Trade Solutions for the Automobile Industry 19 April 2005 David Koh Senior Vice President, Trade Services HSBC China

Trade Outlook In China  Growths of China’s import and export have been strong

China Auto Market Development  China is largely on track in implementing its WTO obligations, reducing import tariff, relaxing import quota and local content requirement.  Growth remains high in 2004 despite being lower than 2003  Recent price cuts have not yet provided the desired boost in overall sales  Sedan manufacturers continue to increase production capacity  All of the world’s top automakers have JVs in China  The market continues to consolidate as the number of manufacturers continue to reduce

China Auto Trade  Import and export continue to grow, esp. export

 Auto components are playing a larger role than auto vehicles in both import (67%) and export (75%) of auto industry  Total import and export of autos still account for only a small fraction of total auto market (4-5%) and China’s overall trade (2-3%)  Japan, Germany and South Korea remain the major car exporters to China  US, Western Europe, South East Asia are major overseas markets for export of China’s auto components China Auto Trade Development

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The Auto Industry’s Supply Chain Plastic Leather/FabricDashboards/ Interior components Rubber Windshields Glass Sheet metal/Rolled Steel Panels/ Doors/ Rims Car seats Tires - OEM Electronic components Engines/ Gear boxesIn-car electronics Distributor Buyer

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