Industry Overview
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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW The information and statistics set forth in this section and elsewhere in this document have been derived from an industry report commissioned by us and independently prepared by Frost & Sullivan, in connection with the Global Offering. In addition, certain information is based on, or derived or extracted from, among other sources, publications of government authorities and internal organizations, market statistics providers, communications with various PRC Government agencies or other Independent Third Party sources unless otherwise indicated. We believe that the sources of such information and statistics are appropriate and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information and statistics are false or misleading in any material respect or that any fact has been omitted that would render such information and statistics false or misleading. Our Directors confirm that, after taking reasonable care, they are not aware of any adverse change in market information since the date of the Frost & Sullivan Report which may qualify, contradict or adversely impact the quality of the information in this section. None of our Company, the Joint Sponsors, the Joint Global Coordinators, the Joint Bookrunners, the Underwriters or any other party involved in the Global Offering or their respective directors, advisors and affiliates have independently verified such information and statistics and no representation has been given as to their accuracy. Accordingly, such information should not be unduly relied upon. SOURCE OF INFORMATION We have commissioned Frost & Sullivan, an independent market researcher and consultant, to conduct analysis and prepare a report (the “Frost & Sullivan Report”) on the leasing industry and markets in China and worldwide. Founded in 1961, Frost & Sullivan conducts industry research and corporate training in various industries, including the financial and leasing industries. We agreed to pay Frost & Sullivan a fee of RMB560,000 for the preparation and use of the Frost & Sullivan Report. Unless otherwise indicated, market estimates or forecasts in this section represent Frost & Sullivan’s view on the future development of the leasing industry in China and worldwide. In preparing the report, Frost & Sullivan has relied on statistics and information obtained through both primary and secondary research. Primary research includes interviewing industry insiders and recognized third-party industry associations, while secondary research includes reviewing corporate annual reports, database of relevant official authorities and professional agencies, independent reports or publications as well as the proprietary database established by Frost & Sullivan in the past decades. Frost & Sullivan also cross-checked the information obtained from different sources, to ensure such information is in line with the practice of the industry. The forecasts were made by Frost & Sullivan on basis of following assumptions: • the global and China’s social, economic and political conditions are expected to remain stable during the forecast period from 2015 to 2020; • the global economy and China’s economy are expected to continue to grow steadily during the forecast period from 2015 to 2020; • the key drivers of the global and China’s leasing industry are expected to continue to drive the development of leasing market in the forecast period from 2015 to 2020; and • the global and China’s leasing markets are not expected to be materially and adversely affected by any extreme circumstances during the forecast period from 2015 to 2020. 72 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW Our Directors confirm that, after reasonable and due inquiry, there has been no adverse change in the market information since obtaining the data from Frost & Sullivan, which may limit, contradict or affect the information in this section. OVERVIEW OF THE PRC ECONOMY The PRC has sustained a steady and rapid economic growth since 2009. According to Frost & Sullivan, the PRC’s nominal GDP grew at a CAGR of 13.0% from RMB34,562.9 billion in 2009 to RMB63,646.3 billion in 2014. The PRC’s real GDP grew at a CAGR of 8.6% from RMB12,407.1 billion in 2009 to RMB18,706.9 billion in 2014. In terms of nominal GDP in 2014, the PRC is the second largest economy in the world. Despite the lower growth rate caused by the slow-down of global macroeconomic growth, the PRC’s economic growth remained at a medium-to-high speed in recent years. According to Frost & Sullivan, the PRC’s nominal GDP is expected to grow at a CAGR of 7.9% from 2014 to 2019, reaching RMB92,900.2 billion by 2019, and the PRC’s real GDP is expected to grow at a CAGR of 6.3%, reaching RMB25,400.9 billion by 2019. According to Frost & Sullivan, in terms of total investment, the PRC’s fixed assets investment grew from RMB22,459.9 billion in 2009 to RMB51,202.1 billion in 2014, representing a CAGR of 17.9%. Total fixed assets investment of the PRC ranked first in the world in 2014. Such rapid expansion of fixed assets investment has been largely driven by accelerated urbanization in the PRC. According to Frost & Sullivan, the PRC’s urban fixed assets investment grew from RMB19,392.0 billion in 2009 to RMB50,126.5 billion in 2014, representing a CAGR of 20.9%. Meanwhile, despite a lower growth rate resulting from the slow-down of global economy, the PRC’s fixed assets investment is expected to remain its sustained and rapid growth at a double-digit growth rate from 2014 to 2019. The PRC’s fixed assets investment is expected to grow at a CAGR of 11.1% from 2014 to 2019, reaching RMB86,652.4 billion by 2019; while the PRC’s urban fixed assets investment is expected to grow at a CAGR of 11.4% during the same period, reaching RMB85,981.9 billion by 2019. OVERVIEW OF THE PRC LEASING INDUSTRY The PRC’s leasing industry has grown rapidly since 2009. According to Frost & Sullivan, in terms of the balance of leased assets, the market of the PRC leasing industry grew from RMB664.7 billion in 2009 to RMB2,633.9 billion in 2014, representing a CAGR of 31.7%. As of December 31, 2014, in terms of the balance of leased assets, the PRC had become the largest leasing market in the world. Meanwhile, the PRC leasing industry demonstrates significant growth potential in the future, and the main drivers include: The penetration rate of the PRC leasing industry remains relatively low. Despite rapid growth of the PRC financial leasing industry, there remains potential for its development as compared with the PRC banking industry. According to Frost & Sullivan, as of December 31, 2014, total loans in the PRC amounted to RMB81,677.0 billion, while the balance of leased assets of the PRC leasing industry was RMB2,633.9 billion. Meanwhile, as the PRC leasing industry is still at the early stage of development, the penetration rate of the PRC leasing industry, which refers to the proportion of total leased assets in the total fixed assets investment, remains relatively low as compared with those of the developed countries. In 2014, among the top ten leasing markets in terms of total leased assets, the penetration rate of the PRC leasing industry was 5.14%, compared with 23.2% in the United States, 28.6% in the United Kingdom and 16.4% in Germany. In recent years, the rapid development of non-bank financial institutions in the PRC has gradually expanded the sources of funding and lowered the financing costs in the market, which helped increase the penetration rate of the PRC leasing industry. 73 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW The PRC government continues to facilitate the development of the PRC leasing industry. For example, the CBRC allowed commercial banks to conduct leasing services in 2007, providing them with significant development opportunities in the emerging leasing industry. In 2008, the PBOC, the CBRC, the CSRC and the CIRC promulgated the financial sector’s opinions to support the development of the PRC’s service sector. The opinions encouraged non-bank financial institutions, including financial leasing companies, to provide efficient financial leasing services to the PRC’s service sector, which is expected to accelerate the development of the PRC leasing industry. In September 2015, the PRC State Council promulgated opinions to encourage financial leasing services to play a more important role in the real economy development, industry upgrade and transformation, as well as industry capacity reallocation in the PRC. The PRC State Council also encouraged financial leasing companies to raise capital through various means such as debt and equity financing, assets securitization and cross-border RMB financing, providing significant opportunities for the development of the PRC leasing industry. The PRC leasing industry has a broad international development prospect. The PRC’s “One Belt, One Road” initiative provides significant opportunities for the PRC’s leasing companies’ overseas development. One of the main focuses of the “One Belt, One Road” initiative is to promote the connection of infrastructure, such as highway, railroad, ports and airports, among countries along the “Silk Road Economic Belt” and the “21st-Century Maritime Silk Road”. As a result, the increasing market demand for infrastructure construction equipment in these countries is expected to bring significant market opportunities for the PRC’s infrastructure leasing companies.