Unit 112, Beijing International Club

21 Jianguomenwai Avenue, Beijing 100020, P.R. China

100020, 中国北京建国门外大街21号
北京国际俱乐部112室
Tel/电话 +86 10 8532 1665
Fax/传真 +86 10 6532 0839
E-mail/电子邮件 seim@public2.bta.net.cn

China's Industry
Stimulus Plans

Prepared by：

Strategic European Investment Management Ltd

(China member of MAI)

March, 2009
Within 6 weeks, China unveiled stimulus plans for 10 industries, on the top of its 4 trillion
yuan stimulus package announced four months ago. The industries are auto, steel,
shipbuilding, textile, machinery manufacturing, electronics and information, light industry,
petrochemicals, non-ferrous metals and logistics. The measures focus on technology
innovation, infrastructure upgrade, closing low-efficiency production, mergers and
acquisitions, tax rebates and subsidies.

Auto Industry

Highlights in plan:
* Increase customer demand
* Expand automakers through M&A
* Support upgrading technologies and brand-
building
* Develop new-energy cars
* Improve credit system for car loans

To encourage car sales, the state council will reduce the vehicle purchasing tax to five
percent on cars with engine capacity below 1.6 liters this year. And 5 billion yuan of
subsidies will be allocated to farmers and drivers who trade in their old vehicles for new ones.

The plan encourages large auto companies, as well as major auto-part makers to expand
through mergers and acquisitions so as to optimize resources and improve their
competitiveness on the international market.

The number of major auto makers will be cut from 14 to 10 and increase the market share of
domestic-brand vehicles. The plan seeks to create two to three powerhouse auto makers with
annual sales and production capacity of 2 million units and another four to five car
companies with the ability to sell 1 million vehicles every year.

In the next three years, the central government will earmark 10 billion yuan as a special fund
to support auto companies to upgrade technologies, and develop new engines that use
alternative energies. The government will offer financial support to promote the use of
energy-saving autos and those fueled by new energies, and support automakers to develop
independent brands and build auto and parts export bases.

Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -2-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839
Steel Industry

Highlights in plan:
* Integrate home and abroad market
* Eliminate excessive steel output
* Promote industrial restructuring through M&A
* Support technology innovation
* Strengthen scrutiny of iron ore imports, regulate
steel product sales

China needs to increase domestic demand for steel and adopt a more flexible tax rebate
policy to keep international markets.

It said the industry needed to eliminate outdated technology, and must not establish new
projects that merely add to steel output. Special funds will be allocated from the central
budget to promote technological advancement of the sector, readjustment of products mix
and improvements of product quality, according to the plan.

The plan requires accelerated upgrading of the steel sector, transforming "big" industry
competitors into "strong" international players.

Textile Industry

Highlights in plan:
* Increase tax rebates for exports to 15%
* upgrade technology and develop domestic brand
* Shut high-polluting and low-efficiency factories
* Encourage producers to relocate to central and
western areas of China
* Urge financial support to textile firm

Tax rebates for exporting textile and garment makers will increase to 15 percent from 14
percent. This is the third increase since last year.

The textile industry is recognized as a pillar of the national economy and still enjoys
advantages in international competition. But the industry needs urgent structural adjustments
and technological upgrades. A special fund will be set up to provide for these needs.

The government will take a proactive attitude to enlarge domestic consumption, innovate
new production, expand rural markets and promote the use of textile products in relevant
industries, while expanding export destinations to stabilize the share in international market.

Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -3-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839
Machinery Industry

Highlights in plan:
* Offer huge incentives for innovation and R&D
* Upgrade technology and raise competitiveness
* Support mergers and restructuring among large
backbone enterprises.

The plan aims to reduce reliance on imported parts. Currently 70 percent of important
machinery parts in China are imported from overseas. China seeks to change this situation
by offering huge incentives for innovation and R&D. The government will promote the
integration of research institutions so that research results can be put into action in a timely
manner.

Ship Building Industry

Highlights in Plan:
*Finance major shipbuilding projects
*Expand market demand for ships
*Encourage mergers and acquisitions
*Upgrade innovative technologies

Shipbuilding is a modern, comprehensive industry that provides technical equipment for

transportation, maritime development and national defense. Supporting shipbuilders would
also help other sectors, including steel, chemicals, textiles, light industry, equipment
manufacturing and information technology.

The plan will increase credit support by an unspecified amount for ship buyers. It also
decided to extend the existing financial support policies for oceangoing vessels until 2012.
These policies include tax rebates on key imported components for domestically owned
oceangoing ships.

It said construction of new docks and the expansion of slipways should be suspended for
three years to facilitate industrial restructuring.

It also recommended investment in research and development of facilities to build high-

technology ships and maritime engineering equipment and promote technical innovation.

Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -4-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839
Electronics and Information Industry

Highlights in Plan:
*Improve structure of industries
*Upgrade digital video products
*Boost innovation
*Promote service outsourcing
*Encourage enterprises to go overseas

The plan will stimulate the domestic demand for the products and put more investment in
the industry. Investment will focus on boosting the progress of the 3G (third-generation)
mobile communication services and promoting the use of digital TVs. Efforts will be made
towards developing national science and technology projects and towards improving public
technological service platforms.

It will promote outsourcing and encourage electronics and information enterprises to go

overseas and build research and development centers, production bases and marketing
networks.

More policy support would be given to the sector, including the adjustment of recognition
standards for high-tech enterprises and tax rebates for electronics and information product
exports.

Light Industry

Highlights in Plan:
*Expand urban and rural consumption
*Promote technology upgrading
*Strengthen food security
*Support brand building and M&A through
leading enterprises
*Further increase tax rebates on certain exports

Light industry is very important in enriching people's physical and cultural lives. It also helps
create 35 million jobs and is a pillar of the country's exports.

Measures to stimulate light industry include expanding urban and rural consumption and
promoting technology upgrading especially in the sectors of paper-making, home appliances
and plastics. The measures also include strengthening food security and brand marketing.
The meeting decided that export tax rebate will be further increased on certain light industry
products. SMEs in the industry will receive more fiscal and credit support. Subsidies to
home appliance makers selling in rural areas will be increased.

Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -5-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839
Petrochemical Industry

Highlights in Plan:
*Safeguard production of pesticide
*Expand credit support to petrochemical firms
*Eliminate excessive output capacity
*Improve corporate governance of those
companies

The plan strives to boost demand for petrochemical products in order to maintain the stable
development of the sector. Supervision on energy imports needs to be intensified and a
pricing scheme is to be set up.

Measures would also be taken to guarantee the supply of farming materials, such as fertilizers,
and to push forward technological innovation and construction of major petrochemical
projects.

Large oil refining projects will be boosted; backward productivity will be abolished,
especially in the coke and carbide sectors.

Nonferrous Industry

Highlights in plan:
* Stabilize and enlarge domestic market and give
policy support for exports
* Control total output
* Upgrade technology
* Promote M&A to optimize industrial structure

The industry has reached a point for a transformation. Priority is given to stabilize domestic
demand from industries like power, transportation, construction, machinery and light
industry.

High-tech firms will be supported and low efficiency ones will be shut down. Research on
high tech will be subsidized and new ways of recycling will be supported.

Mergers and acquisitions are also encouraged to reshape the industry.

Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -6-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839
Logistic Industry

Highlights in Plan:
* Expand market demand and develop in line
with producers and trade companies
* Accelerate M&A
* Promote logistic development in major sectors

China's logistics industry lags some ways behind those from other parts of the world.
According to the bailout plan, the logistics industry should develop in line with producers
and trade companies.

Also, M&A should be accelerated in the industry. Mergers in the sector would help develop
a group of large-scaled logistic companies who will be competitive on an international level.

The development of logistics for energy, mining, automobile, and medical industries and
agricultural products should be especially encouraged.

Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -7-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839
Strategic European Investment Management Ltd.(SEIM) is the China member of M&A
International Inc.(MAI), the world’s leading alliance of independent M&A specialists.
欧洲战略投资管理有限公司(SEIM)是居全球领导地位的专注于中型市场企业融资与并
购服务的投资银行机构——国际并购集团(MAI)的中国成员公司 www.mergers.net
www.seimchina.com

Unit 112, Beijing International Club

21 Jianguomenwai Avenue, Beijing 100020, P.R.
China
中国北京建国门外大街21号北京国际俱乐部
112室
Tel/电话 +86 10 8532 1665
Fax/传真 +86 10 6532 0839
E-mail/电子邮件 james.chen@seimchina.com
Unit 112, Beijing International Club，21 Jianguomenwai Avenue, Beijing 100020, P.R. China -8-
100020, 中国北京建国门外大街21号北京国际俱乐部112室
Tel/电话 +86 10 8532 1665 Fax/传真 +86 10 6532 0839