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“Opportunities in China’s Aero Industry.”

“Opportunities in China’s Aero Industry.”. A Dezan Shira China Group Company. Italian Conference July 5-6, 2002. Jamie Gwynn General Manager. China. Logistics. China Logistics: Logistics consulting and market research in China’s mainland.

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“Opportunities in China’s Aero Industry.”

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  1. “Opportunities in China’s Aero Industry.” A Dezan Shira China Group Company Italian Conference July 5-6, 2002 Jamie Gwynn General Manager

  2. China Logistics China Logistics: Logistics consulting and market research in China’s mainland • A specialized consulting firm in China offering supply chain consulting and logistical market research. • 8 consultants with a variety of logistical backgrounds: telecom, automotive, fast moving consumer goods • Part of the Dezan Shira China Group, China’s leading professional advisory firm 2

  3. China Logistics Dezan Shira China Group: The Leading advisory organization for the China market • Local presence in the China market since 1987 • 12 offices with over 70 staff in the mainland • Practical solutions not classroom theory from our experienced staff • A reputation for project excellence from our diverse client base 3

  4. Dezan Shira & Associates Network analysis Structuring China- Briefing DSMR Market Research China Logistics China Logistics Dezan Shira China Group: Affiliate companies Dezan Shira & Associates DSMR China-Briefing 4

  5. Some of our customers: Examples Identified and qualified distribution partners as well as provided specific market research Devised a complete market penetration strategy which allowed Perdue to market to China Product sourcing and market research for a large shoe retailer. Qualified appropriate factories for technology transfer assistance Product sourcing and market research for glove retailer Conducted market research on the cosmetic industry in China and assisted with the importation of goods 5

  6. China Logistics Discussion items History of China’s aero industry The current environment Approach to the marketplace Key contacts & resources

  7. History of China’s aero industry CJ-5 Trainer • 1950 – 12 Aircraft for civilian use • 1951 – 16 Aircraft factories (milt to civil) • 1954 – First construction

  8. China Logistics History of China’s aero industry • 1970’s production of various “Y” class modules. Y-12 Model (120 units exported to date)

  9. China Logistics Discussion items History of China’s aero industry The current environment Approach to the marketplace Key contacts & resources

  10. China Logistics Merging China’s Airlines • In the 1980’s the CAAC allowed startup carriers to increase competition • Status for local governments • By the late 1990’s over 36 different airlines

  11. China Logistics Merging China’s Airlines: The reason? • Due to late 80’s policy result is overcapacity • Irregular flight patterns • Discounted tickets

  12. China Logistics Merging China’s airlines: The vision: • Orderly consolidation • But also must: Let airlines run their own business • Profit allocation • Allow market demand to determine pricing • Minimize regulation of jet fuel and procurement

  13. China Logistics Merging China’s Airlines: The obstacles • Recent plane crashes • CAAC has control over their 11 airlines representing 81% of the market, but 14 others

  14. China Logistics Infrastructure • Currently 142 airports • CAAC has over 400 aircraft • But the overall total fleet is less than that of British Airways

  15. China Logistics Market Growth • 1970’s & 80’s 17% per year • Last year 10% • Predicted to grow at 7% per year through 2005 • Airbus & Boeing: “China will need over 1,500 aircraft by 2015.”

  16. Airport passenger traffic Year 2000 from CAAC Journal 2 March 2000

  17. Airport cargo traffic

  18. China Logistics Discussion items History of China’s aero industry The current environment Approach to the marketplace Key contacts & resources

  19. China Logistics Approach to the marketplace • CAAC has further liberalized the industry allowing foreign companies to take a 49% share in Chinese airlines from a previous 35% share June 24, 2002

  20. China Logistics Foreign investment: Best sectors • Airport design • Technical construction • Technical equipment (Radar systems, engines) • Commercialization of space • Avionics • Consulting

  21. China Logistics Joint ventures in China • Lufthansa – JV at Shanghai’s Pudong airport • Rolls Royce – Engine research & production • Airbus – Production (100 deliveries) • Bae Systems – Aircraft sales • Dowty & Druck Ltd. – Various projects in Xi’an

  22. China Logistics Projects underway • Guangzhou, Changchun, Lhasa, Qingdao, Chongqing, Datong, Daqing

  23. China Logistics Approval necessary for airport projects • Central approval • State development and planning commission (SDPC) • CAAC • Provincial/ local approval • Appropriate contacts • Consider a local Chinese partner

  24. China Logistics Where to get funding? • Central government • Local government • Commercial market

  25. China Logistics Go West young man • Strategy is a spoke and hub network • Beijing, Guangzhou, Shanghai • Chengdu, Xi’an, Wuhan, Kunming • 19 Airports in the West are currently slotted for improvements

  26. Harbin Urumqi Shenyang Hchhot Beijing Zhongwei Datong Qinhuangdao Taiyuan Jinan Lianyungang Lanzhou Xian Xuzhou Hanjing Zheng-zhou Suzhou Baoji Shanghai Wuhan Chengdu Ningbo Hangzhou Zhuzhou NanChang Xiamen Liuzhou Kunming Guangzhou Nanning Shenzhen Go West

  27. China Logistics SME Opportunities • Subcontractor operations • Trading through Hong Kong or other direct mainland contacts

  28. China Logistics Freight forwarding • Class A • Restricted industry • Foreign company cannot own more than 50% of the JV • Volume must exceed USD 50 Million per year • > 3 years experience with no incidents • > USD 1 Million in registered capital

  29. China Logistics Freight forwarding • Class B • Regional • Cannot handle international activities • Registered capital requirement of USD 60,000

  30. China Logistics Doing business in China: The requirements • Must have more than a good product • Know the market – Do your Due Diligence • Proper budget planning (Trips back and forth,you and govt.) • Long term Strategy • Be aggressive ( don’t wait for tenders to go out)

  31. China Logistics The first steps… • Attend an air show in Zhuhai or Beijing • Visits to the manufacturing basis • Establish contacts with appropriate Beijing bodies • CoC’s, Embassy’s & Consulates • 3rd party consultants • Set up a representative office

  32. China Logistics Discussion items History of China’s aero industry The current environment Approach to the marketplace Key contacts & resources

  33. Key Government Bodies • Civil Aviation Authority of China (CAAC) - the overall governing body • China Aviation Industry Corporations – Deals mainly with the manufacturing sectors & is divided into 2 components • AVIC I for larger aircrafts • AVIC II for smaller aircrafts • China National Aero Technology Import and Export Corporation (CATIC) – main procurement organization • China Aviation Supplies Import & Export Corporation (CASC) – A trading company of aviation products • Ministry of Foreign Trade and Economic Cooperation (MOFTEC) – Regulates foreign business licensing and business structures

  34. Dezan Shira Group Contacts Jamie Gwynn General Manager, DSMR/ China Logistics Ltd. Tel: +86 21 6279 7330 Fax: +86 21 6279 8659 E-mail: jgwynn@PRCLogistics.com Web: www.PRCLogistics.com Alberto General Manager, Dezan Shira & Associates. Tel: +86 755 329 3940 Fax: +86 755 366 4122 E-mail: alberto@dezshira.com Web: www.dezshira.com

  35. Credits • British Embassy – Beijing • China Hand • Local resources • CAAC information database

  36. Cold Supply Chain Logistics in China A Dezan Shira China Group Company Thanks for your Attention Jamie Gwynn General Manager

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