IDA Ireland Presents Attracting Chinese FDI into Ireland

IDA Ireland Presents Attracting Chinese FDI into Ireland Eileen Sharpe Head of Strategic Development China 3 rd September 2013

Agenda Ø IDA Ireland Ø China scale & perspective Ø China investment trends Ø China fundamental differences & underlying investment drivers Ø China challenges & opportunities

IDA Ireland Role & Structure Prime Minister Ø Attracts Foreign Direct Investment (FDI) into Ireland Minister for Jobs, Enterprise & Innovation IDA Board Ø Supports existing clients to develop additional business activities within Ireland Ø Builds relationships and makes connections for client companies within Ireland Ø Assists companies with their entry visa and work permit issues Overseas Offices Regional Offices Sectoral Divisions 250 staff globally Ø Provides incentives to companies in certain areas and locations

IDA Ireland Strategy Focus 2020 Sector Focus ICT Engineering Clean Tech Life Sciences Financial Services Content & Business Services Activity Focus

Why Ireland Favourable Tax regime Large Talent Pool Good Track Record Pro-business Environment

Large Talent Pool Ø Internationalized culture Ø Youngest workforce in Europe, with 34% under 25 years of age Ø Excellent skills and knowledge base with reputation for worker flexibility Ø IMD World Competitiveness Yearbook 2011 • 1 st for the availability of skilled labour • One of the best education systems in the world for Higher Education achievement (ranks 9 th)

Good Track Record Ø 8 of the top 10 in ICT Ø 9 of the top 10 in Pharmaceuticals Ø 17 of the top 25 in Medical Devices Ø More than 50% of the world’s leading Financial Services firms Ø 10 top “Born on the Internet” companies

Favourable Tax Regime Ø Current rate of 12. 5% amongst the lowest in the EU Ø Research and development tax incentives (25% Tax Credit) Ø Ireland’s extensive double taxation treaty network with treaties with 69 countries, of which 59 are currently in force, and negotiations for new treaties are on-going with a further 18 countries. Ø Ireland has signed an excellent double taxation treaty with China § § Withholding Tax 0% Capital Gains Tax 0%

Pro-business Environment Ø Ireland is a member of the EU and also of the OECD Ø Only English speaking member of the Euro-zone Ø Efficient and responsive pro-business government Ø Advanced telecommunications infrastructure Ø Common law jurisdiction Ø IMD World Competiveness Yearbook 2011 - 1 st for business legislation foreign investors

China – Perspective & Scale CHINA • World’s 3 rd largest country • World’s largest population 1. 4 billion Harbin Shenyang Beijing Baoding Shijiazhuang Tianjin Linyi Nanyang Nanjing Wuxi Suzhou Chengdu Chongqing Wuhan Hangzhou Changsha Shenzhen Guangzhou Hong Kong Shanghai Beijing (2013) • Centre of Government and political power • 2 nd largest city • HQs of main banks and financial institutions • Home of State-Owned Enterprises Shanghai (2006) • Largest city by population • Massive inward FDI flow • Major transport hub Shenzhen (2010) • Designated Government high tech center • China’s most successful economic zone • Home to PRCs top high tech companies

China – Scale & Diversity of Market Ø World’s largest population - over 1. 4 billion people & world’s third largest country Ø Urbanisation– 8 cities with population of 10 million, 93 cities with population of 5 million, 263 cities with population of over 1 million Ø Growing middle class forecasted to expand to 700 million by 2020 Ø Diversity – Culture. Though Hans make up 91% of the population there are 56 officially recognised ethnic groups, 44 of which occupy autonomous regions Ø Diversity – Gender Imbalance. Today in China 119 boys exist for every 100 girls; in some regions the ratio is 130 boys to 100 girls

China – Economic Growth Ø World’s second largest economy Shanghai in 1992 Ø GDP growth rate of 11. 6% in 2011, falling to 9. 7% in 2012 Ø Slowing in 2013 with 7. 5% for the 2 nd quarter. Though this represents the slowest expansion since 2009, it remains significantly higher than western economies Ø All indicators suggest growth of 7% plus will be sustained in the medium term because of continued urbanisation, educational and infrastructure investment Ø Distributed economic growth – less developed regions such as Sichuan, Inner Mongolia and Chongqing are growing at Shanghai in 2013 rates of between 10% and 15% annually Ø Largest merchandise exporter in the world @ $1. 58 trillion, 50% to Asia Ø Second largest importer of goods ($1. 4 trillion) Ø World’s 3 rd largest recipient of FDI ($100 billion) with ODI growing substantially

China – Government Policy Ø Aggressive global expansion policy being pursued by Chinese Government called the Go-out-Strategy: 18, 000 Chinese enterprises now overseas (investment: US$424. 8 billion) Ø Centralised decision-making on economic issues with strong Government influence on all large scale overseas investment Ø This influence extends to company level. All SOEs have an operational CEO who reports into a designated Communist Party of China official, based in the company. Two parallel structures exist – political and business Ø Impact of Xi Jinping’s visit to Ireland in 2012 cannot be overstated as it positions Ireland positively with senior party officials in the new 10 year Government

All units in USD Billions China – Outward FDI Trends

All units in USD Billions China – FDI Flows Relative to Global

Chinese Direct Investment in EU-27 (2000 – 2011) 90 82 80 70 69 60 54 54 50 Number of Greenfield Projects 45 42 40 37 30 29 28 26 20 16 13 10 0 3 0 2000 5 4 2001 12 14 12 5 4 3 2002 16 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Number of Acquisitions

All units in USD Million Chinese Direct Investment in EU-27 ( 2000 – 2011)

China – Fundamental Differences Dining Ego Socialising Queuing Lifestyle Transportation Weekend Activities Attitude to Punctuality Behaviours Leadership

Chinese Investment - Underlying Drivers Track Record Natural Resources Chinese Diaspora Brand acquisition Sales Networks Technology Familiarity & ease of doing business

China – Recognising the Challenges to FDI business delivery ØPeripherality / no direct access ØSchengen visa constraints ØScale and diversity of market. ØCulture / Language ØLow base of awareness ØPattern of FDI – Market based and/or M&A ØRelative cost base ØAsian/domestic market focus for some sectors ØLong conversion cycles and relationship building Macroeconomic Risks Social ØRisk of social unrest due to urbanisation, inequality & gender imbalance Political ØTransition from traditional Communist Party rule to market socialism Financial ØLargely unknown – any significant credit tightening will put the brakes on FDI flow

IDA’s Presence in China and Sector Focus IDA Office in China Sector Focus • Shanghai (2006) • Information Communication Technology • Shenzhen (2010) • International Financial Services • Beijing (2013) • Life Science • Clean Tech • State Assets and M&A

Chinese Companies in Ireland 在爱尔兰的中国企业

High Level Strategy for China 1. Win High Quality Investments and promote job creation concentrating on sectors with highest potential for delivery 2. Build a reputation for Ireland as leading location for Chinese MNCs particularly in Financial and ICT sectors 3. Expand Government to Government partnership at all levels 4. Pursue Collaborative and Innovative Approaches to the Business, both internally and externally, including game changing national initiative 5. Build resource capability in China and Ireland to ensure operational effectiveness 6. Undertake High Visibility Marketing & Communications / Reputation Enhancing

Ireland / China Value Proposition Focus Financial Services Target Activities Aircraft & Asset Leasing, Mid office functions to support EU expansion, Regional HQ / operations, Project Financing, Payments / Remittances, Funds & Insurance ICT including Digital Media State Owned Enterprises / Conglomerates, Engineering LS players M&A, Partnerships, Regional Manufacturing – final assembly, R&D, Regional HQ & Sales, Customer / Tech Support, Localisation. Value Propositions State assets for sale or development Excellent China Ireland relations Familiarity / ease of doing business / language EU Membership /Status market access Track Record / Client base Tax Regime, DTA Key Tech Expertise Sino Irish technology funding Special Projects Strategic Acquisition, Infrastructure Projects Legal System Holding co regime Government Access / State Interest in Chinese investment

Ireland – Bridge, links China to the World

THANK YOU For more information please see our website www. idaireland. ie Or Contact Telephone: +353 (0)1 603 4000