Effective Credit Risk Management for Doing Business in China CRIF Hong Kong Limited

About CRIF 2

CRIF AT A GLANCE 30+ 70 4 4,400+ country-based operations subsidiary companies continents staff professionals to serve you 6,300+ 55,000+ 310,000+ financial institutions business clients consumers use CRIF services in 50 countries 20 500+ countries with credit bureau solutions software installations 3

CRIF COMPANIES AROUND THE WORLD Countries & Regions 4

About China Market

Some Figures about China Market China’s GDP Period Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Comparison (year on year) +6.9% +6.8% Source: The National Bureau of Statistics of China China’s Export Value Period Dec 2017 Jan 2018 Feb 2018 Mar 2018 Comparison (year on year) +10.9% +11.1% +44.5% -2.7% Source: The General Administration of Customs of China

Some Figures about China Market Chinese Consumer Price Index (CPI) Period Dec 2017 Jan 2018 Feb 2018 Mar 2018 Comparison (year on year) +1.8% +1.5% +2.9% +1.2% Source: The National Bureau of Statistics of China Chinese Total Retail Sales of Consumer Goods Period Dec 2017 Jan and Feb 2018 Mar 2018 Comparison (year on year) +9.4% +9.7% +10.1% Source: The National Bureau of Statistics of China

Ranking of Creditworthiness in Different Regions of China Shanghai Beijing Jiangsu Guangdong Shandong Zhejiang Tianjin Liaoning Sichuan Hebei Decrease in Creditworthiness Source：China Shippers’ Association

The Ranking of Creditworthiness of Different Enterprise Forms in China State - owned enterprises Foreign and Hong Kong, Macao and Taiwan invested enterprises Limited liability company Private enterprise Sole proprietorship Decrease in Creditworthiness Source：China Shippers’ Association

Main Credit Risks faced by Chinese Enterprises Arrears of payment, loans, taxes Breach of contract Manufacturing of counterfeit products Disclosure of false information Quality fraud Trademark infringement, patent infringement Price fraud Source：Investigation on Credit Problem of Chinese Enterprises

Changes in Middle-Class Family in China Class category % in 2012 Estimated % in 2022 Affluent 3 9 Upper Middle 14 54 Mass Middle 22 Poor 29 16 Affluent: Annual household income > USD34,000 Upper Middle: Annual income from USD16,000 to USD34,000 Mass Middle: Annual income from USD9,000 to USD16,000 Poor ︰Annual income < USD9,000 Source：McKinsey

Potential Markets Market Demand of Middle-Class in China Sporting goods and equipment Health and green foods Trendy and personalised household products Trendy and personalised services Financial investment Automobile after-sale services Source：HKTDC

Credit Risk Management

Need of business information Importance of KYC Understanding the background of your potential / existing customers and suppliers to find reliable business partners and reduce credit risk. Meeting companies’ compliance requirement（e.g. anti-money laundering） However, in international trade, due to language, geographical and other barriers, companies often encounter difficulties in obtaining information on partners. Need of business information

Organization, Analysis What is Business Information? Big Data Organization, Analysis Useful information Make the right business decisions

Why you need the Business Information? New Customer acquisition Existing customer review Change of payment terms / credit terms Change of customers’ orders Large project Delay payments Disputes / litigation 16

In a Business Information Report Registration Details Financial Operation Details Negative Information Rating Overview Registration details Shareholders Key management History Related companies Balance Sheet / P&L Industry Benchmarking Remarks Import & Export date Employee Size Office location Operation background Litigation Public News Payment details Rating Default Rate 17

Business Registration Information Shareholding Full shareholder list Change in shareholders Information of majority & minority shareholders details e.g. registered capital / phone no. / business description (if location is in China) Showing ultimate controller 18

Business Registration Information Key Executives Outbound Investment & Position of Legal Representative Useful information to find out affiliates, in order to prevent fraud case / reduce credit risk Most of the trade fraud related to using company affiliates 19

Mortgages & Charges (if available) Subsidiary Mortgages & Charges (if available) 20

Trademark and Patent Trademark Patent 21

Financial Statements (if available) 22

Industry Benchmarking 23

Operation (Export data) Export data may be compared to the Sales in the financial statement Knowing the percentage of export to certain country helps to judge the trade risk 24

Operation (Import data) Import data may be compared to the Cost of Goods Sold in the financial statement Knowing the percentage of import from certain country helps to judge the trade risk 25

Litigation Plaintiff or defendant? 26

Immediately contact the buyers / Please be aware of the below signals: Litigation record (plaintiff / defendant) Erratic payment Broken promises Failure to return message Post-dated cheque / returned cheque (lack of cash flow) Financial restructuring or change of bank information Return of goods without content Exceptionally low selling price Sudden increase in purchase orders without reasonable explanation Business overexpansion Immediately contact the buyers / suppliers to understand the situation, take appropriate action to reduce losses!