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China—private equity market overview Christoph Konrad Executive Director, UBS AG

July 2011

107014ZU_Public.ppt

Setting the scene Real GDP growth across the key markets in Asia is forecast to significantly outpace that of the US and Europe. Key elements that support this growth include an expanding middle class, urbanisation, high savings rates and cost-effective work forces Forecast Average Real GDP Growth (2011-2015) China India Vietnam Indonesia Taiwan Singapore South Korea Australia Japan US Europe

3.1

1.7

7.1

8.9

3.1

2 0.0

4

4.9 4.7

6

8.6

2.0

4.0

6.0

8.0

10.0

(%)

Private equity investment as % GDP 1.2 1.0

0.80

(%)

0.8 0.6

0.50

0.4 0.2

0.02

0.10

0.10

Japan

South Korea

0.20

0.20

Indonesia

Vietnam

0.30

0.40

0.0 Europe Source:

North America

Thailand

China

India

AVCJ, Dealogic, Global Insight, January 2011 1

China’s economic outlook remains positive but inflation risk increases

107014ZU_Public.ppt

UBS sees GDP growth moderating to 9.3% for 2011 mainly due to higher oil price GDP growth rate expected to moderate in 2011 8,000

9.3 12.7

11.3

4,000 2,000

2,713

2,257

9.6

14.2

4,520

3,494

9.2

4,991

12.0 7,124

5,879

(% yoy)

(US$bn)

6,000

16.0

10.3

8.0 4.0

0

0.0 2005

2006

2007 Money GDP

2008 GDP Growth

2009

2010

2011E

Inflation trending higher 8.0 4.8

(% yoy)

6.0 4.0

1.8

2.0

5.9

3.3

1.5

0.0 (2.0) 2005 Source:

(0.7) 2006

2007 Consumer prices

2008

2009

2010

UBS estimate, as of May 2011

On Apr 6 2011, marking the 4th rate hike in the past 5 months, PBOC raised one-year yuan lending rate to 6.31% and one-year deposit rate to 3.25% 2

107014ZU_Public.ppt

China market outlook 2011 GDP growth to stay robust despite tighter liquidity management and further rate hikes Key drivers

Results & Benefited Sectors

1

Robust fixed investment

2

The start of the 12th FYP will support fixed investment despite the property tightening and fading of the stimulus plan

Manufacturing sector upgrade

More automation, better equipment as well as increased R&D spending Targets for improving energy and emission efficiency, rise in resource taxes and introduction of environmental taxes

Develop new strategic industries

Seven new strategic industries (energy saving, IT, bio, advanced machines etc.) are expected to reach 8% of GDP by 2015 and 15% by 2020 from current