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Credit Suisse hosts the 8th annual China Investment Conference in Shenzhen

Credit Suisse's 8th annual China Investment Conference (CIC) welcomes around 150 companies, representing over USD2.5 trillion in total market capitalization, and more than 800 investors from around the world to exchange insights on the major investment themes in China. The three-day conference comes after the 19th National Congress of the Communist Party of China, in which President Xi Jinping outlined his vision for the country – "Socialism with Chinese Characteristics for a New Era". Ambitious targets have been set for the next 33 years – namely, China is seeking to become a top-ranked innovative nation with pioneering global influence by 2050.

"The blueprint formulated at the 19th Party Congress for the country’s continued reform and modernization in the coming decades provides very important insights for capital market investors. Firstly, it provides for predictability and relative consistency in the country’s political and economic policies over the next five to ten years. Secondly, it confirms the important role that the securities market plays in China and the pressing need for it to expand and develop further. Thirdly, it highlights 'technological innovation’ and 'advanced manufacturing in China’ as being the key investment themes for its equity markets going forward," said Nicole Yuen, Head of Equities North Asia and Vice-Chairman, Greater China, Credit Suisse.

"We are witnessing the beginning of a new era. Under the blueprint formulated at the 19th Party Congress, along with the progress in implementing the 'One Belt, One Road’ and 'Made in China 2025’ initiatives, we are bullish on the long-term prospects for China’s economy and its capital market. Over the next three to five years, the Chinese stock market will demonstrate unprecedented potential and present a major opportunity that no domestic or global investors can afford to ignore," Ms. Yuen added.

China has made great strides in the field of technological innovation over the past two decades, thanks to its aggressive push in Research & Development (R&D) spending, both in the government and in the private sector. To date, China is leading the way in the development of cutting-edge technologies such as quantum communications, supercomputers, artificial intelligence, genetic engineering and fintech. As the country transforms from a technology adaptor to an innovator, China’s leading competitive position in a number of sectors has resulted in many exciting investment opportunities.

To help investors gain a deeper understanding of China’s position in the world of global innovation, this year’s CIC – held in Shenzhen from November 1-3, 2017 – presents an impressive line-up of more than 40 experts and thought leaders. In a series of Addresses and panel discussions, they will share their insights into the opportunities within China’s reach as it enters the new era, and how China is leading global innovation in a wide range of sectors.

Credit Suisse Perspectives

Credit Suisse expects that China’s innovation drive will further accelerate as the country continues to expand R&D spending and policy support provided by the government, such as reform in tertiary education and tax benefits.

China’s Gross Development Expenditure on Research and Development (GERD) was USD 236 billion in 2016. China ranks second globally in terms of R&D spending, although its level of investment is still about 25% below that of the US. Credit Suisse estimates that China’s R&D spending will increase by 73% from the 2016 level, surpassing the US on a Purchasing Power Parity (PPP) adjusted basis.  The Chinese government is committed to driving innovation and has set a target for R&D spending of 2.5% of GDP by 2020.

"Assuming 7.5% nominal GDP growth in China, by 2020, China’s R&D expenditure will be 73% higher than it was in 2016. By that time, on a PPP adjusted basis, China’s R&D expenditure will exceed that of the United States.  The most important driver of China’s R&D expenditure is the business sector, which accounts for over 70% of China’s total R&D expenditure. As a percentage of GDP, business R&D spending in China is already higher than that of the European Union and close to the level of the United States," said Vincent Chan, Head of China Macro Research, Credit Suisse.

"China’s R&D talent pool has increased significantly in the last two decades. We have identified two key drivers of this: firstly, education reform and the expansion of university attendance.   A higher number of science and technology students are graduating in China every year nowadays, compared to 20 years ago.  Secondly, the Chinese government has invested a significant amount of effort in attracting talented professionals back to China from overseas to start their own businesses," Mr. Chan added.

Government subsidies and tax reductions for companies undertaking R&D activities in China, is another key factor that has contributed to China’s advancement in technological innovation in recent years.

"The Chinese government’s support for technology and innovation has been directly translated into tax benefits and subsidies. In China, 150% of R&D expenditure could be tax deductible, and once enterprises achieve the status of "high-technology enterprises" (usually based on their R&D spending as a percentage of sales, adjusted for sector and size), their income tax rate could even drop from 25% to 15%. This is competitive compared to other major Asian economies," said Mr. Chan.

Based on the data of over 2,800 A-share listed companies that Credit Suisse tracks, the effective tax rate of three knowledge intensive sectors—consumer discretionary (auto, media and household appliance companies), healthcare and information technology—is much lower than in other sectors, and direct government subsidies to these sectors are also higher than average.

Mr. Chan concluded that given China’s push for innovation and the development since the launch of the "Made in China 2025" initiative to transform the country into a high-tech manufacturing powerhouse, China could become a global market leader in areas such as biotech (both genetics and stem cell technology), Big Data, Artificial Intelligence (AI), the Internet of Things (IoT), New Energy Vehicles (NEV) and Nuclear Technology.

Credit Suisse in China

Credit Suisse is the leading foreign broker to institutional investors in Greater China. It is one of the leading equities houses in Asia and has been consistently ranked as the top 3 brokerage house in the Asia Pacific region. The bank has a long-term commitment to Greater China, which today represents one of the bank’s most important growth markets globally. Credit Suisse has maintained banking ties with China for over 60 years, and has had a presence in the country for more than 30 years.

In November 2016, Credit Suisse achieved a key milestone in expanding its onshore platform through the launch of its China A-share brokerage business via its joint venture, Credit Suisse Founder Securities. It is now among the first global banks to operate an onshore brokerage business in China. Credit Suisse also operates a successful asset management joint venture with Industrial & Commercial Bank of China – ICBC Credit Suisse Asset Management – which has assets under management exceeding RMB 1 trillion, and is currently the second largest asset manager in China.

Leading wealth management and investment banking franchise

So far this year, Credit Suisse has received a number of top industry accolades, demonstrating the strength of the bank’s franchise in Greater China and its leading position as the Entrepreneurs’ Bank of Asia Pacific. These awards include:

  • Euromoney 2017 Awards for Excellence – Asia’s Best Bank for Wealth Management; Asia’s Best Bank for Financing;
  • FinanceAsia 2017 Country Awards for Achievement – Best Foreign Investment Bank in Taiwan;
  • Asian Private Banker Awards for Distinction 2016 – Best Private Bank in Asia for the third time;
  • Private Banker International Greater China Wealth Awards 2017 – Best Family Office Proposition in Greater China; Most Effective Wealth Management Platform in Greater China for the second time; In addition, Credit Suisse received three Highly Commended accolades for the "Best Foreign Private Bank" in China, Taiwan and Hong Kong;
  • #1 in Institutional Investor’s 2017 All-Asia Sales Team and All-Asia Trading Team surveys;
  • Asia Risk Awards 2017 – Quant House of the Year for Asia ex-Japan
  • Hong Kong Commercial Daily – Best International Broker for Greater China 2016
  • Top 3 Prime Broker in Asia for five consecutive years and #1 for Hong Kong/China by Asia Hedge.