Benefits of Making Business in China | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN CHINA WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN CHINA WWW.MERGERSCORP.COM

4. Country Overview China is an upper-middle-income country and the world’s second largest economy. But its per capita income is still only about a quarter of that of high-income countries, and about 373 million. The People's Republic of China, simply known as China is located in East Asia. It is the world's most populous country, with a population of around 1.404 billion. It is a unified multi-ethnic country with the Han nationality as the main nation. China is one of the four earliest civilizations nations in the world with Yellow River and Yangtze River as its base and cradles.

5. Executive Summary The People's Republic of China, simply known as China (Chinese:中国, pinyin: zhōng guó)is located in East Asia. It is the world's most populous country, with a population of around 1.404 billion. It is a unified multi-ethnic country with the Han nationality as the main nation. China is one of the four earliest civilizations nations in the world with Yellow River and Yangtze River as its base and cradles. Currently, China is governed by the Communist Party of China (founded in 1921), it has 22 provinces, five autonomous regions, four direct-controlled municipalities (Beijing, Tianjin, Shanghai and Chongqing) and two special administrative regions of Hong Kong and Macau. Since the economic reform took place in 1978, China has emerged on the international stage as a fast-growing power house in Southeast Asia.

6. Introduction – Doing business in the China China is ranked 31 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of China improved to 31 in 2019 from 46 in 2018. China, the business hub of the world is a dream for many entrepreneurs. With a 10% growth every year, one billion potential Chinese consumers; of those billion consumers 800 million are cell phone users, 540 million are Internet users and millions of millionaires. China is like a big pot of gold that is just waiting to be dug by eager entrepreneurs.

7. Conducting business in China The various types of business structures in China are : • Company Limited by Shares • Holding Company • Joint Ventures • Wholly Foreign-Owned Enterprise (WFOE) • Representative Office (RO) • State-Owned Enterprise (SOE) • Private Enterprises • Individually-Owned. The National People's Congress (NPC), adopted a new Foreign Investment Law (FIL) on 15 March 2019，to "improve the openness, transparency and predictability of the investment environment, establish equal treatment for foreign and domestic investors, and address concerns of foreign investors around technology transfers".

8. Taxation in China Corporate income tax ("CIT") - standard tax rate is 25%, but the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encouraged by the China government (e.g. New/high Tech Enterprises and certain integrated circuits production enterprises). Business tax - applies to the provision of services (excluding processing services and repair and replacement services), the transfer of intangible properties and the sale of real estate properties in China. Tax rates range from 3% to 20%

9. Trade China is the largest export economy in the world and the 33rd most complex economy according to the Economic Complexity Index (ECI). In 2017, China exported $2.41T and imported $1.54T, resulting in a positive trade balance of $873B. In 2017 the GDP of China was $12.2T and its GDP per capita was $16.8k. The top exports of China are Broadcasting Equipment ($231B), Computers ($146B), Office Machine Parts ($90.8B), Integrated Circuits ($80.1B) and Telephones ($62B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Integrated Circuits ($207B), Crude Petroleum ($144B), Iron Ore ($59B), Cars ($46.8B) and Gold ($40.3B).

10. Banking in China The Chinese banking system used to be monolithic, with the People's Bank of China (PBC), its central bank, as the main entity authorized to conduct operations in that country. In the early 1980s, the government opened up the banking system and allowed four state-owned specialized banks to accept deposits and conduct banking business. These five specialized banks are the Industrial & Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC), Bank of Communications (BoCom), and Agricultural Bank of China (ABC).

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com