The top reasons for M&A in China

1. CHINA IS THE 4TH LARGEST ECONOMY IN THE WORLD.
The country has achieved phenomenal economic development since 1978. China has realized an average real GDP growth rate of over 9 percent annually. 2005 GDP was USD 2.26 trillion and real GDP growth was 9.9 percent.

2. CHINA HAS THE WORLD'S LARGEST POPULATION WITH A RAPIDLY GROWING MIDDLE CLASS.
The total population of China is 1,350,000,000 according to the July 2006 estimate by the government. 50 million Chinese families (150-200 million people) are qualified as middle class, with per household annual income of US9,248, and USD 38,224 of assets on average. The number of middle class families in China is expected to reach 100 million by 2010.

3. WITH A LITERACY RATE OF 90.9 PERCENT, CHINA IS AHEAD OF OTHER MAJOR DEVELOPING COUNTRIES. ITS ABILITY TO PROVIDE QUALITY LABOR AT A LOW COST CANNOT BE MATCHED.
The world's average adult literacy rate for all developing countries is 76.4 percent. China exceeds this figure by 14.5 percent. India has long been considered China's rival in terms of economic development. Yet, when examining adult literacy rates, China enjoys a superior position in comparison to India's 61.07 percent literacy rate.

4. CHINA IS CURRENTLY THE THIRD LARGEST TRADER IN THE WORLD AFTER THE U.S. AND GERMANY. IN 2005, CHINA BECAME JAPAN'S LARGEST TRADING PARTNER WHILE BEING THE SECOND LARGEST OF THE U.S. AND THE E.U.
In 2004, the trade volume between China and the U.S. reached over USD 152 billion, and over USD 151 billion between China and Japan. Japan is China's largest import partner as 16.8% of China's imports came from Japan in 2004. The trade volume has increased 34.66 percent on average with all top ten trading partners in 2004.

5. CHINA HAS SIGNIFICANTLY IMPROVED ITS INFRASTRUCTURE OVER THE PAST DECADE.
The government assigned top priority to the development of the transportation system in its 7th Five-Year Plan (1985 - 1990). China's telecommunications sector averaged an annual growth rate of 20 percent from 1997 to 2004. China's electricity generating capacity has been growing at 6 percent annually.

6. FOLLOWING THE COUNTRY'S ACCESSION INTO THE WTO, CHINA IS OPENING UP ITS MARKET TO FOREIGN INVESTORS.
China's commitment to WTO rules and agreements has brought about significant changes. Previously off limits industries such as banking, insurance, and telecommunication are now gradually becoming more and more accessibe.

7. CHINA OFFERS GENEROUS TAX INCENTIVES TO ATTRACT FOREIGN INVESTMENT.
Investments often are granted tax breaks for up to two years, depending on the industry and location of the business. Various taxation incentive packages are available in free trade zones throughout the country. Free trade zones are designated cities and regions designed to attract foreign investment. Companies registered in these zones are exempt from complex customs regulations.

8. CHINA HAS MADE REMARKABLE IMPROVEMENT IN LABOR PRODUCTIVITY.
According to official statistics, China's labor productivity (the quantity of output produced by a given quantity of labor input) rose from 24.77 in 1995 to 60.54 in 2001. The current average labor productivity growth rate in China is 6.5 percent per year, exemplifying the productiveness of China's labor force.

9. CHINA HAS BEEN RESTRUCTURING ITS BANKING INDUSTRY.
Until recently, China's state-owned banks have been instructed by the government to lend to large failing state-owned enterprises (¡°SOEs¡±), while small or private businesses were unable to secure credit. This resulted insignificant portfolios of non-performing loans. After the reform, local financial institutes will have more funds available for promising new businesses.

10. CHINA HAS SIGNIFICANTLY IMPROVED ITS LEGAL STRUCTURE, IN AN EFFORT TO PROMOTE TRANSPARENCY.
Regulations and periodic updates regarding investment in China are now available on the website of the Ministry of Commerce (¡°MOFCOM¡±). In addition, WTO agreements also required that all notices of regulatory changes be accompanied with appropriate translation.



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