CHINA VIP REPORT
Sample Report (China) Co., Ltd.
D-U-N-S 52-XXX-1277
Prepared for
927XXXXXX
Presented by
Huaxia D&B China
Date
Dec.28, 2012
CHINA VIP REPORT
Dear Customer,
Thank you for your inquiry to Huaxia D&B China. The following China VIP Report was
prepared in response to your request for the information on Sample Report (China) Co., Ltd.
.
If you require further information or have any questions, please contact our Customer
Service Center.
Sincerely,
Customized Reporting
RMS Operations,
Huaxia D&B China
Tel:
(8621) 2321 3928
E-address: [email protected]
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CHINA VIP REPORT
Table of Contents
1. OVERVIEW .....................................................................................................................- 4 - 1.1 Executive Summary ............................................................................................................. - 4 - 1.2 Company Highlights ............................................................................................................ - 5 - 1.3 Credit Capacity Assessment ................................................................................................. - 6 - 1.4 Industry Norm Grouping ...................................................................................................... - 7 - 1.5 Risk Assessment Matrix ....................................................................................................... - 8 - 2. COMPANY HISTORY .....................................................................................................- 9 - 2.1 Business Registration ........................................................................................................... - 9 - 2.2 Shareholding Structure ....................................................................................................... - 10 - 3. CORPORATION STRUCTURE .................................................................................... - 11 - 3.1 Corporation Organization ....................................................................................................- 11 - 3.2 Principals............................................................................................................................ - 12 - 4. BANK INFORMATION & PUBLIC RECORDS .............................................................- 12 - 4.1 Bank Information ............................................................................................................... - 12 - 4.2 Litigation Records .............................................................................................................. - 12 - 4.3 Media & Internet Exposure ................................................................................................ - 13 - 5. PAYMENT INFORMATION ...........................................................................................- 14 - 5.1 D&B Paydex ...................................................................................................................... - 14 - 5.2 Trade Payment Information................................................................................................ - 15 - 5.3 Trade Payment Experiences Details ................................................................................... - 16 - 5.4 Industry Payment Information ........................................................................................... - 17 - 5.5 Trade Payment Industry Comparison ................................................................................. - 17 - 6. COMPANY OPERATION ..............................................................................................- 18 - 6.1 Line of Business ................................................................................................................. - 18 - 6.2 Products Information.......................................................................................................... - 18 - 6.3 Awards & Certificates ........................................................................................................ - 20 - 6.4 Location ............................................................................................................................. - 20 - 6.5 Employee Size.................................................................................................................... - 20 - 6.6 Affiliates & Branches ......................................................................................................... - 21 - 7. SHAREHOLDER INFORMATION ................................................................................- 22 - 8. PROVINCE BACKGROUND ........................................................................................- 23 - 9. COMPETITIVENESS ANALYSIS .................................................................................- 25 - 10 INDUSTRY ANALYSIS ................................................................................................- 27 - 11. APPENDIX ..................................................................................................................- 36 - HDBC EMMA Score ............................................................................................................. - 36 - -2-
CHINA VIP REPORT
D&B Rating ........................................................................................................................... - 39 - Explanation of PAYDEX ..................................................................................................... - 40 - Glossary of Terms ............................................................................................................... - 41 - -3-
CHINA VIP REPORT
1. OVERVIEW
1.1 Executive Summary

Subject was co-invested as a limited company by China ABC Co., Ltd and China KC Co., Ltd,
specially engaged in manufacturing automotives parts. Subject was established in Sep. 1994
and was put into production in January 1995.

As the A-class supplier and the major factory for completer sets of equipments of Shanghai
Sample Automotive Co., Ltd, subject is also providing products for NAVECO, Guangdong
Fengshen, Wuhu Cherry and Shanghai Kaili Air-condition. The products of subject enjoy good
quality guaranty. Subject was awarded with in July 1998 ISO9002 certificate, VDA6.1,
QS90000 and TS16949:2002. In Oct. 2002, subject was awarded ISO14001 environmental
protection certificate。

In June 2001, subject invested Shanghai VIP Sample Sales Co., Ltd. with shares of 20.73%,
together with China DJ Auto Company (19.92%), Other company (8.31%) and other 36
individuals (51.22%). Shanghai VIP Sample Sales Co., Ltd. was established as a limited
company with the registered capital of RMB 2,460,000, mainly engaged in provide after-sales
services. The legal representative id Wang Yi.
According to overall credit condition, subject was rated a D&B rating of 4AA1,
and its Risk Index was rated at EMMA SOCRE 1, which means Much Lower Risk.
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CHINA VIP REPORT
1.2 Company Highlights
SUBJECT
Sample Report (China) Co., Ltd.
D-U-N-S
52-XXX-1277
ADDRESS
No.188, Huancheng (E) Rd., Fengxian Dist.Shanghai, 201319
TEL
(86) 021 12345678
FAX
(86) 021 12245677
Website
www.vip.com
CHIEF EXECUTIVE
Jiashu WANG/ General Manager & Legal Representative
STARTED
1994
LINE OF BUSINESS
Manufacturing and selling automobile parts
US SIC CODE
3714 9900
INDUSTRY
Motor vehicle parts and accessories
LEGAL STATUS
a limited company
EMPLOYEE
400 (Total)
REGISTERED CAPITAL
RMB 210,400,000
HISTORY
Clear
D&B RATING
4AA1
EMMA SCORE
1 (Much lower risk)
* All monetary amounts quoted in this report are shown in Renminbi(RMB) unless otherwise
stated.
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CHINA VIP REPORT
1.3 Credit Capacity Assessment
D&B RATING: 4AA1

RATING CLASSIFICATION: 4AA
The D&B rating for the company is 4AA, which indicates Registered Capital between
85,000,000 and 449,000,000.

THE COMPOSITE CREDIT APPRAISAL: 1
The composite credit appraisal of the company is 1, which indicates an overall credit
condition which is considered strong.
HDBC EMMA SCORE: 1
Range
EMMA Score
% of Report in
Database
% of High Risk
Business
Commentary
Low Risk Scores
1-3
28.9%
5.7%
Lower Risk Range
Medium Risk Scores
4-7
56.7%
9.1%
Average Risk Range
High Risk Scores
8-10
14.4%
36.4%
High Risk Range
RISK ANALYSIS
Subject is rated good scores in the following aspects in all risk factors, which lowers its overall risk
level:

Subject's registered capital is RMB 210,400,000, which is in the higher level range, indicating a
lower risk.

Subject has a long history of 18 years, donating a lower risk level.

Subject is a limited company, which is classified as a lower risk type of business.
By evaluating all risk factors, the company is assigned with EMMA score of "1", indicating "Much Lower Risk".
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CHINA VIP REPORT
1.4 Industry Norm Grouping
Industry Group SIC
3714
Industry Group Description
Motor vehicle parts and accessories
Industry
Group
EMMA
Score
Quartile Values
Lower Quartile
4
Median
5
Upper Quartile
6
COMPANY RISK VS INDUSTRY NORM CHART
DISTRIBUTION OF EMMA SOCRE IN HDBC CHINA’S DATABASE
EMMA Score Trend (Company vs Industry Norm)
Month 2011/7 2011/8 2011/9 2011/102011/112011/122012/12012/22012/3 2012/4 2012/5 2012/6
Company
5
1
1
1
1
1
4
3
1
2
2
1
Industry
5
5
5
5
5
5
5
5
5
5
5
5
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CHINA VIP REPORT
1.5 Risk Assessment Matrix
Risk Assessment Matrix
Risk Range
Low
Medium
High
(EMMA 1 - 3)
(EMMA 4 - 7)
(EMMA 8 - 10)
BA
CA
PAYDEX
AA (Subject lies in this
PAYDEX>=80
group)
80>PAYDEX>=60
AB
BB
CB
PAYDEX<60
AC
BC
CC
Risk Assessment Matrix Analysis
Classifications
Quality group
Low risk group
Risk Level
AA->AB
BA->BB->AC
Description
Business is sound, and the bills are paid
promptly with good credit reputation.
Business is operated under low risk, and
some delay payment behaviors exist.
Credit Policy
Favorable credit policy can be
granted with automatic
approval.
Appropriate credit policy is
suggested with some manual
review.
Business is operated under high risk, and Relatively strict credit policy is
High risk group
CA->BC->CB some severe delay payment behaviors
exist.
manual review.
Business is run under high risk or with
Monitoring group
CC
suggested with detailed
high possibility of windup, and the bills
are unable to be paid in time.
Avoid credit sales. Cash
settlement is suggested.
*Risk levels are listed in order of risk from low to high.
According to the Risk Assessment Matrix, subject is rated as “AA”, which represents the subject
belongs to the quality group:
 The risk level of the subject is low, which reveals its business risk is relatively lower than the
average level amid all Chinese enterprises;
The PAYDEX® of subject/industry indicates that most of the bills are paid promptly, rarely with
any delay, and the credit reputation of subject/industry is decent;
 Subject is rated as a quality company due to its sound operation, prompt payment, low risk level
and good credit reputation. Therefore, subject is recommended to be granted with relative
favorable credit policy.
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CHINA VIP REPORT
2. COMPANY HISTORY
2.1 Business Registration
Registration Date
Sep 02,1994
Registered At
Shanghai Fengxian Administration for Industry & Commerce
Registration No
3100400345678
National Organization Code
234567890
Tax No.
310111234567890
Registered Capital
RMB 210,400,000
Start Date
1994
Type of Business
a limited company
Registered Address
No.179 Huancheng (E) Rd.,Fengxian Dist.,Shanghai
Legal Representative
Wang Jiashu
Automobile parts, import and export of commodity and
Business Scope
technology, establishing branches and affiliates.（subject to
the license, if a license is needed）
Administration for Industry & Commerce is a government entity subordinating to the State
Council. It is in charge of the market supervision, management and other related administrative
law enforcement affairs. Its major responsibilities include but not limit to organizing and managing
the business registration, checking and ratifying registered company names, examining, approving
and issuing relevant licenses for enterprises of all types (including foreign invested enterprises)
and other business units, individuals and foreign (regional) enterprises representative
organizations.
Limited Company (or Limited Liability Companies) refers to companies with less than 50
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CHINA VIP REPORT
shareholders. The shareholders of a limited company shall assume liability towards the extent of
their respective capital contributions, and the company shall be liable for its debts to the extent of
all its assets.
2.2 Shareholding Structure
Name
Country
Shares
Investment Mode
Paid-Up Rate
China ABC Co., Ltd
China
70%
Cash
Fully paid
China KC Co., Ltd
China
30%
Cash
Fully paid
Total
100%
Note：

Subject passed the annual inspection of 2011 with Administration for Industry & Commerce.
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CHINA VIP REPORT
3. CORPORATION STRUCTURE
3.1 Corporation Organization
China sample Industry Corporation
China KC Co., Ltd
China ABC Co., Ltd
30%
70%
Sample Report (China) Co.,
Ltd.
20.92%
Technology
Finance
Production
Purchase
Marketing
Dept..
Dept..
Dept..
Dept..
Dept..
Office
Shanghai VIP Sample Sales Co., Ltd.
Exhaust System Technology Center
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20.73%
CHINA VIP REPORT
3.2 Principals
Wang Jiashu
Activity Status:
Yes
Related Working Experience
5 years+
4. BANK INFORMATION & PUBLIC RECORDS
4.1 Bank Information
The company maintains relationship(s) with the following bank(s) in China:
The Agricultural Bank of China, Shanghai Fengxian Dist. Sub Branch
Address
No.200,Changji Rd., Anting Town, Shanghai
Telephone
021-87654321
4.2 Litigation Records
Up to June 3, 2012, HDBC has searched the China Court website, website of local court in the
place where subject is located, major domestic courts nets as well as our internal China court
database, but no related
court records can be found against the subject during current investigation.
Note: All the above channels are the information channels through which can publicly obtain the
litigation records of Chinese enterprises. However, some cases related to subject might be
omitted due to the absence of the database covering all enterprise litigation information in
Mainland China for inquiry.
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CHINA VIP REPORT
4.3 Media & Internet Exposure
Company Name
Sample Report (China) Co., Ltd.
Publication:
SINA.COM
Date:
Mar. 25, 2011
News:
The market share of automotive parts manufactured by Subject is around
20%.
Linkage:
http://www.sina.com.hk/search?hl=zh-CN&source=hp&q
Publication:
FINANCE.COM
Date:
Mar. 25, 2011
News:
Subject has signed an agreement with GE Company and will establish
strategic relationship in business development.
Linkage:
http://www.finance.com.hk/search?hl=zh-CN&source
Note
Media information we focus on:

Key Event：Bank account frozen, merge, purchase, bankruptcy, out of business, assets
reorganization, restructured, property right transfer, reformed, listed, delisted and etc.

Ranking: Industrial ranking, top 500 list, customs red or black lists other industrial
rankings.

Negative news: Principal’s bribery, arrest, corruption, absconding with money; Poor
quality products, complaints, litigation; Default funds on account, delinquency, tax evasion,
issuing false invoice, contract dispute, violation of regulations, compensation, smuggle
and etc.

Operation：New product launched, new patents granted, quality certificates awarded and
etc.
Court information we focus on:

All court records, either sentenced or under cognizance, with subject company as the
defendant or plaintiff, including intellectual asset in the form of copyright and/or patent, civil
case, economic sentence, fraud, bankruptcy, bribery, contract dispute, compensation,
laboring dispute, damage compensation and so on.
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CHINA VIP REPORT
5. PAYMENT INFORMATION
5.1 D&B Paydex
The D&B PAYDEX® is a unique indicator of payment performance weighted by the monetary
value of the payment experiences as reported to D&B by trade references. A detailed explaination
of how to read and interpret PAYDEX values can be found in the Appendices section of this report.
D&B PAYDEX® Trend(Company vs Industry Norm)
Month 2011/7 2011/8 2011/9 2011/10 2011/11 2011/12 2012/12012/22012/3 2012/4 2012/5 2012/6
Company
75
76
76
77
78
78
78
79
79
79
80
80
Industry
72
72
73
72
72
71
72
71
71
71
71
71
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CHINA VIP REPORT
5.2 Trade Payment Information
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CHINA VIP REPORT
5.3 Trade Payment Experiences Details
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CHINA VIP REPORT
5.4 Industry Payment Information
According to the statistics collected by Huaxia D&B during the recent 12 months (2011.10-2012.9),
the timely payment rates of automobile and parts industry of the past 12 months are mainly
between 55% and 60%, indicating that the payment performance of this industry is stable.
In terms of payment records, the average overdue terms from Q4, 2011 to Q3, 2012 was 19 days.
The timely payment rate and the overdue rate were 56.77% and 32.61%, which almost equal to
Q3, 2012 (59.03% and 30.08%), indicating a stable situation of the industry. Moreover, 18.75% of
the payment amount was delayed. The overdue term of 1-30 days has the largest proportion.
Overall, the payment performance of the automobile and auto parts industry is stable in the recent
12 months, indicating a steady condition of the market, which might result from the rebound of
automobile sales this year.
5.5 Trade Payment Industry Comparison
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CHINA VIP REPORT
6. COMPANY OPERATION
6.1 Line of Business
Subject is mainly engaged in manufacturing and selling automobile parts
6.2 Products Information
6.2.1 Products Category
Product Name
Productivity
Usage
Products A
/
/
Products B
/
/
6.2.2 Purchasing Information
Area
Percent
Region
Local
100%
East China
Terms
PERIOD
Percent
Credit
30 days
/
Contract
/
Advance
/
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CHINA VIP REPORT
Major Suppliers
Area
Name
DUNS
Domestic
Supplier A Co., Ltd.
42-000-1234
Domestic
Supplier B Co., Ld.
66-000-1234
6.2.3 Selling Information
Area
Percent
Region/Country
Local
60%
East China
Overseas
40%
Japan, USA, Europe
Terms
Period
Percent
T/T
L/S
Credit
30-90 days
Major Customers
Region
Name
DUNS
Local
Shanghai Customer Co., Ltd.
65-012-3456
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CHINA VIP REPORT
6.3 Awards & Certificates
Awards
Year
Awards
2001
Top 500 Industry Enterprise of Sales
2006
Member of China Auto Association Committee
License
Import & Export License
Certificates
ISO9002
VDA6.1
ISO/TS 16949:2002
QS90000
6.4 Location
Location Description
An industry area
Land Area
66000 sqm
Used as
Office and factory
Occupation Type
Owns
6.5 Employee Size
Total Employees
400
Note: 50 technicians
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CHINA VIP REPORT
6.6 Affiliates & Branches
【Affiliates】
『Name』
Shanghai VIP Sample Sales Co., Ltd.
『Address』
No. 1111, Fangtai Town, Jiading District, Shanghai
『TEL』
021-61234567
『Shares held by Subject』 20.73%
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CHINA VIP REPORT
7. SHAREHOLDER INFORMATION
Shareholders of Subject
Company Name
China ABC Co., Ltd
DUNS
65-XXX-1111
Address
Tangdian Luzao, Nanhui County, Shanghai
China
TEL
021-58791635
FAX
021-58161568
Type of Business
State owned company
Shares Held in
70%
Subject
Company Overview
China ABC Co., Ltd is wholly owned by China sample Industry Corporation,
mainly engaged in manufacturing automobile products. It was awarded as the
large-scaled state-owned company, class Ⅱ national company, China Star
company, one of the Top 100 Enterprises of Environment Protection in China,
and AAA Grade enterprise of quality, service and goodwill. It is also the member
of the jointly owned company by China Auto Industry Sales Services Company
and China Auto Parts Industry Company. The annual sales are over RMB
500,000,000.
Company Name
China KC Co., Ltd
DUNS
66-009-7890
Address
Jichang Road, Jiading District, Shanghai
China
TEL
021 87654321
Shares Held in
30%
Subject
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CHINA VIP REPORT
8. PROVINCE BACKGROUND
Shanghai
Geological Characters
East China, Yangtze River Delta, Coastal Area
Area (square kilometers)
6,340.5
Population (as end of 2011) million
1,858
Position in the national economy
One of four municipalities; the largest city and
the economic centre, financial center and
logistic center in China
Major Industry Sectors
Automobile industry, petrochemical and fine
chemical industry, high-rank steel products,
complete set of equipment manufacturing and
biological & pharmaceutical industry
Key Economic Indicators
2011
2010
1,369.8
1,200.1
9.7
13.3
0.8
0.8
45.5
47.3
53.7
51.9
482.7
445.86
8.3
13.6
105.8
103.2
212.91
192.43
10.3
18.6
393.65
328.48
19.9
23.2
3,748
4,206
Number of FDI Growth (%)
-10.9
-3.6
Contracted FDI (USD billion)
17.11
14.87
GDP Value (RMB billion)
GDP Growth Rate (%)
GDP Composition:
Agricultural Sector
Industry & Construction Sector
Service & Trading Sector
Fixed Assets Investment (RMB billion)
Fixed Assessment Growth (%)
Consumer Price Index (pre. Yr=100)
Import Volume (USD billion)
Import Growth (%)
Export Volume (USD billion)
Export Growth (%)
Number of FDI Projects Approved
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CHINA VIP REPORT
15.1
Foreign Investment Growth (%)
- 24 -
2.0
CHINA VIP REPORT
9. COMPETITIVENESS ANALYSIS
Threats
Opportunities
＊Automotive Industry has been listed among
＊The demand on automotives plunged
Influence by the financial crisis, the demand
the National Top 10 Plans for Industry
on automotives plunged and the global
Revitalization & one of the key industries
market shows decaying trend. It is deemed
sponsored by Shanghai Municipality
that
Government
the
productivity
and
sales
of
In recent years, the national automotive
External Factors
automotives will descend in 2010.。
production and sales have made great
＊End of the Rocketing Era for China Auto
progress. And the improvement of domestic
Industry
living condition as well as the governmental
Since 2002, the automotive market in China
encouraging on domestic demands leave
has been keeping rocketing for six years,
more space for auto industry growth. At the
with the growth rate greatly exceeding
same time, the service industry supporting
GDP. But the space was slowing down
automotive industry will be urged, too. In a
from the later half of 2008. The more and
totally mature international auto market, the
more gloomy trend of the domestic auto
profit shares for vehicle and auto account for
production
20% respectively. There are profit shares
fundamentally
and
the
sales,
fast
curbed
growth
of
enterprises of complete sets of parts.
- 25 -
available for sedan parts and the auto
services suppliers.
CHINA VIP REPORT
Internal Factors
Weakness
Strength
＊Squeezing industry profit margin
＊Leading position of science and technology,
The price decision mechanisms of upper and
with
lower auto parts are different; leading to the
The company started in R&D, relying on science
profit space of parts industry is squeezed. The
and technology innovation, strengthen the
imbalance
parts
development of new products and internal
enterprises and car enterprises result in the
management, excellent product performance,
inferior position of auto parts industry in the
powerful
industry chain, which cannot be fundamentally
"environmental
changed. Due to the manufacturers, the
subject follow the main developing direction of
company calls for reduction of high cost
world car industry as green engineering and
reduction
car
launched the new product of three-way catalyst
manufacturers would depreciate, subject’ has
instruments, with exhaust gas emission meeting
pressure to reduce its costs.
the standards of DBH/105-1998 and Europe 2 &
＊Ability to resist risks and profitability
3. At the same time, subject has own R&D
power
pressure,
between
etc.
auto
Since
the
In 2010, subject’s sales demonstrated an
upward trend indicating its increasing market
share. But at the same time, subject suffered
from poor profitability, its fees and costs are
significantly higher than the industry average.
self
development
silencing
functions,
protection
star".
ability
known
as
Meanwhile,
center.
＊ Advanced production equipment, good
customer resources, obvious scale effect
There are over 200 pressing machines and
hydraulic pressing machines in subject and
numerical
control
pipe
introduced
from
USA,
bending
automatic
machines
welding
machines introduced from Germany and barrel
automatic
production
line
introduced
Canada and tube cutting machines.
- 26 -
from
CHINA VIP REPORT
10 INDUSTRY ANALYSIS
Chinese Auto Parts Industry Development Situation
Chinese auto parts industry has the following features:
＊Obvious trend of international industrial transfer, rising proportion of overseas business
China auto parts enterprises successfully enter the international procurement system, and
undertake international industrial transfer by virtue of its comparative advantages in international
market. In the sense of transferor, the three major USA car companies continued to shrink its
shares in the market, with continuing low profit levels of parts suppliers, and rising labor and raw
material costs. As the result, more auto parts enterprises in USA entered the lists of bankruptcy
protection in the list. The financial situation of North America auto parts enterprises is not optimistic,
more than 80% of the parts suppliers bonds are rated as a "garbage class" by Standard &poor.
Therefore car companies split the non-core competitive parts apart, to distribute industrial chains
globally, and implement the business strategy of global procurement, global production.
＊As the comparative predominance for main raw materials and energy prices, not mention labor
cost, China's auto parts industry advantage will not disappear in short-term future.
China's main raw materials and energy prices are still significantly lower than the international
market; therefore China's advantages are still apparent. Compared to mature markets in Europe
and America, auto parts procurement in China will save cost ranging from 25% to 30%. Although
the cost of labor and employment of domestic auto parts industry is increasing, unit labor costs
(real wages / labor productivity) has no increased, benefiting from significant improvement of labor
efficiency. Therefore, domestic auto parts industry still has absolute advantage in the international
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CHINA VIP REPORT
comparison. As a result of a long period of "workshop" operation style, auto parts industry
relatively lacks of fixed assets investment, leading to low productivity. In 2006, this situation has
been fundamentally changed, with the capital-intensive inputs, the proportion of capital and labor
input rationalize gradually, resulting in increasing labor productivity.
Chart 1：International Comparison of labor
400
350
300
250
200
150
100
Column from left to right:
50
Japan,
0
日本
美国
韩国
新加坡马来西亚中国
印度
USA,
South
Korea,
Malaysia, China, India
Source: Bureau of Statistics of China
＊The imbalance power between auto parts enterprises and car enterprises, the inferior position of
auto parts industry in the industry chain has not fundamentally changed
The domestic auto parts enterprises feature as numerous, small-scaled, low industry
concentration. Average sales of single domestic auto parts enterprise only account for 2-3% of the
sales of car enterprise; industry concentration is also much lower than the car industry, therefore
there is great disparity between the two sides. Most part enterprises have no bargaining power in
the business negotiations with car enterprises, which is extremely unfavorable for the accessories
industry. Car enterprises will pass the loss of declining price to the upstream parts manufacturers,
with its dominant position in the whole industry chain.
- 28 -
Singapore,
CHINA VIP REPORT
Chart2：parts manufacturer average sales only 3% of car manufacturer
百万元
400
整年平均单厂月度销售规模（左轴）
10
零部件平均单厂月度销售规模（右轴）
300
200
5
200
-
06/07
06/01
05/07
05/01
02/07
04/01
04/01
03/07
03/01
02/07
02/01
-
Source: Bureau of Statistics of China
Average monthly sales of car manufacturer ( left axis) Million RMB
Average monthly sales of part manufacturer (right axis) Million RMB
＊Raw material prices shows a rising trend, which put a lasting margin pressure on parts
manufacturers
The raw material needed by parts industry can be divided into metal and rubber. Iron and steel raw
materials accounted for 64% of the whole, aluminum alloy for 8.3%, PU, PVC, PB, as rubber
materials, also occupy a certain proportion. Overall, raw material prices show a rising trend, which
put a lasting margin pressure on parts manufacturers. The iron and steel occupy the largest pieces
of shares of car product; therefore its price changes will significantly affect the industry gross
margin level.
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CHINA VIP REPORT
Chart3：proportion of raw materials used in automotive industry
0.3%
12.6%
镁合金
7.4%
其他
橡胶和玻璃
7.6%
塑料
铝合金
63.8%
8.3%
钢铁
Source: Bureau of Statistics of China
Column from up to down:
Magnesium alloy, Others, Rubber & Glass, Plastics, Aluminum alloy, Steel & iron
＊China's auto parts industry related policies and regulations
1．"Eleventh Five-Year Plan"
National "Eleventh Five-Year Plan" raised the strategic objective as "Raise China's auto parts
industry from producing level into world advanced level”. Under the guidance of energy saving,
environmental protection, safety, parts industry has rapid progress in new products development,
product structure adjustment and so on. With further standardization of national industrial policy,
mandatory implementation of Guosan emission standards, acceleration the pace of developing
diesel cars, for the of the diesel car further speed up the pace, auto parts industry entered the
stage of the overall skills upgrading.
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CHINA VIP REPORT
2．Changes of value-added tax and export tariffs on tax rebate policy
China's export tax rebate policy adjustment boosted structural changes in exports auto parts
productions. On July 1, 2007, China implemented the new export tax rebate policy, and the 2821
commodities export tax rebate rate will be further reduced, including the automotive spring, glass
and some other auto parts. Government introduced large-scale export tax rebate policy
adjustment, which will help ease the liquidity impact brought by trade surplus, there is always the
possibility that government would further strengthen the tax rebate policy adjustment in the wider
range. Most adjusted products are low value-added products. First, for the labor-intensive low
value-added products, such as low-end auto glass, tires, fuel tanks, the profit was generally not
high. Many enterprises rely heavily on the export tax rebate policy and to take this into big price
war. And increased Low-cost low-quality exporting products have led to frequent trade friction. For
such products, the impact of tax rebate policy is material. Secondly, the state continues to
encourage exports of high value-added auto parts. After policy adjustment, the auto parts products
transfer from labor-intensive to technology and higher value-added products, which will transfer
domestic suppliers competition from International AM fighting market to high-end OEM market,
thus realizing the high value-added supplying.
3．Industry development planning
The year 2009 is China's "most difficult year” for the economic development since the new century.
To achieve GDP growth target of 8%, the central government made a series of policies and
measures to ensure growth rate, to protect the people's livelihood, and to ensure security and
stability, such as the two-year investment plan of RMB 4 trillion. And it gives support for ten
industries, agriculture, consumer, financial and tax deduction. Especially restructuring the top ten
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industries, such as automotive, steel, shipbuilding, petrochemical, light industry, textiles,
non-ferrous metals, equipment manufacturing, electronic information, modern logistics, and the
formulation of revitalization planning would make these key industries rehabilitation. Almost half of
the total RMB 4 trillion is invested for railways, highways, and airports and urban and rural power
grid construction. And the 1.8 trillion will boost the demand for cars. At the same time, the state
introduced "the automobile industry restructuring and revitalization planning", and work out a
number of supportive policies, such as motor vehicles to the countryside, government
procurement, automobile credit, automobile new energy purchases, also reduce the vehicle
purchase tax, consumption tax, to speed up the replacement of old vehicles, arrangements RMB 5
billion for farmers buyers financial subsidies. These policies will stimulate farm vehicles demands
and consumption growth, as the impetus for automotive parts market out of the bottom.
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Forecast for China's auto parts industry
＊
Driven by the domestic car prosperity, parts industry is expected to enter the boom cycle.
Total China car-in-use per thousand is only 40, which is far below the level of developed countries.
With the lifting national standard of living, as well as national policy of stimulating domestic
demand, there is still developing space for cars. This could be a lot of good for upstream industry,
and parts industry is expected to boom driven by the car industry. After five years since the
accession to WTO, China's automobile industry successfully weathers the external shocks, and
the average annual compound growth rate reach 25.5%. The automobile industry is no longer the
infant industry; China has become a truly big country of manufacturing and sales of cars. As
consumer durable goods, the car industry has a clear periodicity, highly relevant with the GDP and
per capita disposable income. History has shown that when per capita GDP enter the interval of
1000 $ -3000 $, the car industry is within a period of rapid growth, which is sustainable for 5-8
years, then entering the period of steady growth. Now China has entered the region, the
automotive industry is expected to maintain rapid growth. In addition, China's first-line city shows
the car changing demand, second and third line cities car purchasing demand come to a peak
point, leading to the superposition of two types of demands.
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CHINA VIP REPORT
Chart4：
1000
900
800
700
600
500
400
300
200
100
0
汽车产量
38.9%
13.0%
234
2001
325
2002
增长率
45%
40%
36.6%
728
35%
30%
27.5%
571
507
25%
444
22.5% 20%
14.2%
15%
12.6%
10%
5%
0%
2003 2004 2005 2006 2007E
892
Auto Production
Volume
Auto Growth Rate
Source: Bureau of Statistics of China
Chart5：2004-2007Car productive per month units: 10,000
100
90
80
70
60
50
40
30
20
10
0
2004
1
2
3
2005
4
5
6
2006
7
8
9
2007
10
11
12
Source: Bureau of Statistics of China
＊Higher localization rate of car manufacturing provides new opportunities for domestic parts
enterprises
Since 2005, the State introduced policy of "Verification rules for constitution of a whole car by
importing auto parts ", some introduction cares realized manufacturing localization. In particular in
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CHINA VIP REPORT
2006, importing of parts for assembly is significantly reduced, the proportion has been reduced to
4.6%, and localization rate of manufacturing increased. We believe that the proportion of importing
CKD will continue to decline, with the higher level of localization manufacturing rate, which
undoubtedly creates new opportunities for domestic auto parts enterprise development.
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CHINA VIP REPORT
11. APPENDIX
HDBC EMMA Score
D&B EMMA Score (Emerging Market Mediation Alert Score) is a risk assessment model
developed for emerging market countries. It is a score developed by data profiling approach and
statistical modeling, which predicts the possibility of a business in perilous status of instability or
unreliability, such as poor financials, delay payment, stale inventory, abnormal operational status,
etc. The EMMA Score provides you with a quick assessment of a business' risk standing, and
when used together with other information, allows you to make better risk decisions.
The EMMA Score is based on a scale of 1 to 10, where 1 represents a lower risk and 10 a higher
risk.
EMMA Score for China is initially rolled out in May 2009, derived from the sample analysis of
millions of company records. When using the Score to make individual applicant decisions, a
customized version of this table based on an analysis of the Score against your customer account
portfolio is recommended. It does not necessarily mean doing business with a company, which is
assigned with higher Risk Score, will result in increased risk.
Considering the particularity of Chinese business environment and in order to make EMMA Score
analyze and reflect risk factors of Chinese enterprises more appropriately, HDBC conducted an
optimization and adjustment toward EMMA Score in the first half of 2012, combined PAYDEX® to
appraisal model as an important risk evaluating dimension and will try harder to deeply reflect the
internal factors of enterprise risk. The optimized EMMA Score makes the scores more scientifically
and effectively reflect the risk characteristics of current China as an emerging market and more
objectively and deeply reflect risk level of Chinese enterprises.
EMMA Score for China is calibrated on regular basis following D&B Global Modeling Methodology
that captures business environmental change in China caused by macro economy shift and
particular systematic events.
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CHINA VIP REPORT
HDBC EMMA Score Commentary
Range
EMMA Score
% of Report in
Database
% of High Risk
Business
Commentary
Low Risk Scores
1-3
28.9%
5.7%
Lower Risk Range
Medium Risk Scores
4-7
56.7%
9.1%
Average Risk Range
High Risk Scores
8-10
14.4%
36.4%
High Risk Range
The Key Drivers of the EMMA Score include the following:
Business Information
Geographical Information

Business Type


Line of Business

Employee Size

Sales Territory

Registered Capital

Percentage of Overdue Payment

Year of Establishment

Company/Industry PAYDEX®

History Status

Property Ownership
Region & Province
Public Record

Number of Negative Record
Payment Information
EMMA Score Application

Low EMMA Score - May proceed to process the applicant quickly with minimal or no
manual review depending on the extent of score validation analysis.

Medium EMMA Score - Medium Risk Scores - Recommend a manual review of the
applicant based on the applicant's capacity, your internal policy and risk tolerance.

High EMMA Score - High Risk Scores - Requires thorough manual review of potential
decline, or approval depending on the applicant's capacity, your internal policy and risk
tolerance.
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CHINA VIP REPORT
Sample Data Analysis of Risk Assessment Matrix Database
Risk Matrix Sample Distribution
Risk Range
PAYDEX
Low
Medium
High
PAYDEX>=80
13.6%
12.6%
0.5%
80>PAYDEX>=60
15.2%
28.7%
1.7%
PAYDEX<60
0.1%
15.4%
12.2%
Possibility of High Risk Enterprise
Risk Range
PAYDEX
Low
Medium
High
PAYDEX>=80
5.8%
8.4%
9.1%
80>PAYDEX>=60
5.6%
8.4%
14.5%
PAYDEX<60
5.6%
11.1%
40.4%
Interpretation and Analysis of Risk Assessment Matrix
Classifications
Quality group
Low risk group
Risk Level
AA->AB
BA->BB->AC
Description
Business is sound, and the bills are paid
promptly with good credit reputation.
Business is operated under low risk, and
some delay payment behaviors exist.
Business is operated under high risk,
High risk group
CA->BC->CB and some severe delay payment
behaviors exist.
Business is run under high risk or with
Monitoring group
CC
high possibility of windup, and the bills
are unable to be paid in time.
Credit Policy
Favorable credit policy can be
granted with automatic
approval.
Appropriate credit policy is
suggested with some manual
review.
Relatively strict credit policy is
suggested with detailed
manual review.
Avoid credit sales. Cash
settlement is suggested.
*Risk levels are listed in order of risk from low to high.
Risk Assessment Matrix is the tool for investigating the insight of subject combined with EMMA Score and
PAYDEX®. EMMA Score can indicate the risk level of subject. With the help of PAYDEX®, one can also
further analysis subject's risk and find out the internal factors causing risks based on the payment records of
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CHINA VIP REPORT
subject. In summary, the assessment matrix can make further insightful analysis towards the enterprises
with similar EMMA Scores.
When using EMMA Score and Risk Assessment Matrix, the combination of other information, such as
internal assessment policy of enterprise, commercial information provided by HDBC, and feedback from the
people who directly contacts with subject, etc., is recommended. With these information, it will allow you to
be more convenient to make risk decisions.
D&B Rating
D&B Rating Interpretation Tables
Financial Strength
Composite Credit Appraisal
Tangible
Registered
Net worth
Capital
5A
5AA
> 450,000,000
1
2
3
4
-
4A
4AA
85,000,000 - 449,999,999
1
2
3
4
-
3A
3AA
8,500,000 - 84,999,999
1
2
3
4
-
2A
2AA
6,500,000 - 8,499,999
1
2
3
4
-
1A
1AA
4,500,000 - 6,499,999
1
2
3
4
-
A
AA
2,500,000 - 4,499,999
1
2
3
4
-
B
BB
1,750,000 - 2,499,999
1
2
3
4
-
C
CC
1,000,000 - 1,749,999
1
2
3
4
-
D
DD
650,000 - 999,999
1
2
3
4
-
E
EE
450,000 - 649,999
1
2
3
4
-
F
FF
300,000 - 449,999
1
2
3
4
-
G
GG
200,000 - 299,999
1
2
3
4
-
H
HH
< 200,000
1
2
3
4
-
3
4
-
3
4
-
Alternate
Ratings
Renminbi (RMB)
Strong Good
Fair
Limited Undetermined
Explanation
N
Financial Strength is negative
O
Financial Strength is undisclosed
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CHINA VIP REPORT
NB
New Business: Less than 24 months
1
NQ
Out of Business: Business has ceased to trade
BR
Branch or division location
INV
Investigation is undergoing
2
3
4
4
Explanation of PAYDEX
A score of 80 denotes that payments reported to D&B have generally been made within terms.
Scores over 80 indicate that payments reported to D&B have been made earlier than terms. The
chart below outlines the specific 0-100 score and what it means.
D&B PAYDEX®
Payment Habit
100
Anticipate
90
Discount
80
Prompt
70
15 days beyond terms
60
22 days beyond terms
50
30 days beyond terms
40
60 days beyond terms
30
90 days beyond terms
20
120 days beyond terms
0-19
Over 120 days beyond terms
UN
Unavailable
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CHINA VIP REPORT
Glossary of Terms
D-U-N-S Number
The Data Universal Numbering System (D-U-N-S) is a standard for keeping track of
companies all over the world. D-U-N-S number is a unique nine-digit code assigned to each
company worldwide.
Standard Industrial Classification (SIC)
The Standard Industrial Classification (SIC) system was first developed by the U.S.
Government and has been widely adopted as the standard coding system used to define and
analyze industry structure.
Parent Company
Parent company refers to a company holds more than 50% of another company’s shares,
which can actually control the company.
Subsidiary Company
Subsidiary refers to a company, 50% of whose shares are held by another company and is
actually controlled by it.
Affiliated Company
Businesses with 50% or less voting stock owned by another business are designated Affiliated
Company.
Branch
A Branch is a secondary location for which its headquarters has legal responsibility. Typically,
a branch is at a separate location.
However, a branch can be located together with its
headquarters or sister branch, provided they have unique, separate, and distinct operations.
Branches often have secondary names of trade styles, but the branch primary business name
must be identical to its headquarters’ primary name.
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CHINA VIP REPORT
Remarks
This report, furnished pursuant to contract for the exclusive use of the subscriber as one factor to
consider in connection with credit, insurance, marketing or other business decisions, contains
information compiled from sources which Shanghai Huaxia Dun & Bradstreet Business
Information Consulting Co., Limited (Huaxia D&B China) does not control and whose information,
unless otherwise indicated in the report, has not been verified. In furnishing this report, Huaxia
D&B China in no way assumes any part of the user's business risk, does not guarantee the
accuracy, completeness, or timeliness of the information provided, and shall not be liable for any
loss or injury whatever resulting from contingencies beyond its control or from negligence.
-- End of the Report--
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