Seb Country Analysis Feb 2009 China

China, P.R.: Mainland SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS

February 5, 2009

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China’s development continuous to confound most analysts and the recent surprise is this time  on the downside. Although the picture is still unclear, recent numbers may point to an outright  recession in early 2009. The big question is if it will be a V‐shaped or a L‐shaped downturn. =

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Percent

qÜÉ=ëäçïÇçïå=~ÅÅÉäÉê~íÉëK=qÜÉ=ëçÑíåÉëë=áå=ÇÉã~åÇ=íÜ~í=~ééÉ~êÉÇ=ëÜçêíäó=~ÑíÉê=íÜÉ= _ÉáàáåÖ=pìããÉê=läóãéáÅë=áå=^ìÖìëí=OMMUI=áåíÉåëáÑáÉÇ=ÇìêáåÖ=íÜÉ=ä~íÉ=é~êí=çÑ=íÜÉ= óÉ~êK==qÜÉ=Çêçé=áå=ÜçìëÉ=éêáÅÉë=~ÅÅÉäÉê~íÉÇ=~ÑíÉê=Ü~îáåÖ=éÉ~âÉÇ=áå=nN=~åÇ=Å~ê=ë~äÉë= ÑçääçïÉÇ=ëìáí=ÇêçééáåÖ=ãçêÉ=íÜ~å=NQB=áå=kçîÉãÄÉê=Åçãé~êÉÇ=ïáíÜ=íÜÉ=ë~ãÉ=ãçåíÜ= OMMTK==qÜ~í=éêçÄ~Ääó=ãìÅÜ=êÉÑäÉÅíÉÇ=íÜÉ=íáÖÜíÉåáåÖ=çÑ=ÅêÉÇáí=ÅçåÇáíáçåë=ïÜáÅÜ=íÜÉ= ~ìíÜçêáíáÉë=Ü~Ç=~ÇãáåáëíÉêÉÇ=áå=íÜÉ=É~êäó=ëéêáåÖ=íç=ëíÉã=íÜÉ=íáÇÉ=çÑ=ëç~êáåÖ=ÅçåëìãÉê= éêáÅÉë=~í=íÜ~í=íáãÉI=Äìí=íÜÉ=ÅçåíáåìÉÇ=ëíçÅâ=ã~êâÉí=êçìí=ëáåÅÉ=ä~íÉ=OMMT=ï~ë=äáâÉäó=~äëç= ~=ÅìäéêáíK==få=íìêå=íÜÉëÉ=Ñ~Åíçêë=~ÑÑÉÅíÉÇ=éêçÇìÅÉê=ÅçåÑáÇÉåÅÉ=~ë=ëÉÉå=áå=íÜÉ=ëíÉÉé=Çêçé= çÑ=íÜÉ=mjf=EmìêÅÜ~ëáåÖ=j~å~ÖÉêë=fåÇÉñF=ëáåÅÉ=j~êÅÜI=~åÇ=íÜÉ=“cáñÉÇ=^ëëÉí= fåîÉëíãÉåíÒ=áåÇáÅ~íçê= China, Consumer Surveys ïÉ~âÉåÉÇ=Ñêçã=OVB=áå= 100 Why so pessimistic? pÉéíÉãÄÉê=íç=OQB=áå= After the successes in the Olympics 98 kçîÉãÄÉê=Ñçê=ìêÄ~å=~êÉ~ëK== China's consumers have turned bñéçêíëI=Äó=Åçåíê~ëíI=ëÉÉãÉÇ= 95 increasingly gloomy åçí=~ë=~=ã~àçê=ÅçåÅÉêå=ìåíáä= íÜÉ=ä~íÉëí=ãçåíÜë=çÑ=íÜÉ=óÉ~êI= 93 Äìí=íÜÉ=åìãÄÉêë=Ñçê= 90 kçîÉãÄÉê=~åÇ=aÉÅÉãÄÉê= 2005 2006 2007 2008 ëÜçìäÇ=Ü~îÉ=ëÜçí=Ççïå=íÜÉ= ä~ëí=~ÇîçÅ~íçêë=çÑ=íÜÉ= Consumer confidence index ÇÉÅçìéäáåÖ=ãóíÜK=^ë=~=êÉëìäíI= Consumer expectation index Consumer satisfaction index ÖêçïíÜ=áå=nQ=ï~ë=Ççïå=íç=QB= Source: Reuters EcoWin

EóçóF=áå=åçãáå~ä=Ççää~ê=íÉêãëI= Ñêçã=OPB=áå=nPI=éêçÄ~Ääó=áåÇáÅ~íáåÖ=ÅäçëÉ=íç=~=ëí~åÇëíáää=áå=êÉ~ä=íÉêãëK==qÜÉêÉ=~êÉ= êÉéçêíë=çÑ=íÜçìë~åÇë==ëã~ää=~åÇ=ãÉÇáìã=ëáòÉÇ=Éñéçêí=Åçãé~åáÉë=ÑçäÇáåÖ=áå=êÉÅÉåí= ãçåíÜë=é~êíáÅìä~êäó=áå=`Üáå~Ûë=Éñéçêí=ÜìÄ=áå=íÜÉ=mÉ~êä=oáîÉê=ÇÉäí~J~êÉ~K===eçïÉîÉêI= ~ë=áãéçêíë=Ü~îÉ=Ñ~ääÉå=áå=í~åÇÉãI=íÜÉ=íê~ÇÉ=Ä~ä~åÅÉ=Ü~ë=ÄÉÉå=äáííäÉ=~ÑÑÉÅíÉÇK==qÜÉ= ëÜ~êé=Çêçé=áå=çáä=éêáÅÉë=Ü~ë=éä~óÉÇ=áíë=é~êí=áå=íÜÉ=êÉÇìÅíáçå=çÑ=íÜÉ=íçí~ä=áãéçêí=ÄáääI= Äìí=ëç=Ü~ë=íÜÉ=ëíÉÉé=Ñ~ää=áå=ÇÉäáîÉêáÉë=çÑ=áåíÉêãÉÇá~íÉ=éêçÇìÅíë=ã~áåäó=Ñçê=íÜÉ= éêçÅÉëëáåÖ=áåÇìëíêó=ïÜáÅÜ=ã~âÉë=ìé=Ü~äÑ=çÑ=íçí~ä=ÉñéçêíëK=qÜ~í=ã~ó=éçáåí=íç= ÅçåíáåìÉÇ=Éñéçêí=êÉÇìÅíáçå=ëçãÉ=ãçåíÜë=ÑìêíÜÉê=Ççïå=íÜÉ=êç~ÇK== fë=`Üáå~=áå=íÉÅÜåáÅ~ä=êÉÅÉëëáçå\==bîÉå=êÉåçïåÉÇ=éÉëëáãáëíëI=áåÅäìÇáåÖ=mêçÑÉëëçê= oçìÄáåá=çÑ=kvrI=Ü~îÉ=ëç=Ñ~ê=äáãáíÉÇ=íÜÉáê=ÇçïåëáÇÉ=éêÉÇáÅíáçåë=íç=“ÖêçïíÜ= êÉÅÉëëáçåÒJíÉêãëK==eçïÉîÉêI=~ë=íÜÉ=nQ=êÉ~ä=dam=ÖêçïíÜ=íáÅâÉÇ=áå=~í=çåäó=SIUB= important your attention is drawn to the statement on the back cover of this report which affects your rights.

SEB Merchant Banking Country Risk Analysis February 5, 2009

ÖêçïíÜI=íÜÉ=èìÉëíáçå=~êçëÉ=áÑ=`Üáå~=ëí~íáëíáÅ~ääó=ëéÉ~âáåÖ=~äêÉ~Çó=áë=áå=~=íÉÅÜåáÅ~ä= êÉÅÉëëáçåI=åçêã~ääó=ÇÉÑáåÉÇ=~ë=íïç=ëìÄëÉèìÉåí=èì~êíÉêë=çÑ=åÉÖ~íáîÉ=ÖêçïíÜ=èì~êíÉêJ çåJ=èì~êíÉê=EèçèFK==qÜÉ=éìÄäáëÜÉÇ=SIUB=êÉëìäí=áë=áå=óÉ~êJçåJóÉ~ê=EóçóF=íÉêãëK=^ë=íÜÉ= ~ìíÜçêáíáÉë=Çç=åçí=éìÄäáëÜ=ãçêÉ=ÇÉí~áäëI=áåÇÉéÉåÇÉåí=ÉÅçåçãáëíë=Ü~îÉ=Å~äÅìä~íÉÇ=íÜÉ= èçè=åìãÄÉê=çå=íÜÉáê=çïåK==^éé~êÉåíäóI=íÜáë=ÅçãÉë=ÅäçëÉ=íç=òÉêçK==^äíÜçìÖÜ=ëçãÉ= áåÇáÅ~íçêë=áå=g~åì~êó=OMMV=ÄÉÖ~å=íç=éçáåí=ìéï~êÇI=áåÅäìÇáåÖ=íÜÉ=mjf=ëìêîÉóI=íÜÉ= äáâÉäáÜççÇ=áë=Ñçê=dam=ÖêçïíÜ=åçí=íç=áãéêçîÉ=ãìÅÜ=áå=íÜÉ=åÉñí=ÑÉï=ãçåíÜëI= ëìÖÖÉëíáåÖ=íÜ~í=nN=ïçìäÇ=ÄÉ=ê~íÜÉê=Ñä~í=Åçãé~êÉÇ=ïáíÜ=íÜÉ=éêÉîáçìë=èì~êíÉê=~åÇ=íÜ~í= ~=íÉÅÜåáÅ~ä=êÉÅÉëëáçå=ÅçìäÇ=ÄÉ=áå=íÜÉ=ã~âáåÖK==

Percent

cáëÅ~ä=~åÇ=ãçåÉí~êó=ëíáãìäìë=éä~åK==^ë=íÜÉ=ÅçåëìãÉê=éêáÅÉ=áåÑä~íáçå=éÉ~âÉÇ=áå=íÜÉ= ëìããÉê=~åÇ=áåíÉêå~íáçå~ä=éêáÅÉ=íêÉåÇë=ëÉÉãÉÇ=íç=ÜÉê~äÇ=~=åÉï=~êÉ~=çÑ=ÇÉÑä~íáçå= ê~íÜÉê=íÜ~å=áåÑä~íáçåI=íÜÉ= Credits and GDP ~ìíÜçêáíáÉë=ïÉêÉ=èìáÅâ=áå= 24 êÉîÉêëáåÖ=íÜÉ=ãçåÉí~êó= 21 íáÖÜíÉåáåÖ=áãéçëÉÇ=ëçãÉ= 19 ãçåíÜë=É~êäáÉêK==`êÉÇáí=ÅÉáäáåÖë= 16 ïÉêÉ=äáÑíÉÇI=áåíÉêÉëí=ê~íÉë= 14 êÉÇìÅÉÇ=~åÇ=êÉëÉêîÉ= Could this kick 11 start the êÉèìáêÉãÉåíë=É~ëÉÇK==^äëçI=íÜÉ= economy soon? 9 éêçÅÉëë=çÑ=äÉÖ~äáòáåÖ=íÜÉ= 6 ~éé~êÉåíäó=ä~êÖÉ=ÖêÉó=ã~êâÉí=Ñçê= 2003 2004 2005 2006 2007 2008 ÅêÉÇáíë=ï~ë=ëéÉÉÇÉÇ=ìé=áå=ã~åó= Bank Loans éêçîáåÅÉëK=qÜ~í=ã~êâÉí=áë= GDP Current prices áãéçêí~åí=Ñçê=ä~Äçê=áåíÉåëáîÉ= pjbëI=ïÜáÅÜ=ëç=Ñ~ê=Ü~îÉ=ÄÉÉå=íÜÉ=Ü~êÇÉëí=Üáí=Äó=íÜÉ=éêçÄäÉãë=áå=`Üáå~Ûë=Éñéçêí= ëÉÅíçêK=cáå~ääó=áå=kçîÉãÄÉêI=íÜÉ=~ìíÜçêáíáÉë=~äëç=ä~ìåÅÜÉÇ=~=ã~àçê=ÑáëÅ~ä=ëíáãìäìë= é~Åâ~ÖÉ=Ñçê=OMMVJOMNM=ïáíÜ=~=íçí~ä=éêáÅÉ=í~Ö=çÑ=`kv=Q=íêáääáçå=E~Äçìí=ASMM=ÄáääK=çê== ENPBLdamFK=qÜáë=éêçÖê~ã=~áãë=~í=~ÅÅÉäÉê~íáåÖ=áåÑê~ëíêìÅíìêÉ=éêçàÉÅíëI=áãéêçîáåÖ= ëÅÜççäë=~åÇ=ãÉÇáÅ~ä=ÜÉ~äíÜ=Å~êÉ=é~êíáÅìä~êäó=áå=íÜÉ=Åçìåíêó=ëáÇÉI=~åÇ=ëéÉÉÇáåÖ=ìé=íÜÉ= íê~åëÑÉê=çÑ=áåÅçãÉ=íç=êìê~ä=ÇáëíêáÅíëK==qÜÉ=ä~ííÉê=áë=áå=äáåÉ=ïáíÜ=~=äçåÖJëí~åÇáåÖ=~áã=çÑ= íÜÉ=ÖçîÉêåãÉåí=íç=ÇáëíêáÄìíÉ=íÜÉ=Ñêìáíë=çÑ=ÉÅçåçãáÅ=ÖêçïíÜ=ãçêÉ=ÉîÉåäó=~Åêçëë=íÜÉ= Åçìåíêó=Äìí=ïçìäÇ=éêçÄ~Ääó=~äëç=ÄÉ=ÉÑÑÉÅíáîÉ=áå=ÄççëíáåÖ=ÅçåëìãÉê=ÇÉã~åÇ=~ë=íÜÉ= ãçêÉ=ïÉ~äíÜó=ìêÄ~å=ÇïÉääÉêë=~êÉ=äáâÉäó=íç=Ü~îÉ=~=ÜáÖÜÉê=ã~êÖáå~ä=ë~îáåÖë=éêçéÉåëáíó= íÜ~å=íÜÉáê=éççêÉê=Åçìëáåë=Ñêçã=íÜÉ=ÅçìåíêóK==eçïÉîÉêI=íÜÉ=ÉÑÑÉÅíáîÉ=ëáòÉ=çÑ=íÜÉ= ëíáãìäìë=Ü~ë=ÄÉÉå=èìÉëíáçåÉÇ=Äó=áåÇÉéÉåÇÉåí=çÄëÉêîÉêëI=~ë=íÜÉ=é~Åâ~ÖÉ=ëÉÉãë=íç= áåÅäìÇÉ=ã~åó=éêçàÉÅíë=íÜ~í=~åóï~ó=ïÉêÉ=~=é~êí=çÑ=éêÉîáçìëäó=~ééêçîÉÇ=ÑáîÉJóÉ~ê= éä~åëI=~åÇ=íÜ~í=íÜÉ=êÉ~ä=~ÇÇáíáçå~ä=ëéÉåÇáåÖ=ÅçìäÇ=ÄÉ=åç=ãçêÉ=íÜ~å=~=íÜáêÇ=çÑ=íÜÉ= ÜÉ~ÇäáåÉ=åìãÄÉêK==kÉîÉêíÜÉäÉëëI=íÜÉ=é~Åâ~ÖÉ=Ü~ë=ÄÉÉå=ÖêÉÉíÉÇ=~ë=~=ïÉäÅçãÉ=ëíÉé=íç= êÉÄ~ä~åÅÉ=íÜÉ=ÉÅçåçãó=íçï~êÇ=êÉäóáåÖ=ãçêÉ=çå=ÇçãÉëíáÅ=ÇÉã~åÇI=áå=é~êíáÅìä~ê= ÅçåëìãÉê=ÇÉã~åÇI=íÜ~å=Éñéçêíë=~åÇ=ÉñíÉêå~ä=ÇÉã~åÇK== Source: Reuters EcoWin

eçéÉë=Ñçê=~=sJëÜ~éÉÇ=êÉÅçîÉêó\==`Üáå~Ûë=ÉÅçåçãó=Ü~ë=çå=éêÉîáçìë=çÅÅ~ëáçåë= êÉ~ÅíÉÇ=éçëáíáîÉäó=íç=ëíáãìäìë=é~Åâ~ÖÉë=ä~ìåÅÜÉÇ=Äó=íÜÉ=ÅÉåíê~ä=ÖçîÉêåãÉåí=~åÇ=áí=áë= åçí=ÉñÅäìÇÉÇ=íÜ~í=íÜÉ=ÖçîÉêåãÉåí=ïáää=ÄÉ=~ÄäÉ=íç=çåÅÉ=~Ö~áå=~ÇãáåáëíÉê=ëìÅÜ=~=ÑáñK=fíë= î~ëí=êÉëÉêîÉë=áåëíáää=ÅçåÑáÇÉåÅÉ=íÜ~í=áí=Ü~ë=íÜÉ=êÉëçìêÅÉë=íç=Çç=ëçK==eçïÉîÉêI=íÜÉ= ÅÜ~ääÉåÖÉë=ã~ó=íÜáë=íáãÉ=ÄÉ=ÖêÉ~íÉê=íÜ~å=çå=éêÉîáçìë=çÅÅ~ëáçåëK==qÜÉ=ïçêäÇ=ÉÅçåçãó= ã~ó=ÄÉ=áå=Ñçê=~=äçåÖ=êÉÅÉëëáçå=ãÉ~åáåÖ=íÜÉ=ÉñíÉêå~ä=ÇÉã~åÇ=ã~ó=åçí=ÅçãÉ=Ä~Åâ=íç= ~ëëáëí=íÜÉ=êÉÅçîÉêó=~åóíáãÉ=ëççåK==^ë=ëìÅÜI=`Üáå~=ã~ó=åÉÉÇ=íç=êÉíÜáåâ=áíë= ÇÉîÉäçéãÉåí=ãçÇÉä=Ä~ëÉÇ=çå=Éñéçêí=äÉÇ=ÖêçïíÜK==qÜ~í=ãçÇÉä=Ü~ë=ëç=Ñ~ê=ëÉêîÉÇ=íÜÉ= Åçìåíêó=ÉñíêÉãÉäó=ïÉääI=~åÇ=áí=ã~ó=åçí=ÄÉ=~=ëáãéäÉ=í~ëâ=íç=ÇáíÅÜ=~å=çäÇ=ëìÅÅÉëëÑìä= ëíê~íÉÖó=çîÉêJåáÖÜíK==få=íÜÉ=ãÉ~å=íáãÉ=áí=Å~å=éêçé=ìé=ÇçãÉëíáÅ=ÇÉã~åÇ=Äó= ÖçîÉêåãÉåí=ëéÉåÇáåÖI=Äìí=êáëâë=áå=íÜÉ=éêçÅÉëë=áå~ÇîÉêíÉåíäó=êÉîÉêëáåÖ=ã~åó=çÑ=íÜÉ= êÉÑçêãë=çÑ=êÉÅÉåí=ÇÉÅ~ÇÉëK===eçïÉîÉêI=~ÅÅçêÇáåÖ=íç=ëçãÉ=~å~äóëíë=íÜÉ=ÖçîÉêåãÉåí=áë= 2

SEB Merchant Banking Country Risk Analysis February 5, 2009

îÉêó=ãìÅÜ=ÑçÅìëÉÇ=çå=íÜÉ=ëçÅá~ä=Ä~ä~åÅÉ=~åÇ=ïçìäÇ=åçí=êáëâ=~=ëíÉÉé=êáëÉ=áå=íÜÉ= åìãÄÉêë=çÑ=ìåÉãéäçóÉÇK=^ë=~=ÅçåëÉèìÉåÅÉI=áí=ïáää=ÄÉ=ÜáÖÜäó=ãçíáî~íÉÇ=íç=Çç=áíë= ìííÉêãçëí=íç=âáÅâJëí~êí=íÜÉ=ÉÅçåçãó=íç=~îçáÇ=~=iJëÜ~éÉÇ=äçåÖ=êÉÅÉëëáçåK=== `çìäÇ=`Üáå~=ÄÉ=ãÉí=ïáíÜ=éêçíÉÅíáçåáëã=Ñêçã=çíÜÉê=ÅçìåíêáÉë\==páåÅÉ=íÜÉ=ëìããÉê= çÑ=OMMUI=`Üáå~=ÇáëÅçåíáåìÉÇ=íÜÉ=~ééêÉÅá~íáçå=çÑ=íÜÉ=êÉãáåÄá=îáëJ¶Jîáë=íÜÉ=Ççää~êI=Äìí= Ü~ë=ÅçåíáåìÉÇ=íç=~ééêÉÅá~íÉ=áå=ÉÑÑÉÅíáîÉ=íÉêãë=~ë=íÜÉ=Ççää~ê=ëíêÉåÖíÜÉåÉÇ=îáëJ¶Jîáë=íÜÉ= Éìêç=~åÇ=ãçëí=çíÜÉê=ÅìêêÉåÅáÉë=ÉñÅÉéí=íÜÉ=óÉåK==eçïÉîÉêI=íÜÉ=åÉï=“éÉÖÒ=~Ö~áåëí=íÜÉ= Ççää~ê=Ü~ë=åçí=ÄÉÉå=êÉÅÉáîÉÇ=ïÉää=Äó=rp=éçäáíáÅá~åëI=~åÇ=íÜÉ=êáëâ=áë=íÜ~í=íÜÉ=åÉï= ~Çãáåáëíê~íáçå=áå=t~ëÜáåÖíçå=ÅçìäÇ=áå=íÜÉ=åÉñí=ÑÉï=ãçåíÜë=å~ãÉ=`Üáå~=~=“ÅìêêÉåÅó= ã~åáéìä~íçêÒK=qÜ~í=ïçìäÇ=íêáÖÖÉê=~=éêçÅÉëë=áå=`çåÖêÉëë=íÜ~í=ÅçìäÇ=ÉåÇ=ïáíÜ= áãéçëáåÖ=éêçíÉÅíáçåáëí=ãÉ~ëìêÉë=~Ö~áåëí=áãéçêíë=Ñêçã=`Üáå~K=br=~åÇ=çíÜÉê=ÅçìåíêáÉë= ÅçìäÇ=í~âÉ=íÜ~í=~ë=ÖêÉÉå=äáÖÜí=íç=Ñçääçï=ëìáíK==lå=íÜÉ=çíÜÉê=Ü~åÇI=Åçëí=ÅçåëáÇÉê~íáçåë= Ü~îÉ=ÄÉÅçãÉ=~å=áåÅêÉ~ëáåÖäó=éêÉëëáåÖ=áëëìÉ=Ñçê=ã~åó=`ÜáåÉëÉ=ÉñéçêíÉêëI=~åÇ=íÜÉ= ÖçîÉêåãÉåí=Ü~ë=ÄÉÉå=Å~ìÖÜí=ÄÉíïÉÉå=~=êçÅâ=~åÇ=~=Ü~êÇ=éä~ÅÉK==qÜáë=Ü~ë=ÄÉÉå=~= äççãáåÖ=Ç~åÖÉê=Ñçê=ëçãÉ=íáãÉI=Äìí=ã~ó=Ü~îÉ=ÅçãÉ=íç=~=ÜÉ~Ç=É~êäáÉê=íÜ~å=ÉñéÉÅíÉÇK== JGJ= “^í=íÜÉ=Åêçëëêç~ÇëÒ=áë=~=ãáëìëÉÇ=ÅäáÅܨ=Äìí=ëÉÉãë=íç=Ñáí=`Üáå~Ûë=áå=áíë=éêÉëÉåí= ëáíì~íáçåK=^=äçåÖ=ëìÅÅÉëëJëíçêó=ã~ó=ÄÉ=~Äçìí=íç=ÅçãÉ=íç=~å=ÉåÇ=~åÇ=íç=ëÉÅìêÉ= ÅçåíáåìÉÇ=éêçÖêÉëë=íÜÉ=ÇÉîÉäçéãÉåí=ëíê~íÉÖó=ã~ó=Ü~îÉ=íç=ÄÉ=êÉíÜçìÖÜíK==líÜÉê= ÅçìåíêáÉë=Ü~îÉ=ÄÉÉå=áå=íÜÉ=ë~ãÉ=ëáíì~íáçå=~åÇ=ìëì~ääó=ã~å~ÖÉÇ=íÜÉ=éêçÅÉëë=áå=~= êÉ~ëçå~Ääó=ëãççíÜ=ã~ååÉêI=áå=é~êíáÅìä~ê=ÅçìåíêáÉë=ïáíÜ=ÉäÉÅíÉÇ=ÖçîÉêåãÉåíëK=qÜÉ= ëÅçéÉ=çÑ=íÜáë=åçíÉ=ÇçÉë=åçí=~ääçï=Ñçê=~=äÉåÖíÜó=Éä~Äçê~íáçå=çå=íÜÉ=ëìÄàÉÅíK=pìÑÑáÅÉ=íç= ë~óI=Ñçê=íÜÉ=åÉñí=ÑÉï=óÉ~êë=ïÉ=ÑçêÉëÉÉ=íÜÉ=ÖçîÉêåãÉåí=ÄÉáåÖ=~ÄäÉ=íç=ëí~îÉ=çÑÑ=ëçÅáÉí~ä= ÇáëíìêÄ~åÅÉë=íÜ~í=ÅçìäÇ=íÜêÉ~íÉå=áíë=Åä~áã=íç=éçïÉê=ìåÇÉê=ãçëí=ÅáêÅìãëí~åÅÉë=~åÇ= íÜ~í=íÜÉ=ÖêÉ~íÉëí=êáëâ=áë=Ñçê=íÜÉ=ÖçîÉêåãÉåí=íç=çîÉêêÉ~Åí=~åÇ=íÜÉêÉÄó=ëÉí=íÜÉ=ÅäçÅâ= Ä~Åâ=çå=êÉÑçêãëK==eçïÉîÉêI=íÜÉ=~ìíÜçêáíáÉë=ÅçìäÇ=çîÉê=íÜÉ=åÉñí=ÑÉï=óÉ~êë=ãÉÉí=~=íÉëí= åçí=çåäó=áå=ÉÅçåçãáÅ=Äìí=~äëç=áå=éçäáíáÅ~ä=íÉêãë=åçí=ëÉÉå=Ñçê=~=äçåÖ=íáãÉI=~åÇ=áí=áë=óÉí= íç=ëÉÉ=Üçï=áí=ïáää=ÅçéÉK==qÜÉ=ê~íáåÖ=~ÖÉåÅáÉë=Ü~îÉ=ëç=Ñ~ê=åçí=áëëìÉÇ=~åó=ê~íáåÖ= ï~êåáåÖë=çå=`Üáå~I=Äìí=~éé~êÉåíäó=Ü~äíÉÇ=íÜÉ=éêçÅÉëë=çÑ=ìéÖê~ÇáåÖK== =

Resilience

Key ratios

2009

GDP/capita ($)

3414

GDP (%chg.)

5,6% Macro balance

15

10

Liquidity

5

0

Inflation

0,9%

Trade balance/GDP

8,8%

Reserves/imports (months) Budget balance/GDP

24

cáíÅÜW=^H pCmW==^=

8%

mÉÉêëW

hçêÉ~ p~ìÇá=^ê~Äá~ `ÜáäÉ

Information China Average EM Saudi Arabia

-1%

Government debt/GDP bñíÉêå~ä=ê~íáåÖëW=

Absence of event risk

Graph: China scores above average on macro balance and liquidity much like Saudi Arabia, but is weaker than the average on reliable information. Resilience is about the average of emerging markets but event risk is weaker like Saudi Arabia.

3

SEB Merchant Banking Country Risk Analysis February 5, 2009

= Key data: 2004 2005 2006 2007 GDP (mill.US$) 1 931 660 2 247 790 2 649 280 3 290 920 GDP/capita (US$) 1481 1712 2006 2478 GDP (%chg.) 10,1% 10,4% 11,6% 11,9% Investments/GDP 42% 43% 44% 44% Budget balance/GDP -1% -1% -1% 1% Govt debt/GDP 16% 15% 14% 12% CPI inflation (%chg.) 3,8% 1,8% 1,8% 4,8% 11,4% 10,1% 12,8% 14,0% Money demand (%chg.) Stock prices (%chg.) -1% -21% 59% 144% Interest rates 5,4% 5,6% 5,9% 6,9% Exch. Rate ($) 8,28 8,19 7,97 7,61 Trade/GDP (%) 58% 62% 65% 65% Oil price (Brent) $38 $54 $65 $73 Millions US $ Export of goods 593 393 762 484 969 682 1 220 000 Imports of goods 534 410 628 295 751 936 904 618 Other: 9 676 26 629 32 120 56 451 Current account ($ mill) 68 659 160 818 249 866 371 833 (% of GDP) 3,6% 7,2% 9,4% 11,3% FDI 53 132 67 821 56 935 121 418 Loan repayments -16 289 -20 848 -18 122 -23 829 Net other capital flows 40 441 21 929 -61 612 -63 340 Balance of payments 145 943 229 720 227 067 406 083 Reserves 513 260 742 980 970 047 1 376 130 Total debt 232 983 268 896 307 383 335 000 o/w short term debt 105 391 136 081 163 961 181 753 Source: OEF (Oxford Economic Forecasting) and SEB estimates.

2008 2009 2010 2011 4 128 040 4 587 940 5 345 190 6 014 140 3090 3414 3955 4426 8,8% 5,6% 8,8% 7,7% 44% 44% 43% 43% 1% -1% -1% -1% 9% 8% 8% 8% 5,8% 0,9% 1,7% 0,9% 10,4% 10,6% 9,7% 7,7% -42% 6,9% 4,5% 4,4% 3,9% 6,95 6,67 6,38 6,22 61% 55% 49% 47% $97 $44 $60 $74 1 423 880 1 444 160 1 509 000 1 596 260 1 096 900 1 081 420 1 128 180 1 209 240 55 609 42 957 29 034 21 915 382 589 405 697 409 854 408 935 9,3% 8,8% 7,7% 6,8% 231 669 65 463 64 450 45 790 -29 613 -33 469 -36 898 -39 774 -112 495 -77 441 -85 656 -68 300 472 150 360 250 351 750 346 650 1 848 280 2 208 530 2 560 280 2 906 930 347 156 356 848 365 494 371 962 189 733 196 726 202 807 207 938

Rating history Fitch (eoy) Moody's (eoy) S&P (eoy) Type of government: Next elections Other: Latest PC deal Recent IMF programs

AAAA A A3 A2 A2 A2 A1 BBB BBB+ AA A Communism rule (experiments with free elections at local levels) N/A None None

Spot and forward rates, USD/CNY

Shanghai Stock Exchange

8,50

7000

Spot

8,25 8,00

6000

NDF

7,75

5000

7,50

4000

7,25

3000

7,00 2000

6,75 6,50

1000

6,25 05

06

Spot Rates, USD/CNY., Close

07

08

96

97

98

99

00

01

02

03

04

05

Forward Rates, USD/CNY 12 Month Outright, Bid Source: Reuters EcoWin

Investments/GDP 70 60 percent 50 40 30 20 10 0 2002

0

09

2004

2006

2008

06

07

08

Source: Reuters EcoWin

)s n o il li b d n a s u o h (t s n o il ilr T D S U

Foreign reserves 2,00 1,75 1,50 1,25 1,00 0,75 0,50 0,25 0,00

2000

Source: OEF

2002

2004

2006

2008 Source: Reuters EcoWin

4

SEB Merchant Banking Country Risk Analysis February 5, 2009

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5