The Analyst

Monthly Inbound FDI in China and y-o-y Growth Rate (USD bn, Jan 2011-Jan 2012) China Capital: 14 0.35 0.30 12 0.25 Inbound/Outbound 0.20 10 0.15 0.10 FDI & Financial 8 0.05 0.00 6 -0.05 Markets -0.10 4 -0.15 -0.20 In 2011, FDI into China amounted to USD 116 bn, 2 -0.25 up by 9.72% y-o-y. However, FDI decreased y-o-y -0.30 0 -0.35 for four consecutive months from November 2011 Jan Feb Mar Apr MayJune July Aug Sep Oct Nov Dec Jan Feb 11 12 to February 2012. China’s outbound investment Source: MOFCOM; The Beijing Axis Analysis in 2011 reached USD 60.1 bn, registering a slight growth of 1.8% y-o-y. Significant investments Notable FDI Deals in China in 2011 occurred both in the resources and non-resources • In February, Softbank Corp., a Tokyo-based company engaged in telecommunications and e-commerce, acquired a 35% sectors. By Beijing Axis Capital stake in China’s SynaCast Corporation, a Shanghai-based online media company, for USD 244 mn • In March, Rhodia SA, a French specialty chemical manufacturer, completed its acquisition of a chemical facility owned by Foreign Direct Investment into China Suzhou HiPro Polymers Company for USD 489 mn • In August, Japanese trading house Itochu Corp. agreed to buy a Summary 30% stake in Chinese textile and apparel maker Shandong Ruyi • In 2011, foreign direct investment (FDI) into China amounted Science and Technology Group in a deal worth USD 200 mn to USD 116 bn, up by 9.72% y-o-y. Yet FDI into China fell for four • In October, Scotiabank, Canada’s third-largest bank and the one consecutive months from November 2011 to February 2012 with with the biggest overseas presence acquired a 20% stake in concerns that the Chinese economy is set for slower growth in 2012 China’s state-owned Bank of Guangzhou for about USD 735 mn • In 2011, wholly foreign-owned enterprises were the major • In November, Pearson agreed to buy China’s Global Education vehicles of investment in China, accounting for around 78% and Technology Group for USD 294 mn of total actually utilised capital • In November, French chemical maker Arkema agreed to • In 2011, 87% of FDI in China originated from other Asian acquire two chemical fi rms in China for a total of USD 365 mn countries/regions. Hong Kong, as the main bridge for inbound • In December, US-based IT company Expedia concluded its investment into mainland China, is still the largest source of acquisition of Renren’s stake in online travel provider eLong capital, contributing USD 77 bn or 66.4% of total FDI for USD 72.4 mn

Annual Inbound FDI in China (USD bn, 2005-2011) FDI into China by Source Country/Region (USD bn, 2011) 120 Netherlands (0.78) France (0.8) 100 (1.14) Others UK (1.61) (9.71) South Korea (2.55)

80 US (3)

Singapore (6.33) 60 (6.35) 40 Hong Kong Taiwan (77) (6.73) 20

0 2005 2006 2007 2008 2009 2010 2011 Source: MOFCOM; The Beijing Axis Analysis Source: MOFCOM; The Beijing Axis Analysis

19 І The Beijing Axis The China Analyst

Chinese Outbound Foreign Direct Investment China Financial Markets Summary China’s Stock Markets in 2011-Q1 2012 • In 2011, China’s OFDI amounted to USD 60.1 bn, an increase • In 2011, China experienced a bearish market and there was a of 1.8% y-o-y general downward trend in all of China’s three major indexes • In 2011, Beijing Axis Capital followed 122 overseas investment • Starting at 2,852.6, the Shanghai Stock Exchange Index activities by Chinese companies (including ongoing fi nished at 2,199.4, down by approximately 23%, yet it still transactions and concluded deals of previously announced outperformed the Shenzhen Stock Exchange Index transactions), among which 44 are resource-related investments and 78 are non-resources investments Shanghai Stock Exchange Index (Jan 2011-Mar 2012) • In terms of resources deals, became the most attractive region for Chinese investors with 14 deals followed 3200 by North America and Africa, with 10 and 8 deals, respectively. In terms of non-resources deals, Europe was favoured the most by Chinese investors with 25 deals, followed by Asia and North America, with 20 and 16 deals, respectively. Africa 2800 was the least favoured with only two non-resources deals by Chinese investors • In terms of deal size, oil & gas deals conducted by China’s three energy giants, CNPC, Sinopec, and CNOOC, are notable. 2400 Two of the most recent big deals occurred in North and South America, with both exceeding USD 2 bn in deal size (see Galp Energia and OPTI Canada deals below) 2000

Notable Chinese OFDI Deals in 2011 • In April, XCMC China, a wind energy company, acquired the Argentinian company Reta Region Wind Power for USD 200 mn 1600 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar • In May, China National Chemical Corporation (CNCC) concluded 11 12 an agreement with MA Industries, an Israeli farm chemicals Source: Shanghai Stock Exchange company, to buy a 60% interest in MA for USD 1.44 bn • In May, Fosun International, a leading private company in • The Shenzhen Stock Exchange Index slumped by China, acquired 9.5% of the Greece luxury jewellery maker approximately 30% over the year from 12,714 to 8,919. The Folli Follie for USD 123 mn market lost its momentum from the beginning of H2, while it • In July, China’s largest agricultural group COFCO announced its was relatively stable during the fi rst half of 2011 acquisition of Tully Sugar, an Australian company, for USD 149 mn • Like the other two indexes, the Growth Enterprise Market • In November, Sinopec bought a 30% stake in the Brazilian unit declined from 1,155 to 729.5 at the end of the year, registering of Portuguese oil company Galp Energia for USD 3.54 million a 37% plunge, despite a recovery period in Q3 after it fell to • In December, China Guangdong Nuclear Power Group around 790 at the end of H1 announced the acquisition of Australia-based Kalahari • Despite the stock market indexes plunging signifi cantly in Minerals for USD 990 mn 2011, the beginning of 2012 saw a recovery. The Shanghai • In December, CNOOC completed the acquisition of the Index and Shenzhen Index have climbed by around 9.5% and Canadian energy company OPTI Canada for USD 2.1 bn with 16%, respectively, as of mid-March, while the Growth Market the objective of securing oil resources in North America Index has also risen since the end of January

China’s Annual Outbound Non-fi nancial FDI and y-o-y Growth Shenzhen Stock Exchange Index (Jan 2011-Mar 2012) Rate (USD bn, 2005-11) 14000 70 150%

60 120% 12000 50

90% 40 10000

30 60%

20 8000 30% 10

6000 0 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2005 2006 2007 2008 2009 2010 2011 11 12 Source: MOFCOM; The Beijing Axis Analysis Source: Shenzhen Stock Exchange

20 І The Beijing Axis The China Analyst

Source: Various media; Company reports; The Beijing Axis Analysis

21 І The Beijing Axis