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. Robust infrastructure construction activities are expected to stimulate a sustained financing demand, creating broad overseas business development prospect for the PRC’s financial leasing companies.

COMPETITIVE LANDSCAPE IN THE PRC LEASING INDUSTRY

According to Frost & Sullivan, as of December 31, 2014, there were more than 2,077 leasing companies in the PRC. These leasing companies can be generally classified into two categories based on its regulatory regime: • CBRC-regulated leasing companies. The CBRC-regulated leasing companies are usually established by banks, non-bank financial institutions or PRC local governments. The CBRC-regulated leasing companies are the major players in the PRC leasing industry, and generally have stronger shareholder background, higher licensing requirements, better financial and liquidity performances and higher flexibility in financing. As of December 31, 2014, there were 32 CBRC-regulated leasing companies in the PRC, with an aggregate asset balance of RMB1,278.7 billion. The key players in this category mainly include, among others, CDB Leasing, ICBC Financial Leasing Co., Ltd. and Minsheng Financial Leasing Co., Ltd..

• MOFCOM-regulated leasing companies. The MOFCOM-regulated leasing companies can be divided into Chinese-funded MOFCOM-regulated leasing companies and foreign-funded MOFCOM-regulated leasing companies based on the differences in their shareholder structures. The Chinese-funded MOFCOM-regulated leasing companies are established by the PRC’s equipment manufacturers or independent parties, whereas the foreign-funded MOFCOM-regulated leasing companies are generally established by foreign equipment manufacturers or independent parties. As of December 31, 2014, there were 152 Chinese-funded

74 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

financial leasing companies and 1,893 foreign-funded financial leasing companies in the PRC, with an aggregate asset balance of approximately RMB1,101.0 billion. The key players in this category mainly include, among others, Far East Horizon Limited, Bohai Leasing Limited and Changjiang Leasing Limited.

The regulatory requirements for the CBRC-regulated leasing companies and the MOFCOM- regulated leasing companies are mainly different in terms of source of funding and requirements in capital adequacy, leverage ratio and minimum registered capital. In particular, compared with the MOFCOM-regulated leasing companies, the CBRC-regulated leasing companies can finance their businesses in the interbank lending market at a lower financing cost and with diverse sources of funding, while the MOFCOM-regulated leasing companies are not allowed to finance their businesses by deposits or interbank lending. Meanwhile, the CBRC-regulated leasing companies are regulated under more stringent CBRC regulations, and generally have greater capacity in financing safety and operation stability. Currently, the PRC leasing industry is dominated by the CBRC-regulated leasing companies in terms of market share, industry influence and business size.

CDB Leasing is a CBRC-regulated leasing company, and has the highest credit ratings among all publicly listed leasing companies in the world. CDB Leasing also holds a leading position in terms of a variety of major financial indicators compared with its competitors. According to Frost & Sullivan, as of December 31, 2013, 2014 and September 30, 2015, in terms of the balance of operating lease assets, CDB Leasing was the largest CBRC-regulated leasing company in the PRC, and a number of its financial indicators, such as total assets, net assets and paid-in capital, are also highly ranked in the PRC leasing industry. Meanwhile, as of December 31, 2013 and 2014, CDB Leasing ranked the first among all leasing companies in the PRC in terms of total revenue. The following table sets forth the five largest CBRC-regulated leasing companies in the PRC in terms of total revenue and the balance of operating lease assets as of December 31, 2014:

The five largest CBRC-regulated The five largest CBRC-regulated leasing companies in the PRC leasing companies in the PRC in terms of total revenue in terms of the balance of as of December 31, 2014 operating lease assets as of December 31, 2014

The balance of operating Revenue lease assets (RMB in (RMB in Rank Company billions) Rank Company billions) 1 CDB Leasing ...... 11.7 1 CDB Leasing ...... 36.0 2 ICBC Financial Leasing Co., Ltd. .... 10.5 2 ICBC Financial Leasing Co., Ltd. .... 24.1 3 Minsheng Financial Leasing Co., Ltd. . 9.1 3 Minsheng Financial Leasing Co., Ltd. . 24.1 4 Bank of Communications Financial 6.7 4 Bank of Communications Financial 11.9 Leasing Co., Ltd...... Leasing Co., Ltd...... 5 CMB Financial Leasing Co., Ltd. .... 6.2 5 CCBFinancial Leasing Corporation. . . 4.7

Source: the Frost & Sullivan Report

75 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

AIRCRAFT LEASING

The Global Industry

The development of global aircraft leasing market is largely dependent on the market demand for air transportation. According to Frost & Sullivan, the global revenue passenger kilometer (“RPK”) grew from 4,540.8 billion in 2009 to 6,144.5 billion in 2014, representing a CAGR of 6.2%. As a result, in terms of the number of aircraft, the size of global commercial aircraft fleet grew from 23,264 in 2009 to 26,653 in 2014. Meanwhile, according to Frost & Sullivan, the global airline industry is expected to continue to grow rapidly from 2014 to 2019 and in the long term, primarily because: (i) the global market demand for air transportation is expected to continue its rapid growth rate from 2014 to 2019. The global RPK is expected to grow at a CAGR of 5.1% from 2014 to 2019, reaching 7,887.0 billion by 2019, and the size of global commercial aircraft fleet is expected to increase to 31,094 by 2019, respectively; (ii) the global airline industry is expected to remain profitable primarily due to the relatively low fuel price. According to Frost & Sullivan, the fuel price is expected to remain at a low level, which is expected to help reduce the operating costs of , increase consumer spending on the air traffic brought by lower air fares, and stimulate global market demand for global commercial aircraft.

The PRC Airline Industry

Driven by rapid economic growth, the PRC airline industry grew rapidly from 2009 to 2014. According to Frost & Sullivan, the number of the PRC’s air passengers grew from approximately 220.0 million in 2009 to approximately 360.0 million in 2014, representing a CAGR of 11.2%, and is expected to grow at a CAGR of 8.5% from 2014 to 2019, reaching approximately 530.0 million by 2019. During the same period, the PRC’s RPK grew from 334.8 billion in 2009 to 630.8 billion in 2014, representing a CAGR of 13.5%, and is expected to grow at a CAGR of 11.3% from 2014 to 2019, reaching 1,077.4 billion by 2019. The rapid growth of the PRC airline industry led to the fast growth of the number of the PRC’s commercial aircraft in service. According to Frost & Sullivan, the number of the PRC’s commercial aircraft in service grew from 1,417 in 2009 to 2,370 in 2014, representing a CAGR of 10.8%, and is expected to grow at a CAGR of 10.6% from 2014 to 2019, reaching 3,914 by 2019.

76 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 Global and the PRC Aircraft Leasing Industry

Robust growth of the global and PRC airlines industry, along with the benefits brought by the accounting treatment of aircraft operating lease, have greatly promoted the development of the global and the PRC aircraft leasing industry. Aircraft operating lease allows airlines to maintain the operation of aircraft while lowering their operating cost at the same time. It also enables the airlines to arrange their fleet and manage their balance sheets with more flexibility and not to assume the responsibilities of managing the residual value of the aircraft. According to Frost & Sullivan, the global aircraft leasing penetration rate, which refers to the proportion of the total number of commercial aircraft under leases in the total number of commercial aircraft in service, grew rapidly from 0.5% in 1970 to 29.7% in 2014, and is expected to grow to 31.0% by 2020. Meanwhile the number of global operating lease aircraft fleet grew at a CAGR of 3.1% from 2009 to 2014 and is expected to grow at a CAGR of 3.7% from 2014 to 2019, reaching 9,513 by 2019. The following table sets forth the historical and forecast number of operating lease aircraft from 2009 to 2019:

Number of Aircraft CAGR: 3.7%

10,000 9,513 CAGR: 3.1% 9,165 8,838 9,000 8,226 8,531 7,917 7,613 8,000 7,303 7,442 6,811 7,090 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

The historical and forecast number of operating lease aircraft from 2009 to 2019

Source: the Frost & Sullivan Report In particular, the PRC aircraft leasing industry experienced significant growth from 2009 to 2014. According to Frost & Sullivan, the number of operating lease aircraft in the PRC grew at a CAGR of 9.3% from 2009 to 2014 and is expected to grow at a CARG of 12.5% from 2014 to 2019, reaching 1,633 by 2019. The following table sets forth the historical and forecast number of the PRC’s operating lease aircraft from 2009 to 2019:

Number of Aircraft

1,800 CAGR: 12.5% 1,633 1,600 1,479 1,338 1,400 CAGR: 9.3% 1,197 1,200 1,054 1,000 908 798 800 689 715 636 581 600 400 200 0 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

The historical and forecast number of the PRC’s operating lease aircraft from 2009 to 2019

Source: the Frost & Sullivan Report

77 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

Competitive Landscape of the Global and the PRC Aircraft Leasing Markets

Competition is intense in the global aircraft leasing market. According to Frost & Sullivan, as of December 31, 2014, there were over 160 aircraft leasing companies in the world. In terms of total book value of aircraft fleet, CDB Leasing ranked tenth among all aircraft leasing companies in the world. The following table sets forth the global 20 largest aircraft leasing companies in terms of the total book value of aircraft fleet as of December 31, 2014.

Total book Total book value of both value of both operating and operating and finance lease finance lease aircraft fleet aircraft fleet (USD in (USD in Rank Company millions) Rank Company millions) 1 AerCap Holdings N.V...... 32,487 11 Aviation Capital Group Corp...... 6,266 2 GE Capital Aviation 32,480 12 Holdings Limited ...... 6,069 Services, Inc...... 3 BBAM Aircraft Leasing and 15,463 13 Doric GmbH ...... 4,383 Management LLC ...... 4 SMBC Aviation Capital ...... 12,126 14 Standard Chartered Aviation ..... 4,263 5 BOC Aviation Pte. Ltd...... 9,600 15 Aircastle Limited ...... 4,080 6 AWAS Aviation Capital Ltd...... 9,263 16 Macquarie Air France Ltd...... 3,840 7 ...... 7,988 17 Jackson Square Aviation Ltd...... 3,671 8 CIT Aerospace, Inc...... 7,514 18 FLY Leasing Ltd...... 2,997 9 ICBC Financial Leasing Co., Ltd. . . 6,721(1) 19 A/S ..... 2,848 10 CDB Leasing ...... 6,299(1) 20 MC Aviation Partners, Inc...... 2,842

(1) calculated on basis of the foreign exchange rate between US Dollar and Renminbi by PBOC (1US Dollar = 6.119 Renminbi) on December 31, 2014

Source: the Frost & Sullivan Report

Competition is also intense in the PRC aircraft leasing market. Historically, the PRC aircraft leasing market was dominated by foreign aircraft leasing companies. In recent years, however, the market share of Chinese aircraft leasing companies has increased rapidly and is expected to remain at its fast growth rate in coming years. Meanwhile, Chinese airlines are exempt from paying withholding tax when leasing aircraft from Chinese aircraft leasing companies, which strengthens the competitiveness of the Chinese aircraft leasing companies in the PRC aircraft leasing market. According to Frost & Sullivan, as of December 31, 2014, there were over 50 Chinese and foreign aircraft leasing companies providing leasing services to Chinese airlines. The following table sets forth the five largest aircraft leasing companies operating in the PRC as of December 31, 2014 in terms of number of aircraft leased to Chinese airlines.

Company Market Share AerCap Holdings N.V...... 18.3% GE Capital Aviation Services, Inc...... 13.4% ICBC Financial Leasing Co., Ltd...... 7.4% CDB Leasing...... 6.3% Changjiang Leasing Co., Ltd...... 5.8%

Source: the Frost & Sullivan Report

78 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

Entry Barriers of the Aircraft Leasing Market

In addition to adequate capital, low financing cost, and the stable sources of financing to support its business, the crucial factors for an aircraft leasing company to stay competitive also include, among others, diversified aircraft portfolio and customer base, well-managed customer relationships and executive capabilities in lease extensions and re-leases. In order to secure lease contracts with airlines, an aircraft leasing company should also monitor the aircraft orders and fleet expansion plans in the market, and have expertise in aircraft asset management and the aircraft marketing and re-marketing.

CDB Leasing’s Competitive Advantages in the Global and the PRC Aircraft Leasing Markets

As of December 31, 2013, 2014 and September 30, 2015, CDB Leasing ranked first among all Chinese leasing companies in terms of aircraft operating lease assets. CDB Leasing has global aircraft leasing platforms in the PRC, the Cayman Islands and Ireland and a global customer network. Meanwhile, CDB Leasing has the highest credit ratings among all publicly listed leasing companies in the world, which allows the Company to finance its aircraft leasing business at a lower cost. As of September 30, 2015, CDB Leasing’s customer base included 40 airlines, including 12 airlines in the PRC and 28 airlines overseas. It also had a total fleet of 371 owned, managed and committed aircraft.

INFRASTRUCTURE LEASING

The PRC Infrastructure Leasing Industry

Infrastructure investment is a major driver of the PRC’s economic growth. In the past three decades, the sustained and increasing spending on infrastructure construction by the PRC government has produced significant infrastructure assets. According to Frost & Sullivan, the aggregate five-year infrastructure investment in the PRC between 2010 and 2014 was RMB41,472.1 billion, the largest in the world, compared to an aggregate investment of RMB17,376.3 billion between 2005 and 2009. In addition, the PRC government continues to consider infrastructure construction as a top priority during China’s 13th five-year plan (2016-2020). According to Frost & Sullivan, the aggregate five-year infrastructure investment in the PRC between 2015 and 2019 is expected to reach RMB73,395.8 billion. The existing and increasing infrastructure assets have greatly promoted the development of the PRC infrastructure leasing industry.

Currently, the PRC infrastructure leasing industry mainly focused on completed and revenue-generating infrastructure assets such as toll roads, urban rail transit systems, power equipment, and urban water supply systems. In recent years, infrastructure leasing increased rapidly among PRC local governments and state-owned infrastructure construction companies, primarily because infrastructure leasing was more flexible in lease terms, interest rates and the uses of proceeds as compared with other means of financing. Such comparative advantages have provided PRC local governments and infrastructure construction companies with more options to better manage their infrastructure asset portfolios. According to Frost & Sullivan, in terms of

79 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 total assets held under finance leases, the PRC infrastructure leasing market grew at a CAGR of 14.7% from 2009 to 2014, and is expected to reach RMB824.0 billion by 2019. The following table sets forth the historical and forecast growth of the PRC infrastructure leasing industry from 2009 to 2019:

RMB in billions 900 Transportation Urban Energy 824.0 CAGR: 12.8% 800 735.1 214.6 700 656.1 183.9 600 CAGR: 14.7% 582.5 157.6 514.2 135.1 500 450.6 202.5 115.9 183.0 400 392.2 165.6 339.3 99.4 149.9 295.1 83.5 135.5 300 258.7 68.9 122.6 227.1 58.5 110.6 51.7 99.0 200 46.5 88.2 78.1 332.9 368.1 406.9 68.9 262.8 297.5 100 171.4 198.1 228.6 111.7 128.8 148.4 0 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

The historical and forecast growth of the PRC infrastructure leasing industry from 2009 to 2019

Source: the Frost & Sullivan Report

Transportation Infrastructure Leasing Industry

According to Frost & Sullivan, the total lengths of the highways and railways in the PRC amounted to 4.5 million kilometers and 111.8 thousand kilometers in 2014, respectively, and are expected to grow to 4.9 million kilometers and 149.0 thousand kilometers by 2019, respectively. Benefiting from the significant volume of transportation infrastructure assets, the PRC transportation infrastructure leasing industry grew rapidly in recent years. According to Frost & Sullivan, in terms of total assets held under finance leases, the PRC transportation infrastructure leasing market grew from RMB111.7 billion in 2009 to RMB228.6 billion in 2014, representing a CAGR of 15.4%, and is expected to grow at a CAGR of 12.2% from 2014 to 2019, reaching RMB406.9 billion by 2019.

Urban Infrastructure Leasing Industry

The PRC’s rapid urbanization produced increasing demand for urban infrastructure investment in the past three decades. According to Frost & Sullivan, the PRC’s urban infrastructure fixed investment grew from RMB19,392.0 billion in 2009 to RMB50,126.5 billion in 2014, representing a CAGR of 20.9%, and is expected to reach RMB85,981.9 billion by 2019. Benefiting from the fast development of PRC urban infrastructure fixed investment, the PRC urban infrastructure leasing industry grew rapidly in recent years. According to Frost & Sullivan, in terms of total assets held under finance leases, the PRC urban infrastructure leasing market grew from RMB68.9 billion in 2009 to RMB122.6 billion in 2014, representing a CAGR of 12.2%, and is expected to grow at a CAGR of 10.6% from 2014 to 2019, reaching RMB202.5 billion by 2019. Meanwhile, as of December 31, 2014, the PRC’s urbanization rate (urbanization rate refers to the proportion of the total urban population in the total population) was 54.4%, as compared to 82.3% in the United Kingdom, 81.4% in the United States and 75.1% in Germany. Therefore, it is believed that the PRC’s urban infrastructure investment and urban infrastructure leasing industry have considerable growth potential in the future.

80 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

Energy Infrastructure Leasing Industry

The PRC government considers new energy as a main focus of development in the future, and has promulgated a series of policies to facilitate its development. As a result, a number of major Chinese power companies have increased their investments in the new energy areas. Compared with other sources of funding, financial leasing provides customized solutions for energy equipment manufacturers to expand their market shares, and generate stable risk-adjusted yields for various investors. According to Frost & Sullivan, the PRC’s energy infrastructure fixed investment grew from RMB1,000.3 billion in 2009 to RMB1,632.7 billion in 2014, representing a CAGR of 10.3%, and is expected to grow at a CAGR of 22.3% from 2014 to 2019, reaching RMB4,472.5 billion by 2019. Meanwhile, in terms of total assets under finance lease, the PRC energy infrastructure leasing market grew from RMB46.5 billion in 2009 to RMB99.4 billion in 2014, representing a CAGR of 16.4%, and is expected to grow at a CAGR of 16.6% from 2014 to 2019, reaching RMB214.6 billion by 2019.

Competitive Landscape of PRC Infrastructure Leasing Market

According to Frost & Sullivan, as of December 31, 2014, there were over 20 leasing companies providing infrastructure leasing services in the PRC. In terms of leased assets, CDB Leasing ranked first among all such leasing companies. Meanwhile, in terms of leased assets, CDB Leasing ranked first and third, respectively, among the leasing companies providing transportation infrastructure and urban infrastructure leasing services in China, respectively. The following table sets forth the five largest leasing companies providing infrastructure leasing services in the PRC in terms of leased assets and their market shares as of December 31, 2014:

Company Market Share CDB Leasing...... 10.7% Bank of Communications Financial Leasing Co., Ltd...... 10.6% ICBC Financial Leasing Co., Ltd...... 9.3% Minsheng Financial Leasing Co., Ltd...... 8.8% CMB Financial Leasing Co., Ltd...... 8.3%

Source: the Frost & Sullivan Report

The following table sets forth the five largest leasing companies providing transportation infrastructure and urban infrastructure leasing services, respectively, in the PRC in terms of leased assets and their market shares as of December 31, 2014.

The five largest leasing companies providing The five largest leasing companies providing transportation infrastructure leasing services in the PRC urban infrastructure leasing services in the PRC as of December 31, 2014 as of December 31, 2014

Company Market Share Company Market Share CDB Leasing ...... 14.4% Bank of Communications Financial Leasing Co., Ltd...... 10.0% Bank of Communications Financial ICBC Financial Leasing Leasing Co., Ltd...... 13.2% Co., Ltd...... 8.0% ICBC Financial Leasing Co., Ltd...... 9.7% CDB Leasing ...... 7.8% Minsheng Financial Leasing Minsheng Financial Leasing Co., Ltd...... 9.1% Co., Ltd...... 7.6% CMB Financial Leasing CMB Financial Leasing Co., Ltd...... 8.6% Co., Ltd...... 7.0%

Source: the Frost & Sullivan Report

81 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

Entry Barriers of the Infrastructure Leasing Market

Infrastructure construction generally requires large scales investment and a long construction period, and the investors are mostly large state-owned enterprises or other companies affiliated with PRC local governments. As a result, the entry threshold for infrastructure leasing business is generally higher than that of other leasing businesses. Crucial factors for a leasing company to stay competitive and increase its market share mainly include, among others, adequate capital, low financing cost and stable sources of financing. Well- managed relationships with the PRC local governments and large state-owned enterprises are also essential to the leasing companies to secure their leasing contracts. Meanwhile, the infrastructure leasing companies also need expertise in infrastructure assets management in order to diversify their revenue sources.

Competitive Advantages of CDB Leasing in the PRC’s Infrastructure Leasing Market

As the sole leasing business platform of the CDB, CDB Leasing has benefited from high-quality industrial resources from the CDB. CDB Leasing’s industry focus is synergistic with that of the CDB, and similar to the CDB, CDB Leasing serves the infrastructure sectors that are of national strategic significance. CDB Leasing has extensive experience in providing leasing services involving a wide range of infrastructure assets in both direct finance leasing and sale-and-leaseback transactions. It has cultivated a broad customer base across infrastructure industry sectors. It has also established a well recognized brand name in the market, and maintained good cooperative relationships with government authorities of various levels.

SHIP, COMMERCIAL VEHICLE AND CONSTRUCTION MACHINERY LEASING

Ship Leasing Industry

Most of the vessels in the PRC are purchased by shipping companies through loans, project financing or other means of financing. Historically, the international ship financing market was dominated by traditional ship financing banks in the United States and Europe. In recent years, however, such banks have scaled back their ship financing businesses due primarily to the financial difficulties and changes of business strategies. Under such circumstances, ship leasing has become the preferred choice for shipping companies. However, despite fast development in recent years, the penetration rate of global ship leasing industry, which refers to the proportion of the total number of vessels under leases in the total number of vessels in service, was still less than 30% as of December 31, 2014. Therefore, the global ship leasing industry has considerable growth potential in the future. CDB Leasing conducts its ship leasing business in both the global and the PRC market. As of September 30, 2015, CDB Leasing had a portfolio of 41 owned or leased vessels, and the average age of the CDB’s owned vessels was 7.0 years.

82 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

Commercial Vehicle Leasing Industry

Benefiting from factors such as improvement in infrastructure, development of free trade zones and extension of transportation networks in the PRC, the PRC automobile industry, especially the commercial vehicle segment, grew rapidly in recent years. Meanwhile, urban infrastructure construction, real estate development as well as the growth of rail transportation network also provided significant development opportunities for various commercial vehicle leasing businesses. According to Frost & Sullivan, the number of vehicles in use in the PRC commercial vehicle leasing industry grew from approximately 1.6 million in 2009 to approximately 3.2 million in 2014, representing a CAGR of 14.8%, and is expected to grow at a CAGR of 7.4% from 2014 to 2019, reaching approximately 4.5 million by 2019. As of December 31, 2014, in terms of number of leased commercial vehicles, CDB Leasing ranked second among all leasing companies providing commercial vehicle leasing services in the PRC.

Construction Machinery Leasing Industry

Benefiting from the fast urbanization in the PRC and increase in fixed assets investment, the demand for construction machinery grew rapidly in recent years. Meanwhile, the PRC government promulgated a series of incentive policies to encourage the development of high-end construction machinery equipment industries, providing great opportunities for the development of PRC construction machinery leasing industry. According to Frost & Sullivan, the number of construction machinery equipment, in the PRC construction machinery leasing industry grew from approximately 1.4 million in 2009 to approximately 3.3 million in 2014, representing a CAGR of 19.2%, and is expected to grow at a CAGR of 7.4% from 2014 to 2019, reaching approximately 4.4 million by 2019. As of December 31, 2014, CDB Leasing ranked fifth among all leasing companies providing construction machinery leasing services in the PRC.

Entry Barriers of Ship, Commercial Vehicle and Construction Machinery Leasing Market

For ship leasing market, a leasing company needs adequate capital to finance their businesses. Meanwhile, a leasing company should also establish stable and high-quality overseas client bases and service networks to support its international development. Furthermore, a leasing company needs expertise in macroeconomics, international finance, international law, shipping assets management to keep its competitiveness in the international market. For commercial vehicle leasing market, unless a leasing company has adequate capital and low financing costs to support its business, it is difficult for the leasing company to develop the scales effect and win the intense market competition. For construction machinery leasing market, a leasing company not only needs strong financing capacity, low financing costs and risk control capability, but also needs to provide flexible and stable leasing solutions that meet the needs of its customers.

83