisor Winner of The Best Global Risk Management House Best Cash Management Bank in China 2010 Best Trade Finance Services for Corporate/Institutional Banking in Asia 2010 Best Trade Finance Bank in Asia 2010 Most Trusted Foreign Bank 2010 Distinguished Foreign Trade Enterprises in China 39 Best Trade Bank in Asia 2010

Linking China and the world for our customers Differentiation through country desks and dedicated coverage HSBC s unparalleled global network supports overseas ambitions of mainland companies Strong onshore capabilities for multinational clients banking needs in China HSBC has 17 China country desks overseas and 9 foreign desks in HSBC China Düsseldorf, Germany Vancouver, Canada New York, US London, UK Paris, France Hong Kong, SAR Ho Chi Minh City, Vietnam San Paolo, Brazil Sandton, South Africa Colombo, Sri Lanka Dubai, UAE Riyadh, Saudi Arabia Singapore Sydney, Australia 40

Doing business in China booklet Available for download at HSBC China s website: http://www.hsbc.com.cn/1/pa_1_083q9ffkg80e20ra9q00000000/content/china/commercial/internationalbanking/images/doingbusinessinchina.pdf 41

Summary China s growth a sustainable story Profound impact on the world economy A multitude of commercial opportunities HSBC s unequalled capabilities - we are here to help! 42

Disclaimer This document is issued by HSBC Bank (China) Company Limited. The information contained herein is derived from sources we believe to be reliable, but which we have not independently verified. HSBC Bank (China) Company Limited makes no representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to the completeness or accuracy of any information, projection, representation or warranty (expressed or implied) in, or omission from, this document. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of this document. Any examples given are for the purposes of illustration only. The opinions in this document constitute our present judgment, which is subject to change without notice. This document does not constitute an offer or solicitation for, or advice that you should enter into, the purchase or sale of any security, commodity or other investment product or investment agreement, or any other contract, agreement or structure whatsoever. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. It is intended for institutional customers and is not intended for the use of private customers. The document is intended to be distributed in its entirety. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This document, which is not for public circulation, must not be copied, transferred or the content disclosed, to any third party. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank (China) Company Limited. 43