The document discusses opportunities and risks for investing in China. It outlines sectors with opportunities such as healthcare, environmental protection, and technology. Technological change is creating winners that eliminate steps, innovate, monetize intangibles, and have unique positions, while negatively impacting some traditional sectors. However, risks also exist such as limited foreign access, lack of transparency, and potential economic slowdowns. Overall, China remains a fast growing market that is becoming more open and offers opportunities across industries that utilize technology well.

1. Investing in China 4th July 2014
Investing in China
What we should know in this fast growing
market
1

2. Investing in China 4th July 2014 2
Pension fund asset allocation 10 years ago

3. Investing in China 4th July 2014 3
Assets Pension funds consider now
LDI Hub Liquid Markets Liquid Credit Illiquid Credit Illiquid Markets
Collateral Mgt. Equities (EM, DM) Sterling Credit (IG) Structured Finance Reinsurance
Pooled vs. Seg DGFs Global Credit (IG) Infrastructure Debt Private Equity
Leverage & Liquidity Style Premia HY/Loans Senior Direct Lending Infrastructure
Overlay Strategies Risk Parity ABS Mezzanine Finance Real Estate
CTA
Emerging Market
Debt
Distressed Debt
Global Macro
Absolute Return
Bonds
Senior CRE Debt
Equity Long-Short Total Return Sub-IG
Credit Relative Value

4. Investing in China 4th July 2014 4
Shenzhen - 30 years ago
Development of China

5. Investing in China 4th July 2014 5
Shenzhen - Now
Development of China

6. Investing in China 4th July 2014 6
20 years ago
Development of China

7. Investing in China 4th July 2014 7
Now
Development of China

8. Investing in China 4th July 2014 8
Development of China

9. Investing in China 4th July 2014 9
Development of China

10. Investing in China 4th July 2014 10
Development of China

11. Investing in China 4th July 2014 11
Development of China

12. Investing in China 4th July 2014 12
Strong
Growth
Financial
Crisis
Collapse
Post
Crisis
Recovery
Recent
Underperfor
mance
Stock Market Performance

13. Investing in China 4th July 2014 13
I skate to where the
puck is going to be, not
where it has been.
Wayne Gretzky
Opportunities

14. Investing in China 4th July 2014 14
Percentage of Order Adults (Age 65+) in China
• Far less mature industry than developed
countries
• Demographic change and aging population
• Rising income and affordability
• Healthcare reform
• Healthcare awareness
Opportunities
Healthcare

15. Investing in China 4th July 2014 15
• Serious environmental degradation driven by
economic development
• Strong government support
• Clean China over the next 5 years
• Higher desire for clean energy
Opportunities
Environmental Protection

16. Investing in China 4th July 2014 16
• Government Investment: Biotech, energy
saving, environmental protection, high-end
manufacturing
• Internet Penetration
Opportunities
Technology

17. Investing in China 4th July 2014 17
“Internet will change
people’s life”
1999 Jack Ma –
Founder of Alibaba Group
Technological Change

18. Investing in China 4th July 2014 18
E-commerce company,
founded in 1999
Handled 1.1 Trillian Yuan in
sales in 2012
Estimated market value
$120 billion
Instant/mobile messenger,
founded in 1998
850 million monthly active
users
Market value $150 billion
Search engine, founded in
2000
Handling 5 billion search
queries per day
Market value $65 billion
Technological Change

19. Investing in China 4th July 2014 19
Technological Change

20. Investing in China 4th July 2014 20
“take a human desire, preferably one that has
been around for a really long time. Identify that
desire and use modern technology to take out
steps.”
Evan Williams – Co-Founder of
Twitter
Technological Change
1 – Eliminating steps

21. Investing in China 4th July 2014 21
Technological Change
1 – Eliminating steps

22. Investing in China 4th July 2014 22
Technological Change
1 – Eliminating steps

23. Investing in China 4th July 2014 23
Technological Change
1 – Eliminating steps

24. Investing in China 4th July 2014 24
Who stole my
cheese??
Technological Change
2 – Cross Sector Competition

25. Investing in China 4th July 2014 2525
MACHINERY LABOUR
CAPITALLAND
Intellectual property
Patents
Brand
New Technology
Data
User Platform
Goodwill
Customer Base
Human Capital
I
n
t
a
n
g
i
b
l
e
s
T
a
n
g
i
b
l
e
s
Technological Change
3 – Recognition of Intangible Assets

26. Investing in China 4th July 2014 26
Technological Change
4 – Innovate or Die

27. Investing in China 4th July 2014 27
QQ Online
Game
QQ Blog
Webmail
QQ Mobile
App, Expand
Value Added
Services
Mobile IM
Wechat
Launched
Mobile Social
Media
Apps for
taxi/flight
booking
Mobile
Payment
Platform
Technological Change
4 – Innovate or Die

28. Investing in China 4th July 2014 28
Customer
First
Team Work
Integrity
Embrace
Change
Passion Commitment
Technological Change
5 – Distinction and uniqueness, not just scale

29. Investing in China 4th July 2014 29
Technological Change
5 – Distinction and uniqueness, not just scale

30. Investing in China 4th July 2014 30
Type of
Investment
Domestic/Non-
Domestic
Currency Additional
Information
A Share Domestic RMB QFII license
required
B Share Non-Domestic USD
H Share Non-Domestic HKD
Other share
classes traded on
foreign stock
exchange
Non-Domestic Currencies in
local stock
market
e.g. NYSE, NASDAQ,
Singapore
Indirect
Investment
Non-Domestic Currencies in
local stock
market
Shares of companies in
developed countries
which have significant
business operation in
China
Ways to access Chinese market

31. Investing in China 4th July 2014 31
• Less capacity to access the market for foreign investors
• Lack of transparency
• Lack of using derivatives for hedging and portfolio replication
• Demographic shift
• Political risk
• Increased concerns of credit growth
• Property bubble
• Perceived slowdown in growth
Limitation and Risk

32. Investing in China 4th July 2014 32
• Fast growing market
• More open to the world
• Opportunities include
 Health Care
 Environmental Protection
 Technology
• Technological Change
 Positive to technology sector and those which use technology in the right way
 Winners
 Meet human desire (take out steps)
 Innovate
 Monetise intangible assets
 Unique and distinct market position
 Negative Impact
 Some traditional sectors, e.g. retailers, sales agents, intermediaries
 Business impacted by cross-sector competition
Summary