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X.D. Yang Managing Director

Foreign Investment in China: The Private Equity Perspective. X.D. Yang Managing Director. Carlyle Shanghai Office . Favorite Destination Fasting Growing & 2nd Largest Market in Asia. FDI into China. Private Equity Investment in China. Private Equity Investment Ranking.

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X.D. Yang Managing Director

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  1. Foreign Investmentin China: The Private Equity Perspective X.D. Yang Managing Director Carlyle Shanghai Office

  2. Favorite Destination Fasting Growing & 2nd Largest Market in Asia FDI into China Private Equity Investment in China Private Equity Investment Ranking

  3. Favorable Trends for Private Equity Investing • Attractive macro-economic growth story • Structural changes - WTO • Privatization of SOEs • Private sector growth • Large technology based talent pool • More reasonable valuation • Exits become easier

  4. SOEs to be kept – less than 200 SOEs to be privatized Trends:SOE Privatization Prompts Change in Ownership Total number of State Owned Enterprises (SOE) in China = 340,000 Gross industrial output value of SOE to total Percent Source: China Statistics Year Book

  5. 1600 90 Engineering Post Graduates (LHA) 80 1400 Engineering College Graduates (RHA) 70 1200 60 1000 50 800 40 (thousands) 600 30 (thousands) 400 20 200 10 0 0 1975 1978 1984 1981 1987 1990 1993 1996 1999 2002 Trends:Growing Engineer Pool Fosters VC Talents Source: CEIC, Morgan Stanley Research

  6. Trends:Valuation Has Come Down Source: Bloomberg

  7. Still…Challenges Like No Other Markets • Limited exit channel • Lengthy deal execution process • Difficult to gain control • Volatile industry dynamics with irrational competitors in SOEs • Lack of management talent pool • Unpredictable regulatory and legal environment

  8. Carlyle’s InvestmentsThree Roads to China Buyout Venture $35 mm Leading online travel information and reservation services company in China. World’s largest supplier of artificial Christmas trees. $45 mm Leading Lithium-ion polymer batteries maker in China. A chain of nine department stores in China. Leading ChineseMedia Company Leading Chinese Media company with focuses on delivering advertisements through traditional and non-traditional media. $400+ mm* Leading Chinese Insurance Provider Real Estate Leading Chinese Construction Equipment Manufacturer $300+ mm* • Investments range $10-50 mm • Commercial and Residential * Transactions in progress

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