IDA Ireland PresentsIDA Ireland Presents

Attracting Chinese FDI into Ireland

Eileen SharpeHead of Strategic Development China

3rd September 2013

Agenda

IDA Ireland

China scale & perspective

China investment trends

China fundamental differences & underlying investment drivers

China challenges & opportunities

IDA Ireland Role & Structure

Attracts Foreign Direct Investment (FDI) into Ireland

Supports existing clients to develop additional business activities within Ireland

Builds relationships and makes connections for client companies within Ireland

Assists companies with their entry visa and work permit issues

Provides incentives to companies in certain areas and locations

IDA Ireland Strategy Focus 2020

Sector Focus Activity Focus

Why Ireland

Favourable Favourable Tax regime Tax regime

GoodGoodTrack Record Track Record

Large Large Talent Pool Talent Pool

Pro-business Pro-business Environment Environment

Large Talent Pool

Internationalized culture

Youngest workforce in Europe, with 34% under 25 years of age

Excellent skills and knowledge base with reputation for worker flexibility

IMD World Competitiveness Yearbook 2011

• 1st for the availability of skilled labour

• One of the best education systems in the world for Higher Education achievement (ranks 9th)

Good Track Record

8 of the top 10 in ICT

9 of the top 10 in Pharmaceuticals

17 of the top 25 in Medical Devices

More than 50% of the world’s leading Financial Services firms

10 top “Born on the Internet” companies

Favourable Tax Regime

Current rate of 12.5% amongst the lowest in the EU

Research and development tax incentives (25% Tax Credit)

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.

Ireland has signed an excellent double taxation treaty with China

Withholding Tax 0% Capital Gains Tax 0%

Pro-business Environment

Ireland is a member of the EU and also of the OECD

Only English speaking member of the Euro-zone

Efficient and responsive pro-business government

Advanced telecommunications infrastructure

Common law jurisdiction

IMD World Competiveness Yearbook 2011 - 1st for business legislation for foreign investors

Beijing (2013)•Centre of Government and political power•2nd 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 – Perspective & Scale

CHINA•World’s 3rd largest country•World’s largest population 1.4 billion

Shanghai

Shenzhen

BeijingBaoding

Tianjin

Chongqing

Chengdu

Guangzhou

Harbin

Suzhou

Nanyang

Shijiazhuang

Linyi

Wuxi

Wuhan

Nanjing

Hong Kong

Hangzhou

Shenyang

Changsha

China – Scale & Diversity of Market

World’s largest population - over 1.4 billion people & world’s third largest country

Urbanisation– 8 cities with population of 10 million, 93 cities with population of 5 million, 263 cities with population of over 1 million

Growing middle class forecasted to expand to 700 million by 2020

Diversity – Culture. Though Hans make up 91% of the population there are 56 officially recognised ethnic groups, 44 of which occupy autonomous regions

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

World’s second largest economy

GDP growth rate of 11.6% in 2011, falling to 9.7% in 2012

Slowing in 2013 with 7.5% for the 2nd quarter. Though this represents the slowest expansion since 2009, it remains significantly higher than western economies

All indicators suggest growth of 7% plus will be sustained in the medium term because of continued urbanisation, educational and infrastructure investment

Distributed economic growth – less developed regions such as Sichuan, Inner Mongolia and Chongqing are growing at rates of between 10% and 15% annually

Largest merchandise exporter in the world @ $1.58 trillion, 50% to Asia

Second largest importer of goods ($1.4 trillion)

World’s 3rd largest recipient of FDI ($100 billion) with ODI growing substantially

Shanghai in 1992

Shanghai in 2013

China – Government Policy

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)

Centralised decision-making on economic issues with strong Government influence on all large scale overseas investment

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

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

China – Outward FDI Trends

China – FDI Flows Relative to Global

Chinese Direct Investment in EU-27 (2000 – 2011)

Chinese Direct Investment in EU-27 ( 2000 – 2011)

China – Fundamental Differences

Dining Lifestyle Transportation

Ego Weekend Activities Attitude to Punctuality

Socialising Behaviours Leadership

Queuing

Chinese Investment - Underlying Drivers

Track RecordNatural Resources

Sales NetworksChinese Diaspora

TechnologyBrand acquisition

Familiarity & ease of doing business

China – Recognising the Challenges

Challenges to FDI business delivery

Peripherality / no direct access

Schengen visa constraints

Scale and diversity of market.

Culture / Language

Low base of awareness

Pattern of FDI – Market based and/or M&A

Relative cost base

Asian/domestic market focus for some sectors

Long conversion cycles and relationship building

Macroeconomic Risks

SocialRisk of social unrest due to urbanisation, inequality & gender imbalance

PoliticalTransition from traditional Communist Party rule to market socialism

FinancialLargely unknown – any significant credit tightening will put the brakes on FDI flow

IDA’s Presence in China and Sector Focus

• Shanghai (2006)

• Shenzhen (2010)

• Beijing (2013)

IDA Office in China

• Information Communication Technology

• International Financial Services

• Life Science

• Clean Tech

• State Assets and M&A

Sector Focus

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

Strategic Acquisition, Infrastructure Projects

Value PropositionsState 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

Legal System

Holding co regime

Government Access / State Interest in Chinese investment

Special Projects

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.

Ireland – Bridge, links China to the World

THANK YOU

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www.idaireland.ie

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