MERCER CHINA 2014 ANNUAL HR CONFERENCE WINNING THE FUTURE THROUGH - PowerPoint PPT Presentation

MERCER CHINA 2014 ANNUAL HR CONFERENCE WINNING THE FUTURE THROUGH TODAY’S INNOVATION September 23, 2014 China - Shanghai

Economic Overview Global , AP and China

World GDP and Inflation GDP goes up and Inflation goes down from 2013 to 2015 10.0 8.0 6.0 4.0 2.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 -2.0 Emerging market and 9.2 5.4 5.9 7.3 6.0 5.8 5.5 5.2 developing economies Inflation Emerging market and 5.9 3.1 7.5 6.3 5.1 4.7 4.9 5.3 developing economies GDP 6.0 2.5 3.6 4.9 3.9 3.6 3.5 3.4 World Inflation 2.7 -0.4 5.2 3.9 3.2 3.0 3.6 3.9 World GDP Source: IMF World Economic Outlook (April, 2014) 2 MERCER

Shift in Global Business Landscape Driving corporate growth in Asia Pacific Asia Pacific vs. Developed markets Asia Pacific still leading the pack 4.3% GDP growth 2.0% GDP growth 1.1% GDP growth To cash in where the growth is today, and for the foreseeable future, Increasing focus on Asia Pacific Source: APAC Exec Brief, August, 2014, IMA Asia 3 MERCER

Regional GDP, Inflation & Salary Increase 8% 7% 6% 5% 4% 3% 2% 1% 0% AU CN HK ID IN JP KR MY NZ PH SG TH TW VN GDP 3.0% 7.4% 2.5% 5.0% 4.9% 0.4% 3.6% 6.2% 3.3% 6.2% 3.2% 1.1% 3.8% 5.0% Inflation 2.6% 2.5% 3.8% 5.7% 7.3% 2.7% 1.5% 3.5% 2.0% 4.6% 2.1% 2.3% 1.7% 4.9% Salary Increase 3.5% 7.5%* 4.5% 10.0% 11.0% 2.1% 5.0% 5.6% 3.0% 7.0% 4.5% 5.9% 3.8% 10.7% Source: IMA Asia Brief Aug 2014 Salary Increase: Mercer Global Compensation Planning Report 2014 July *Mercer TRS Surveys 2014 4 MERCER 22 September 2014

Human Capital Index – by Region Human Capital Index 1 0.8 Health and Wellness 0.6 0.4 Education 0.2 0 Workforce and -0.2 Employment -0.4 -0.6 Enabling -0.8 Environment -1 North America Europe and Asia and Pacific Latin America Middle East and S ub-S aharan Central Asia and the North Africa Africa Caribbean 1. The overall index is unweighted average of the four pillar scores 2. Scores are weighted by population; population data from United Nations Department of Economic and Social Affairs, World Population Prospects, rev. 2012. Source: The Human Capital Report, World Economic Forum, 2013 The report is published in collaboration with Mercer 5 MERCER

Human Capital Index - China Rank #43 Country Rank Score Switzerland 1 1.455 Finland 2 1.406 Singapore 3 1.232 Netherlands 4 1.161 Sweden 5 1.111 Japan 15 0.948 United States 16 0.920 Malaysia 22 0.644 China 43 0.186 Thailand 44 0.158 Russian Federation 51 0.010 Indonesia 53 0.001 Brazil 57 -0.054 Mexico 58 -0.057 Vietnam 70 -0.202 India 78 -0.270 Source: The Human Capital Report, World Economic Forum, 2013 6 MERCER

Population Demographics - Gender Asia 100+ 2030 95-99 90-94 2010 85-89 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% Male Female Source: UN Population Statistics 2012 7 MERCER

Population Demographics – Median Age 55 Median Age of the Total Population (Years) 50 1990 2010 2030 45 40 35 30 25 20 15 10 5 0 India ASEAN USA Australia China South Korea Japan MERCER 8 Source: UN World Population Prospects 2012

China’s Changing Demographics Group by 10 from 20 - 59 Unit: thousand 250,000 200,000 20-29 30-39 150,000 40-49 50-59 100,000 50,000 1990 1995 2000 2005 2010 2015 2020 2025 2030 The forecast of the future population adopts medium fertility rate assumption. Source: World Population Prospects: The 2012 Revision, United Nations 9 MERCER

China on Track for Moderate Growth GDP, CPI, salary increase and turnover rate GDP CPI(Inflation Rate) Salary Increase Staff Voluntary Turnover 18 16.3 15.7 16 14.6 13.6 13.6 13.4 13.5 14 12.2 13 11.3 7.2 12 2014 1 st half year 11.6 9.6 9.4 10 10.4 10.4 9.6 7.9 9.1 9.3 7.7 7.5 8.7 8 8.6 8.5 8.2 8.2 7.8 7.7 7.4 6.9 6.7 6 5.9 5.4 4.8 4 3.3 2.8 2 2.6 2.6 2.5 1.8 1.5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(E) 2015(F) -0.7 -2 Source : National Bureau of Statistics of China IMA Asia (Aug 2014) 2004-2014 Mercer Total Remuneration Survey 10 MERCER

China on Track for Moderate Growth GDP per capital China’s Ranking of 7,961 GDP per capital 7,333 6,747 Year Ranking 6,078 5,434 2011 91 2012 88 2013 84 2014(F) 82 2015(F) 81 2011 2012 2013 2014(F) 2015(F) 1. Source: IMF World Economic Outlook (April, 2014). 2. GDP is expressed in current U.S. dollars per person. Data are derived by first converting GDP in national currency to U.S. dollars and then dividing it by total population. 3. For the ranking, there are 186 countries and regions with the data of GDP Per Capital. 11 MERCER

China GDP Growth Rate Forecast CHINA: GDP Growth by Component, % 15 Manufacturing Construction Services GDP 12 9 6 3 0 2010 2011 2012 2013 2014 2015 2016 Source: China Forecast Book, IMA Asia ， 2014 Q3 12 MERCER

China’s Total Debt vs. GDP Raised rapidly since 2008 economic risk increased Source: Financial Times reported on July 22, 2014, citing estimates from Standard Chartered. 13 MERCER

China Foreign Direct Investment (FDI) China FDI Growth 2013 FDI Flow 40 Growth Percentage(Year-on-year) 30 20 100 124 10 USD, Billion 0 FDI Outflow FDI Inflow -10 2014 -20 Outflow > Inflow Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 Source : Ministry of Commerce of the People’s Republic of China Source: World Investment Report 2014 United Nations Conference on Trade and Development 14 MERCER

China PMI : Manufacturing and Services 55 PMI Manufacturing 54.1 PMI Service 54 Highest 53 since Mar 2013 52 Service 51 50 50.2 Down Again 49 after 3-month up 48 47 Manufacturing 46 45 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2013 2014 Source: HSBC September, 2014 15 MERCER

Innovation – A Path to Transformation China has improved its innovation from 2013 to 2014 Global Innovation Index rankings Country/Economy Score(0-100) 2014 Rank 2013 Rank Switzerland 64.78 1 1 United Kingdom 62.37 2 3 Sweden 62.29 3 2 United States of America 60.09 6 5 Hong Kong (China) 56.82 10 7 Japan 52.41 21 22 China 46.57 29 35 Russian Federation 39.14 49 62 Brazil 36.29 61 64 India 33.70 76 66 Source: The Global Innovation Index 2014 Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO) 16 MERCER

Summary • China still has strong-to-moderate GDP growth rate in next 3 years. • Economic risk is raising due to stimulation. • China may become a FDI net outflow country in 2014. • China is on the way improving its Human capital index and innovation ranking in the world, while the aging population will be a issue ， China has to seek way to offset its negative impact. 17 MERCER