CREDIT SUISSE ASSET MANAGEMENT (Switzerland) Ltd.1/2018

0755

19E

China

Think Big, Think China. Insights from the World’s Most Dominant Economy.

First We Take Manhattan

Increasing demand for international real estate investments – from London to Berlin

30 Global Real Estate

Best of China

Easier access to two of the world’s largest equity and bond markets

18 China Investment Solutions

Ready, Steady, Go!

Profit from China’s strong economic growth

06 The Scope Interview

… or order other Credit Suisse publicationsfree of charge at credit-suisse.com/shop

(publications shop).

Electronic newsletters on current topics related to business, society, culture, and sports are

available for subscription at credit-suisse.com/newsletter.

Subscribe to …

CREDIT SUISSE ASSET MANAGEMENT (Switzerland) Ltd.

1/2018

0755

19E

China

Think Big, Think China. Insights from the World’s Most Dominant Economy.

First We Take ManhattanIncreasing demand for international real estate investments – from London to Berlin

32 Global Real Estate

Best of ChinaEasier access to two of the world’s largest equity and bond markets

17 China Investment Solutions

Ready, Steady, Go!Profit from China’s strong economic growth

06 The Scope Interview

� e world’s oldest banking magazine.

Know-how and investment themes from Asset Management.

++

C R E D I T S U I S S E

Bulletin

Sinc

e 189

5. Th

e wor

ld’s o

ldes

t ban

king

mag

azin

e.

Sinc

e 189

5. Th

e wor

ld’s o

ldes

t ban

king

mag

azin

e.

Sinc

e 189

5. Th

1 / 20

18

075

36

0E

VisionariesConversations with Exceptional People

ROGER FEDERER – p. 6

JIL SANDER – p. 61

JANE GOODALL

p. 44

Biographer Robert Skidelsky on

JOHN MAYNARD KEYNES – p. 18

Scope | 1/2018 3

Michel Degen Head of Asset Management

Switzerland & EMEA

Editorial

Think Big,Think China.

There is no definitive answer to the question of whether the People’s Republic of China is following a centrally planned or free market eco-nomic policy. The fact remains that the government is currently charting a course towards a market economy. Today, the General Secretary of China’s Communist Party is talking of easier market access for foreign investment while promising to open up the country’s services sector, as well as implement a reform of its currency and financial system. The policy roadmap was unveiled in 2015 under the programmatic title “Made in China 2025”, a sweeping initiative to radically upgrade the Chi-nese economy. Its goals include the promotion of innovation, moderniza-tion of production structures and enhancement of productivity.

For investors, China’s equity and bond markets are exciting for two reasons. First, the correlation to developments in the Western world is low; second, China’s investment universe has grown exponentially over the past 20 years. Credit Suisse boasts a decades-long presence and experience in China, as explained in an interview with Eric Varvel, Global Head of Asset Management. Our vast on-the-ground investment ex-pertise and global know-how in asset management form the basis on which Credit Suisse has developed a broad array of solutions for securities investments in China. For more information, refer to the articles on pages 19, 21 und 23.

The Chinese economy has ramped up to become the global leader in a wide range of sectors. This fact is reflected not only in China’s capital market but also in the increasing international presence of Chinese in-vestors. The People’s Republic of China is positioning itself as a leading economic center as it strides inexorably towards the future.

I wish you an enjoyable and inspirational read of our 4th edition of Scope.

Michel Degen

4 Scope | 1/2018

Contents

Contents

Editorial Topical articles

03 Think Big, Think China The time is now to get serious about securities investments in China

06 “We are well positioned” Interview with Eric Varvel

10 Steep Learning Curve How China is on its way to the top of the world

14 Thomas Gottstein Bringing skills and capabilities within reach

18 Best of China Farsighted investors cannot afford to ignore investments in China

19 The Third Way Capitalizing on China’s equity and bond markets using a balanced strategy

21 New Universe Easy access to the world’s third largest bond market

23 Chinese for Savvy Investors Easy access to the world’s second largest equity market

27 Index of the Future The inclusion of China A-shares in the MSCI Emerging Markets Index will increase the country’s weight in the index

30 Discover London Chinese investors are increasingly targeting international real estate, with an eye on Europe in particular

36 Hand in Hand Urs Buchmann has been in China for Credit Suisse since 1987 so he knows how the Chinese tick

40 China’s New Retails Frontrunners in innovative technologies, new sales channels and changing consumer behavior

China Investment Solutions

Best of ChinaCredit Suisse’s China products are ideal for investors with a variety of risk/reward profiles. The spectrum ranges from equity strategies, balanced strategies and index investments up to and including easy access to the world’s third largest market.

Scope | 1/2018 5

Contents

The “disclaimer/important information” at the end of this publication applies to every page of the document.

Miscellaneous Legal information Subscribe to “Scope”Read “Scope” in

e-paper format for tablets orin magazine form.

credit-suisse.com/scope

34 Garden of Friendship The Chinese Garden on Zurich’s lakeside promenade has symbolized the city partnership between Zurich and Kunming for 24 years

44 Knowledge Nuggets Interesting facts about China

46 Contact Imprint Sources

47 Disclaimer/ Important information

Credit Suisse is the ideal partner for investors looking to participate in China’s economic growth.

The Scope InterviewEric Varvel Global Head of Asset Management

Economic OutlookSteep Learning CurveHow China Is on Its Way to the Top of the World

China owes its stronger-than-average growth to the unprecedented sense of purpose demonstrated by its political leaders. Their targets are set out in comprehensive initiatives and programs such as “The New Silk Road.”

Global Real EstateDiscover LondonChinese Investors Are Reshaping Their Preferences

Instead of properties in Manhattan and Asia-Pacific, today European metropolises are highly popular among investors. The Monument Building in the heart of London is a perfect fit for this investment profile.

6 Scope | 1/2018

Eric VarvelMr. Eric M. Varvel serves as Global Head of Asset Management and President and Chief Executive Officer of Credit Suisse (USA), Inc. Prior to assuming his current role, Mr. Varvel was Chairman of the Emerging Markets and Sovereign Wealth Funds. He was also previously CEO of Asia Pacific and CEO of Europe, Middle East and Africa.

The Scope Interview

Scope | 1/2018 7

Mr. Varvel, China has rapidly become an economic powerhouse, and may eventually displace the US as the world’s largest economy. How is Credit Suisse affected by this economic shift and positioned to capitalize on potential opportu- nities in China?Eric Varvel: Credit Suisse has demon-strated its commitment to China over time and we are strong believers in the oppor-tunity presented by the growth as well as the dynamic developments of China’s economy. Our business in China started in 1955 when we established a corre-spondent banking relationship with the

Bank of China. Credit Suisse was among the first global financial institutions to set up a local presence in China in 1985. In 2005, we established ICBC Credit Suisse Asset Management (ICBCCS), which was the first asset management joint venture between a Chinese commer-cial bank and a foreign asset manager. ICBCCS is now one of the largest asset managers in China with over RMB 1 trillion of AuM.

While many of our competitors have been focused on how to extract money from China, we are working on becom-ing a leader in providing investors access

to investment opportunities in China. We recently launched two RMB funds for international investors focused on Chinese domestic bonds and China A- shares. The key to our success in China and the value that we bring to our clients is combining the onshore presence and expertise of our leading partner, ICB-CCS, with the institutional investment capabilities of Credit Suisse Asset Man-agement. In summary, we’ve invested a lot in China over a long time to build a strong franchise and are well-positioned to help our clients benefit from the con-tinuation of this growth trajectory.

Interview with Eric Varvel Global Head of Asset Management

“We are well-positioned to help our clients

benefit from China’s growth trajectory”

Thanks to its several decades of local presence in China and in-depth knowledge of local conditions, Credit Suisse is

the ideal partner for investors wanting to participate inthe Middle Kingdom’s impressive economic growth. Now is a

good time to invest as China has lowered the barriers to entry for foreign investors, which should help gradually

globalize its capital markets, as Eric M. Varvel explainsin the following interview.

The Scope Interview

8 Scope | 1/2018

While China has become integral to the global economy, has that been mirrored in China being a criti-cal component in the portfolio of global investors? China is already the second largest economy in the world with a GDP of ap-proximately USD 12 trillion and it is the biggest contributor to global growth. The Chinese equity market is the sec-ond largest and the local bond market is ranked third in the world. Even with the scale and growth of China, international investors are significantly under-allocat-ed. This is beginning to change. The in-clusion of China A-shares in MSCI indi-ces and strong market performance is stimulating increasing interest and ur-gency for investors to start the process of right-sizing their geographic allocations. While having exposure to China was not historically viewed as a necessity, we believe it is an essential part of a global investment portfolio. A shift in the geo-graphic composition of portfolios towards China is supported by improving regula-tory transparency and corporate gover-nance. We also think investing in China makes economic sense for investors with attractive valuations relative to earnings growth, higher yields and a lower correla-tion to developed markets that we believe will enhance the risk-adjusted returns of a global investor’s portfolio.

The majority of Chinese companies are only traded as “A-shares” on the mainland stock exchanges of Shanghai and Shenzhen. How do these exchanges differ from their counterparts in the US and Europe?There are important differences that have made it more challenging for global in-vestors to gain access to most Chinese companies. As a result, the A-shares listed on the Shanghai and Shenzhen

stock exchanges are primarily held by domestic investors. The combined market capitalization of these exchanges has grown to more than USD 7 trillion. Rec-ognizing the need to open these large markets to international capital, the Chi-nese government and regulators have been making meaningful changes to re-duce the barriers of entry for global in-vestors. This was initially done through quota programs like the Qualified For-eign Institutional Investor scheme that allotted capacity for institutional investors to invest in RMB-denominated stocks and bonds. More recently, the Stock Con-nect and Bond Connect programs have substantially alleviated constraints to trad-ing onshore subject to certain daily vol-ume and volatility limitations. Individual investors are able to utilize offshore fund vehicles to avoid the complexities of navi-gating these markets directly. Over time, the internationalization of the RMB and capital markets in China should translate into the Shanghai and Shenzhen Ex-changes operating similarly to their global peers.

A-shares are on the verge of being incorporated into the MSCI indices. What will this development mean for investors? The amount of the initial allocation to A-share in the MSCI emerging market in-dices is less meaningful than the symbol-ic significance. I remember when China became a member of the World Trade Organization in 2001 and the IMF includ-ed the Chinese RMB in their Special Drawing Rights Basket in 2016. These are historic moments that can often only be appreciated in hindsight. In June 2018, a subset of large-cap A-shares will represent 0.73% of the MSCI Emerg-ing Market indices. We believe the A- share allocation will increase significantly

within the EM indices and eventually be included in the global indices. Passive in-dex-tracking and benchmark-oriented strategies will steadily and predictably in-crease their allocation to China in line with these changes. More broadly, MSCI inclusion is a reflection of the opening of China, market liquidity and RMB inter-nationalization. This is already causing global investors to fundamentally re-eval-uate their exposures to A-shares and local currency bonds.

You mentioned that Credit Suisse recently launched two China funds that invest in onshore equities and bonds. For which investor profiles are these products a good fit?We believe that exposure to the eco-nomic growth in China through equities and fixed income is appropriate for any globally diversified, balanced portfolio. The problem that we tried to solve is the best approach and structure for investors to access these markets. It is not a great epiphany to suggest that an investment allocation to China makes sense. The bigger challenge is doing it in a manner that is seamless and value-added. We did not want to be just another global as-set manager claiming to have unique in-sights into China. Our competitive advan-tage is having the largest asset manage- ment joint venture in China with ICBCCS. They already have an outstanding long-term track record, a talented team, quality infrastructure, differentiated market knowledge and corporate access that can’t be replicated by an offshore man-ager. We seek to complement their ex-pertise in security selection and macro analysis with our institutional approach to portfolio construction and risk manage-ment. Our funds were then designed to be accessible and efficient in UCITS- compliant structures with daily liquidity.

“Over time, the internationalization of the RMB and capital marketsin China should translate into the Shanghai and Shenzhen Exchanges

operating similarly to their global peers.”

The Scope Interview

Scope | 1/2018 9

It’s a hard combination to beat for inves-tors seeking to invest in China. The ques-tion of the fit for a client’s portfolio is usually a matter of their individual risk- return profile to determine the right long-term allocation.

There has been a lot of attention around Chinese internet companies and valuations seem to be expen-sive. What is your view on whether these companies represent an opportunity or a risk for investors?Naturally, there are both opportunities and risks to be managed. China has a thriving technology sector that has be-come quite pioneering, particularly in the adoption of mobile technologies. Un-like companies in the US and Europe that have already globalized, China’s tech-nology companies are just beginning to

expand geographically and people are going to be surprised by their innovation, competitiveness and eventual penetra-tion. There is tremendous potential in many of these companies, but you also have to be thoughtful about valuations and potential risks. This is where our re-search-based, fundamental investment approach can add value for investors.

China no longer wants to be just the “world’s factory.” It is currently pursuing the China Manufacturing 2025 plan, which involves a complete technological overhaul of the do-mestic manufacturing industry. How will the implementation of this plan impact on the global economy?With rising labor costs and an aging population, China may no longer produce the cheapest shoes or T-shirts. China

is maturing like other countries that have gone through an industrial revolution. The focus on education and quality labor is facilitating competitiveness in both high-er-value manufacturing and other sectors like technology as we discussed. The quality of growth has improved as China continues its transition from an ex-port and investment-led economy to a consumption and services-driven econ-omy. We believe this is positive for sus-taining global growth, but it will also pose challenges for international companies that are competing in these businesses. Ultimately global trade and competition are good things.

  February 2018

“People are going tobe surprised by the innovation,

competitiveness andeventual penetration of China’s

technology companies.”

The Scope Interview

10 Scope | 1/2018

Everyone has an opinion on China. The world’s second biggest economy inspires politicians, academics, scien-tists, entrepreneurs, artists and the media worldwide to conduct analyses, produce specialist literature and, of course, air their views. These opinions cover the whole spectrum from blatant criticism to unabashed admiration. However, the common denominator here is respect for what the country has achieved over the last several de-cades. The single-minded way in which China targets – or has already achieved – leading positions across a whole raft of fields is impressive.

A look backWhen the People’s Republic of China was founded in 1949, the Communist Party of China (CPC) faced a multi-tude of huge challenges. Agriculture was at a low ebb, the irrigation system was in very poor shape due to ram-shackle dams, and the transportation infrastructure was in a precarious state. The “Great Leap Forward” campaign proclaimed by Chairman Mao Zedong ended in a cata-

strophic famine that caused millions of deaths. The “Great Proletarian Cultural Revolution”, Mao’s other key project, also claimed millions of lives and only came to an end on Mao’s death in 1976. Up until then, the Peo-ple’s Republic was largely isolated from the West. It was not until after the Cultural Revolution that the Com-munist Party embarked upon a controlled process of opening the country up to the outside world.

For reasons of space, we are unable to provide a de-tailed description of how China has developed over the 40 years since then in this article. We have restricted ourselves to three initiatives and programs with a direct link to the present: “The New Silk Road”, “Made in China”, and “China Manufacturing 2025 (CM2015)”.

The New Silk RoadThe New Silk Road, also referred to as “One Belt, One Road” or the “Belt and Road Initiative”, has been a key priority of the Communist Party leadership under Chinese

Burkhard Varnholt Chief Investment Officer (CIO) Switzerland of Credit Suisse,

Deputy Global CIO and Vice-Chairman of the Investment Committee of Credit Suisse

After the US, China is already the world’s second biggest economy. China’s gross domestic product (GDP) climbed by 6.9% in 2017. Above-average growth is also forecast for the coming years thanks to more research,

more innovation, and greater efficiency.

Steep Learning Curve

How China Is on Its Way to the Top of

the World

Economic Outlook

Scope | 1/2018 11

“workshop of the world” tag by bidding farewell to mass production via an industrial upgrade.

A sovereign investment fund – the Silk Road Fund – was set up in late 2014 to finance the initiative. A hydroelec-tric power plant in northern Pakistan is one of the first projects it has funded. The China Development Bank, the Export-Import Bank of China, and the Asian Infrastruc-ture Investment Bank (AIIB), whose members include Switzerland, are also providing funding for projects within the New Silk Road initiative. The AIIB was established at China’s instigation. Its founder members include India, Russia, Indonesia, the Philippines, Germany, France, the United Kingdom, Italy, and the Netherlands.

Made in China 2025The initiative is partly inspired by Germany’s “Industry 4.0” program, which aims to combine the opportunities pro-vided by information and communications technology with industrial production. However, the Chinese program

President Xi Jinping for a number of years now. The term harks back to the old Silk Road, which linked China to central Asia, the Middle East, and Europe.

Essentially, the initiative is a vast infrastructure project with which China aims to facilitate free trade across the globe. The New Silk Road runs through 60 countries, which are home to more than 60% of the world’s popu-lation. As well as building roads, railways and ports, the initiative envisages the establishment of special economic zones. Besides the Middle Kingdom itself, neighboring countries are also set to benefit from the New Silk Road.

For their part, many Europeans take a skeptical view of this project, accusing the Chinese of conducting this huge undertaking predominantly out of self-interest. There is a widespread sense that China wishes to exploit this en-hanced infrastructure to gain efficient access to coun-tries that it would like to take over the cheap mass pro-duction of goods in future. The Chinese aim to lose the

Figure 1: A Silk Road for the 21st century

Economic Outlook

Source: NZZ

New Silk Road over land Maritime Silk Road

Moscow

Kazakhstan

Russia

China

Beijing

Xian

Fujian

Hanoi

Indonesia

Singapore

Jakarta

Kolkata

India

Colombo

Tehran

Iran

IstanbulTurkey

NairobiKenya

Venice

DuisburgRotterdam

Indian Ocean

12 Scope | 1/2018

goes a lot further. The aim is not only to digitalize China’s industry, but also to make the whole country ready to manufacture products that add the highest value possible. At the same time, the plan is to boost productivity, en-hancing competitiveness to world-class levels. “China still lags a huge distance behind leading multinational cor-porations in many industries, but the catch-up process is gaining traction,” was the recent assessment of the Mercator Institute for China Studies, Berlin.

China Manufacturing 2025 (CM2015)This initiative, which was launched in 2015, aims to promote ten specially selected economic sectors. These include various industries such as IT, robotics, aviation, the manufacturing of rail transport equipment, electric vehicles, agricultural machinery and ships as well as biotechnology and pharmaceutical products. The program gives priority treatment to building up local expertise quickly. The aim is to put Chinese companies in a position to compete with the best European and US corporations when it comes to quality, efficiency, sustainability, and innovation. Chinese companies that meet these criteria

can benefit from tax privileges and subsidies. In contrast, it is by no means unusual for foreign suppliers to be at a disadvantage, as they either face obstacles to market entry or are denied access altogether.

The quest for stabilityAccording to Credit Suisse’s Investment Outlook 2018, China’s policy focus this year will likely switch from eco-nomic stimulus to limiting growth in debt. Having achieved a surprisingly strong level in 2017, growth may therefore slow down somewhat, not least because of what will prob-ably be ongoing consolidation in key industries.

On the back of their quest for stability, the Chinese authorities have tightened up capital controls, which has recently prompted a modest rise in money market rates. As a result, after a weak 2016 the RMB appreciated slightly on a trade-weighted basis last year as outflows eased amid a recovery in foreign exchange reserves. The authors of the Investment Outlook 2018 take the view that, while a more restrictive policy approach will likely be pursued again this year, capital controls could

Source: https://www.credit-suisse.com/microsites/private-banking/investment-outlook/en/global-economy/regions-in-focus/china.html

Figure 2: Global economic rankings

GDP in USD bn

Economic Outlook

2016 2022 estimates

25,000

20,000

15,000

10,000

5,000

0

US China Japan Germany UK France India Italy Brazil Canada

18,624

23,505

18,383

11,232

4,9375,482

3,4794,452

2,629 2,961 2,4663,162

2,264

3,924

1,851 2,244 2,6291,799 1,530 2,052

Sources: IMF, Credit Suisse; Data as of October 31, 2017

Historical performance indications and financial market scenarios are not reliable indicators of current or future performance.

Scope | 1/2018 13

be eased a little. In light of what are relatively robust Chinese fundamentals, they do not expect this to trigger another phase of weakness in the RMB. Furthermore, the currency’s stability should limit the risks of protection-ist measures against China and of heightened pressure on other emerging market currencies.

Hats off to China!Commentators may well take a critical view of the gener-al conditions under which China’s economic success has been achieved. Yet there can be no doubt that the end has justified the means. The Chinese government’s track record is indisputable. China’s GDP of USD 11.9 trillion now accounts for 15% of global output, which runs to an estimated USD 79.3 trillion at present. The gap versus the US, whose GDP comes in at USD 19.4 trillion (24.5% of global GDP), is steadily shrinking. With its growth last year alone of 6.9%, China boosted its economic output by some USD 750 billion, which is higher than Switzerland’s entire GDP of around USD 660 billion.

Sources: IMF, Datastream, Credit Suisse/IDC; Data as of December 29, 2017

These forecasts are not reliable indicators of future performance.

Sources: https://www.merics.org/de/china-flash/wirtschaftsausblick-2018; IMF estimates; https://www.credit-suisse.com/ch/de/articles/private-banking/die-weltwirtschaft-lauft-heiss-201710.html; Global Wealth Report 2017, Credit Suisse

Two million millionairesThe Chinese took just 17 years (2000 to 2017) to increasewealth by the same factor achieved in the US over 70 years (1946 to 2016). Per capita wealth in China climbed from USD 5,410 to USD 26,870 between 2000 and 2017, more than half of which was made up of tangible fixed assets, especially real estate. After the US and ahead of Japan, Chi-nese households now have the second highest assets in the world.

Despite the divide between urban areas and the country-side, until several years ago the disparity in the distribution of wealth was limited because it is unusual for large sums to be inherited. Furthermore, there is a relatively even distri-bution of residential property and ownership of rural land. However, inequality has been rising rapidly since 2000, and China is now home to more than two million millionaires. With the exception of the US, there is no country on earth with more inhabitants whose wealth exceeds USD 50 million than China.

Figure 3: China is achieving faster growth

Annual GDP growth rates (in percent)

Economic Outlook

15

10

5

0

–5

–101998 2000 2002 2004 2006 2008 2010 2012 2014

Forecast 2017(IMF, January 2018)

China: 6.7%

USA: 2.5%Eurozone: 2.4%Japan: 2.0%

2016

China US Japan Eurozone

14 Scope | 1/2018

Investment Conference

“It’s about bringing our capabilities and expertise even more within reach”

Interview with Thomas Gottstein CEO Credit Suisse (Switzerland) AG

Scope | 1/2018 15

Investment Conference

Mr. Gottstein, Switzerland is an attractive and highly competitive market for private banking. What do you see as Credit Suisse’s core strengths?Thomas Gottstein: On the one hand, we can look back on a long tradition in private banking; on the other, we are also continuously investing in the further expansion of our business. As a lead-ing provider of private banking services, we are well placed to offer top quality advisory services thanks to our highly trained, experienced relationship man-agers. Clients’ needs and the market environment have become more wide-

ranging and complex, which explains the ever-increasing importance of com-prehensive advisory services. We see ourselves as long-term partners to our clients and provide services uniquely suited to the needs of every generation and stage of life, whether it’s defining investment strategies, personal pension provisions or inheritance consulting. We have broad expertise at our Bank, which is brought most particularly to bear in addressing more complex needs and requirements.

Credit Suisse is also esteemed as a bank for entrepreneurs. What can you offer entrepreneurs that other banks cannot?As a bank for entrepreneurs, we intro-duce precisely the kind of comprehensive approach that an entrepreneur seeks: We understand not only the situation at the corporate level but also private finan-cial themes. Thanks to our wide array of services, we can support companies at each step of the way – from company creations and financing issues in the start-up / growth phases to potential initial public offerings, company sales and succession planning. We also offer advisory solutions for clients’ private

Switzerland is a comparatively small albeit wealthy country. Thomas Gottstein, CEO of Credit Suisse (Switzerland), elucidates the

Bank’s focus in providing advisory services for high-net-worth private clients. He also

explains why – digitalization notwithstanding – a key role will continue to be played

by client events, which are held regularly throughout Switzerland.

Thomas GottsteinThomas Gottstein, 53, is CEO of Credit Suisse (Switzerland) AG. He has held various functions at the Bank over the last 18 years, including Head of Premi-um Clients Switzerland, Head of Invest-ment Banking Switzerland and Co-head of Equity Capital Markets EMEA. Born in Rüschlikon (ZH), he graduated from the University of Zurich with a degree in Fi-nance and Accounting. He lives with his wife and two children in the Zurich region.

16 Scope | 1/2018

Investment Conference

financial needs. Here, too, our levers of success are our international footprint and the resources at our disposal to mo-bilize the expertise of the entire bank.

How do you respond to the increasingly large number of clients interested in using digital channels to interact with the bank?Digitalization spurs us on to embark on new paths instead of resting on our laurels. This explains why we invest a great deal of time and capital into our digital platforms, as well as the services that they make accessible. Last year, for instance, we rolled out Digipigi, Swit-zerland’s first electronic digital money box for youngsters. Also last year we launched our digital onboarding for new clients, which allows them to open an account with us online in just 15 minutes – without having to step so much as a foot inside the Bank. The trend couldn’t be any clearer: electronic channels are becoming increasingly popular; converse-ly, the use of counter and ATM services is declining with every year. The trend notwithstanding, we continue to lay great store by direct personal contact. Backed by our team of relationship managers and experts, we maintain an on-the-ground presence in all of Switzerland’s regions.

Speaking of on-the-ground: In the age of digital networking, why bother with client investment conferences like the one to be held at Bocken’s historic conference center in the vicinity of Zurich in early June 2018?In a nutshell, it’s about bringing our capabilities and expertise even more with-in reach. Today, thanks to the internet, knowledge – including of financial mat-ters – is available to us in infinite abun-dance around the clock. When it comes to in-depth topical discussions, however, we continue to appreciate the key value of interpersonal dialogues and discus-sion panels, which are even becoming all the more valuable. At our conferences and events, which not only focus on a wide panoply of themes and topics but also feature prominent guest speakers and workshops, clients can enjoy the op-portunity to partake directly in the Bank’s enormous expertise. Such forums make it possible for them to become person-

ally involved while exchanging valuable information as well.

Long-term trendsare an interesting alter-

native for investorswho are less keen onthe rapid changes infinancial markets and

stock exchanges.

What is the message that Credit Suisse (Switzerland) will want to convey as host at the Bocken conference center?What we will want our customers to take away is a great deal of knowledge – not just in terms of facts and figures but even more importantly in terms of insights and practical perspectives con-cerning markets and trends – and per-haps also to inspire them to engage with an investment theme that had not previously blipped on their radar. Offer-ing workshops conducted both by internal experts and by external partners is also our way of showing how closely connect-ed we are as a bank – which addition-ally helps us to find the right solutions for our clients. Last but not least, the conference will also include some form of entertainment – but I’d rather not give away too much at this point.

One theme that will be explored at the conference is supertrends, i.e. long-term developments in the world: Why should investors focus on these trends already?Our investment experts have identified five major global trends that promise to be of relevance to investors in the years ahead, thereby enabling us to suggest thematic investment opportunities to clients so they can profit from long-term societal trends. Take technology, for example. It is constantly bringing out innovations that carry great potential for change. Just look at virtual reality or the use of robots, for instance. Another example involves so-called millennials, aged 19–35, who will have an impact on specific investment areas by virtue of

their consumer habits and lifestyles. Fo-cussing on long-term trends can also prove an interesting alternative for inves-tors who are less keen on the rapid changes in financial markets and stock exchanges.

In 1856 Alfred Escher founded “Schweizerische Kreditanstalt”, forerunner of today’s Credit Suisse. A business leader and pioneer, he too thought in bold strokes. What can we learn from Alfred Escher, also with a view to today’s economic and market environment?Alfred Escher identified the major trends of his time in the construction of the rail-road network and industrialization, and took farsighted action. Granted, today’s economy and markets are much more fast-paced – yet what still continues to in-spire us to this day is his brand of looking ahead to the future while taking advan-tage of opportunities that might only pay off after a number of years. That calls for entrepreneurial courage, which after all is one the secrets behind Switzerland’s economic success.

  March 2018

Investment conferences organized by Credit Suisse

(Switzerland) Ltd.At Credit Suisse’s investment

conferences, various specialists at Credit Suisse, including from

Credit Suisse Asset Management, present investment solutions and

products for investors in Switzerland. The conferences are aimed at provid-

ing clients with the opportunity to thor-oughly delve into investment themes,

as well as to interact and dialogue with experts and other participants.

LEXUS LC 500 AND LC 500h

A SAFE BET AT ALL TIMES. The Lexus LC 500 and LC 500h – an extraordinary vehicle with two sporting souls. You have a tough choice between the 2+2-seater with an innovative full-hybrid drive or a classic combustion engine. But they are a pleasure to drive either way. To enjoy with all your senses.

www.lexus.ch

Seven at one stroke – as the only car manufacturer in the world, Lexus offers all models with a contemporary full-hybrid drive, too.

Lexus CT Lexus IS Lexus RC Lexus LC Lexus NX Lexus RX Lexus LS

18-105-GL_Inserat_Lexus_LC_Credit_Suisse_A4_en.indd 1 04.04.18 14:15

Advertisement

18 Scope | 1/2018

China Investment Solutions

Farsighted investors jumped on the bandwagon long ago. Others are still reluctant to hop on. Investments

in China – a theme every investor should start thinking about. Investors aiming for portfolio diversification in keep-

ing with the times cannot afford to ignore the world’s second largest equity market and third largest bond market.

For investors lacking both the expertise and the time for costly security selection and investment processes,

Credit Suisse Asset Management has just the thing: products with different risk/reward tradeoffs. They belong

on the radar of all investors with a long-term horizon and global focus.

Best of China

Scope | 1/2018 19

Investors wishing to achieve broad diversification for their investments on the Chinese capital market can

benefit from a balanced strategy, which enables them to participate in the second largest equity market and

the third largest bond market in the world.

The ThirdWay

Alexandre Bouchardy Head of Asset Management Singapore and

Fixed Income APAC alexandre.bouchardy.2@credit-suisse.com

China Investment Solutions

HarmoniousThe Harbin Opera House, completed in the

megacity of Harbin in 2015, represents the perfect symbiosis between nature, culture and man.

The architectonic masterpiece designed by MAD architects, Beijing, is today regarded as a mighty

symbol of yet another one of China’s up-and-com-ing, heretofore little-known metropolitan cities.

20 Scope | 1/2018

China Investment Solutions

There is a clear expert consensus that the Chinese economy offers good growth prospects over the long term. This un-derpins the case for exposure to equities and the opportunity to benefit from ris-ing valuations. However, this approach also entails exposure to the risks inher-ent in equities, including poor returns or falling stock prices. Investors wishing to mitigate these risks cannot ignore the asset class of bonds, which is suited to those who value steady income.

With a view to combining the best of both worlds, Credit Suisse Asset Man-agement has designed a product tai-lored to the balanced requirements of investors with an interest in China. The target allocation is split down the middle between equities and fixed-rate bonds, giving investors the chance to benefit from rising Chinese stock prices while achieving attractive bond returns.

Optimal DiversificationCredit Suisse Asset Management, which is advised by ICBC Credit Suisse Asset Management Co. Ltd. (ICBCCS, see page 26), is responsible for manag-ing the innovative balanced product. The advisory service covers the macro-economic environment (including inter-est rate policy), the analysis of equity and bond markets, as well as the prepara-tion and evaluation of fundamental data and corporate growth prospects.

Within the sector allocation of the equity component, the highest weight-ings are assigned to banks, industrials, raw materials, cyclical consumer goods, IT, and real estate. Within the fixed in-come allocation, the investment focus is on banks (including the state-controlled policy banks), state institutions, real es-tate, local government, engineering and construction, and investment companies. Around 50 holdings in the equity seg-ment and some 70 bond positions ensure optimal diversification.

Risk/return profileThe fund pursues a holistic approach with

the aim of generating relative value across all corporate capital structures.

Sources: Bloomberg, Credit Suisse; Data as of February 2018

Historical performance indications and financial market scenarios are not reliable indicators of current or future performance.

Robust renminbiThe new balanced product is around 95% invested in renminbi.

The currency of the People’s Republic of China became increasingly stable versus the US dollar, the euro, and the Swiss

franc between 2005 and 2017 and offers the potential for long-term appreciation.

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

2005 2007 2009 2011 2013 2015 2017

USDCNY Cur EURCNY Cur CHFCNY Cur

Evolution of the renminbi exchange rate (in RMB)

Source: Credit Suisse Asset Management (Switzerland) Ltd., February 2018

Low

Low

Low

Medium

High

High

Gov. Bonds

Senior SecuredDebt

Senior UnsecuredDebt

Subordinated/Convertible Debt

Preferred Equity

Common Equity

Deb

tE

quity

Lower RiskLower Return

Higher RiskHigher Return

Scope | 1/2018 21

A Credit Suisse Asset Management fund launched just a few months ago offers investors

access to the Chinese bond market, the world’s third largest. The fast growing market is

increasingly opening up to foreign investors.

New Universe

Sources: BIS, Credit Suisse; Data as of June 30, 2017

No. 3In terms of total debt outstanding, China boasts the world’s third largest onshore bond market.

However, foreign investors hold less than 2% of the market.

Adrian Chee Head of Portfolio Management and Credit, Asia

adrian.chee@credit-suisse.com

Lei Zhu Senior Portfolio Manager lei.zhu@credit-suisse.com

Total Bond-Market Debt Outstanding (in USD bn)

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0US Japan China UK France Germany Italy Canada

38,501

12,59410,367

5,6924,395 3,533 3,159 2,317

China Investment Solutions

22 Scope | 1/2018

China Investment Solutions

What many bond investors have been waiting for: the opportunity to invest in a new universe that has a target yield of 4.5%–5.5% and that is characterized by a relatively high credit rating and low interest rate sensitivity. A Credit Suisse Asset Management fund launched last year turns this wish into reality. The fund invests mainly in onshore renminbi-de-nominated corporate and financial bonds on the interbank market. The issuers either have their headquarters in China or conduct a significant part of their busi-ness activities there. In addition, the fund may also invest to a lesser extent in gov-ernment bonds, bonds issued by state-owned banks and local governments, and other Asian onshore and offshore mar-kets. The fund aims to generate alpha through active management of duration, active sector allocation and bottom-up issuer selection.

In the sector allocation, the following account for the highest shares: banks (in-cluding state-controlled policy banks), government bonds, coal mining, metals and mining, real estate, power utilities, and distributors and wholesalers.

Participate in the world’s third largest bond marketOur new fund product offers investors access to a bond market that not only is among the world’s three largest but has also established itself as an asset class in its own right. The market has a good chance of inclusion in global bond indi-ces, attracting both active and passive fund flows.

Owing to the low correlation to global bond markets, investors reap substantial diversification benefits. In addition, the strong government backing of corporate entities provides stability while contribut-ing to the ongoing improvement of issuer fundamentals. Corporate governance and transparency are also coming gradually closer to meeting Western investors’ ex-pectations. Still, consideration must be given to risks typically associated with emerging market bonds and investments. Not least are currency risks relating to renminbi investments.

Given that more than 85% of the bonds have a maturity of less than five years, the universe of Chinese corporate bonds exhibits relatively low interest rate sen-

sitivity. The Chinese bond market stands out for offering the highest real yield among major bond markets. The risk/reward profile is seen as attractive.

An experienced Asia-based investment team oversees the fund’s management.

The team has an impressive track record in investing in Chinese offshore and Asian corporate bonds. Moreover, it benefits from the experience and local in-depth knowledge of ICBCCS, one of the larg-est fixed income managers in China (see page 26).

Sources: ChinaBond, Wind, Bloomberg, Credit Suisse; Data from January 31, 2008 – January 31, 2018

Yield pickupCompared to European and US markets, Chinese onshore bonds

offer much higher yields (in percent).

6.0

5.0

4.0

3.0

2.0

1.0

0EUR

TreasuriesUS

TreasuriesChina Treasuries

OnshoreEUR

CorporatesUS

CorporatesChina Corporates

Onshore

0.71

0.09

2.47

0.40

3.87

0.63 0.82

0.16

3.45

0.46

5.83

2.69

Low correlationCompared to the Bloomberg Barclays US Credit Index

and the Bloomberg Barclays US Treasury Index, the ChinaBond New Composite Bond Index (in USD unhedged terms)

displays a low or even negative correlation.

Jan 2008–Jan 2013 Jan 2013–Jan 2018

0.40

0.20

0

–0.20

–0.40Bloomberg Barclays US Credit Index Bloomberg Barclays US Treasury Index

–0.21

0.25 0.210.16

Sources: Bloomberg Barclays Index, ChinaBond, Credit Suisse;  Data as of January 31, 2018

Yield Yield / Unit of Duration

EUR Treasuries:EUR Corporates:US Treasuries:US Corporates:China Treasuries Onshore:China Corporates Onshore:

Bloomberg Barclays Euro Aggregate Treasury IndexBloomberg Barclays Euro Aggregate Corporate Index Bloomberg Barclays US Aggregate Treasury IndexBloomberg Barclays US Aggregate Corporate IndexChinaBond Treasury Bond IndexChinaBond Credit Bond Index

Scope | 1/2018 23

China Investment Solutions

There is no alternative in the long run to investing in China’s equity market. Ample opportunities for globally oriented investors are there for the taking. All the same,

a mindful eye should be kept on the risks.

Chinese for Savvy Investors

Lily Chang Portfolio Manager

lily.chang@credit-suisse.com

Xiao Li Portfolio Manager

xiao.li@credit-suisse.com

Mountain AirIn addition to being a UNESCO World Cultural

and Natural Heritage site, the Huangshan mountain range also provides the topographic

setting for the unique Huangshan Mountain Village as of 2017. As part of a major tourism master plan, the mountain village is designed

to instill a renewed sense of awareness for na-ture and sustainability in its inhabitants.

24 Scope | 1/2018

With a population of around 1.4 billion, China’s share of the estimated world population of 7.5 billion is almost 19%. In 2016, the People’s Republic of China contributed USD 11,218 billion or roughly 15% to the total global gross domestic product of USD 75,278 billion. It is but a matter of time before China overtakes the US as the world’s largest economic power. China’s economic growth rates and the government’s targets for growth are indeed impressive. At the same time, however, Chinese equities – allowing Western investors to participate directly in China’s dynamic growth – either con-tinue to be under-represented in, or else are entirely absent from, Western in-vestors’ portfolios.

There were good reasons in the past for international investors to shy away from Chinese equities. In particular, un-certainty surrounding the government’s economic strategy, the bureaucratic reg-ulations and limited transparency tend-ed to put off investors from the Western hemisphere. But the framework condi-tions have begun to change for some time now. China has been sending clear signals that foreign capital is welcome. Today, China should be on the radar of equity investors with a longer term hori-zon who are keen to diversify globally.

Straightforward fund solutionProfessional fund solutions provide easy access to China’s stock market. Since September 2017, Credit Suisse Asset Management has been managing an equity fund as a connecting bridge be-tween China’s A-shares in Shenzhen and Shanghai, which – combined with the Hong Kong stock market – form the world’s second largest equity market (see charts on page 25). There is every indi-cation that the trading volume and market cap of tradable shares will continue their growth trajectory. The inclusion of China A-shares (see page 28) in MSCI indices slated to begin in May 2018 will give this asset class an added boost. Both passive (index-tracking) and active (benchmark- oriented) fund managers will be pushed into this asset class, which should bolster share prices.

The fund not only invests in a well-diver-sified portfolio of stocks listed mainly on the exchanges in Shanghai, Shenzhen and Hong Kong but also offers daily

Source: Bloomberg; Data as of January 2018

Historical performance indications and financial market scenarios are not reliable indicators of current or future performance.

Attractive valuationsFrom a historical perspective, index valuations

are attractive.

12-month forward P/E Average +/– stdev

CSI 300

40

35

30

25

20

15

10

52007 2009 2017201520132011

12.0×

Shanghai Composite

40

35

30

25

20

15

10

52007 2009 2017201520132011

12.7×

MSCI China (offshore listed)

40

35

30

25

20

15

10

52007 2009 2017201520132011

17.4×

Shenzhen Composite

40

35

30

25

20

15

10

52007 2009 2017201520132011

12.6×

China Investment Solutions

Scope | 1/2018 25

liquidity. The portfolio concentrates on the Chinese economy’s most promising growth areas. The Shenzhen-Hong Kong Stock Connect program, which was launched in December 2016, offers opti-

mal portfolio diversification opportunities as over 50% of the Shenzhen-listed stocks belong to the new-economy sectors in China – versus only 20% of the stocks listed in Shanghai. Now is

an opportunity to directly invest in China A-shares from HK, which are currently trading at a steep discount to global equi-ties (MSCI World). Earnings are broadly anticipated to grow at double-digit per-centage rates over the next two years.

Attractive macroeconomic environmentChina’s large-scale initiative for economic cooperation and trade should provide an additional boost to the equity market. Under its “One Belt, One Road” initia-tive – also dubbed the “New Silk Road” – the Chinese government aims to create new trade channels, stimulate the inter-nationalization of China’s economy and strengthen its position among its main trading countries. Its “Made in China 2025” initiative, which is designed to transform the country into a high-tech economic powerhouse, has the greatest potential to accelerate China’s economic growth (see page 11). China harbors grand ambitions in dynamic fields like bio-technology, artificial intelligence, Inter-net of Things (IoT), renewable energy and nuclear technology.

Home advantage thanks to ICBCCSAlthough China is increasingly opening up its markets to international investors, on- the-ground experience and direct access remain indispensable. Credit Suisse As-set Management enjoys the privileged po-sition of being able to rely on a proven and highly successful partnership in Chi-na. Credit Suisse Asset Management owns a 20% stake in ICBC Credit Suisse Asset Management Co. Ltd. (ICBCCS), a joint venture initiated in 2005 with In-dustrial and Commercial Bank of China (ICBC), which holds an 80% interest.

The joint venture company became the first fund manager in China formed from the partnership between a domes-tic commercial bank and a foreign asset manager. As of end-2017, ICBCCS had assets under management of RMB 1,100 billion (USD 174 billion), making it the second largest asset manager in China. Not only is ICBCCS one of the few fully licenced fund managers in China offering a broad spectrum of investment services to international clients but it has also earned an outstanding reputa-tion worldwide as a manager of China A-share strategies.

No. 2China A-share and Hong Kong stock market

ranks second worldwide by market capitalization and turnover velocity.

Sources: Bloomberg, World Bank; Data as of January 2018

Market capitalization in 2017 (in USD trn)

US

China + HK

Japan

UK

France

Germany

India

Canada

Switzerland

South Korea

29.6

0 5 10 15 20 25 30 35

13.17.7 5.4

6.3

3.8

2.5

2.4

2.4

2.3

1.8

1.7

Annual equity turnover in 2016 (in USD trn)

0 5 10 15 20 25 30 454035

42.1

19.718.3 1.4

5.2

1.9

1.6

1.2

1.1

1.1

0.8

0.8

US

China + HK

Japan

UK

South Korea

Canada

Germany

France

Switzerland

India

China Investment Solutions

26 Scope | 1/2018

Investment processBacked by the expertise of ICBCCS in Beijing and the know-how of Credit Suisse Asset Management Hong Kong, the fund employs a multi-step bottom-up securities selection process.

The Luxembourg-domiciled fund in-vests in a diversified portfolio of 30–80 companies active in traditional and new sectors of the Chinese economy. The investment universe is initially comprised of stocks listed on the Shanghai and Shenzhen exchanges (China A-share market) which are eligible to be traded via the Stock Connect program. The fund also invests in Hong Kong-listed shares – for example, in order to exploit valuation discrepancies in dual-listed stocks – as well as in Chinese companies listed in the US (ADRs).

The focus lies on stocks with valuations that are strongly supported by funda-mentals. The fund offers a high level of exposure to small and mid-cap stocks, to new-economy sectors listed in Shen-zhen and to stocks of blue-chip compa-nies undergoing the state-owned enter-prise reforms. The investment objective of the fund is to generate long-term capital growth.

Although the chances are good that in the current geopolitical environment this objective will be achieved over the longer term, the risks should not be ignored. These are namely emerging market in-vestment risks in general, as well as spe-cific risks associated with the Chinese market. Tax laws, regulations and prac-tices in China are constantly changing and may even change with retroactive effect. Tax burdens for issuers or securities may also have a negative impact on perfor-mance. As always, it is ultimately up to the investor to weigh the opportunities and risks, including for Chinese equities.

ICBCCS – key data

ICBCCS assetsunder management

in RMB bn

China Investment Solutions

Sources: ICBCCS, AMAC; Data as of December 2017

600

500

400

300

200

100

02005 2006 2010200920082007 2011 2012 2013 2014 2015 2016 2017

AUM – Mutual Fund

> USD 198 bnof assets under

management

600employees

No. 44th largest player in

the enterprise annuity and government

pension business

> 40investment

fund portfolio managers

No. 2Second largest

mutual fundmanager in China

No. 77th largest player in the segregated account business

in China

Source: ICBCCS; Data as per December 2017

Scope | 1/2018 27

At present, the main equity indices do not provide an adequate reflection of China’s economic standing in the world. This is largely because, in the past, foreign

investors could only gain access to the market for Chinese domestic stocks, or A-shares, subject to major restric-

tions. The forthcoming inclusion of Chinese A-shares in the MSCI Emerging Markets Index means that China

will be assigned a greater weight in this benchmark. This is reason enough in itself to look at index investments

on Chinese equities.

Index ofthe Future

Valerio Schmitz-Esser Head of Index Solutions

valerio.schmitz-esser@credit-suisse.com

China Investment Solutions

Signs of the upswingIn China’s cities the signs of the upswing

are unmistakable. Investors keen to profit from the economic growth potential

without costly securities selectionshould put index products squarely on

their radar.

28 Scope | 1/2018

Foreign investors generally find it harder to access emerging markets such as China than their developed counterparts. Ownership limits and capital controls cer-tainly make it more difficult for foreigners to obtain access. Reduced competition among providers of trading platforms and stock market services as well as idio-syncrasies in the market structures pose an additional challenge.

In the past, these barriers to market entry have meant that the geographical distribution of global market capitaliza-tion in the indices has failed to properly reflect the corresponding economic out-put, or gross domestic product (GDP). Relative to the country’s economic out-put, the US is over-represented in mar-ket-weighted indices. In contrast, the People’s Republic of China is under-rep-resented due to the restrictions imposed on foreign investors’ access to A-shares.

Fresh focus on Chinese domestic stocksThe good news is that the Chinese mar-ket is becoming more and more open to foreign investors (see “The Gateway Is Opening” on page 29), including index- oriented investors. Although Chinese equities are already included in the main MSCI indices, this is only true of stocks that are traded in HKD, USD and SGD. The current MSCI China Index does not include any A-shares and therefore only covers some 60% of the investment op-portunities in China at present. As a re-sult, the benchmark offers no coverage of a significant chunk of the market. Nevertheless, this year will see around 230 A-shares being admitted to the MSCI Emerging Markets Index. However, the index will initially only include 5% of A-shares’ market capitalization.

For investors wishing to participate in the Chinese equity market without the need for labor-intensive stock selection, time-consuming monitoring and elevat-ed cluster risks, an index product is the most suitable choice. An index such as the MSCI China All Shares, which al-ready replicates the full market capital-ization of the A-shares in the MSCI China benchmark, should be seriously considered. The MSCI China All Shares Index benefits from very broad diversi-fication across stocks and sectors, giving investors the opportunity to par-

ticipate in the full spectrum of the Middle Kingdom’s investment opportunities via a single instrument.

China Investment Solutions

Sharp rise in China’s weight inthe MSCI Emerging Markets Index

The MSCI China All Shares Indexin brief

ComprehensiveThe MSCI China All Shares Index captures large and mid-cap representation

across Chinese A-shares, B-shares, H-shares, Red-chips, P-chips and foreign listings (e.g. ADRs). The index aims to reflect the full opportunity set of

Chinese share classes listed in Hong Kong, Shanghai, Shenzhen and outside of China. It is based on the concept of the integrated MSCI China equity

universe but with Chinese A-shares included. The sector weighting of the MSCI China All Shares Index is also more diversified as compared with

the MSCI China Index, for example.

ConsistentThe MSCI China All Shares Index is constructed by applying the MSCI

Global Investable Market Indexes (GIMI) methodology, the same framework used for the MSCI Emerging Market Index.

DynamicBy targeting a full investable market representation instead of a fixed

number of securities, the MSCI China All Shares Index is designed to dynamically reflect the evolution of China’s opportunity set.

PerformingFor the past five years ending January 2018, the MSCI China All Shares

Index has produced a higher relative return than the China A International Index, for example.

Source: MSCI

China’s weight in the MSCI Emerging Markets Index before and after inclusion of A-shares

China A-shares: 0.9%

5% Inclusion

China A-shares: 0%

Before

China A-shares: 15.1%

100% Inclusion

24.6% 27.3% 37.8%

Scope | 1/2018 29

China Investment Solutions

The Share Classes

The gateway is openingThe gateway to Chinese domestic stocks is opening ever wider. For many years, the only way for foreign equity investors to gain exposure to Chinese stocks was via

equities traded in HKD, USD and SGD. Via Stock Connect, the stock exchanges in Shanghai and Shenzhen now also offer foreign investors access to Chinese

domestic stocks traded in CNY, which make up the largest proportion and feature the most liquid trading on the Chinese equity market. As things stand, only 2%

of A-shares are in the hands of foreign investors.

Share Class Definition Stock exchange Exemplary companies

A-shares Stocks of companies incorporated in mainland China that are listed on the Shanghai or Shenzhen Stock Exchange and traded in renminbi (CNY).

Shanghai (CNY) Shenzhen (CNY)

Kweichow Moutai

B-shares Stocks of companies incorporated in mainland China that are listed on the Shanghai Stock Exchange (USD) and Shenzhen Stock Exchange (HKD).

Shanghai (USD) Shenzhen (HKD)

Chongqing Changan Auto

H-shares Stocks of companies incorporated in mainland China that are listed on the Hong Kong Stock Exchange (HKD).

Hongkong (HKD) China Construction Bank

Red-Chips Chinese stocks of state-controlled companies from outside of mainland China that are listed on the Hong Kong Stock Exchange (HKD).

Hongkong (HKD) China Mobile

P-Chips Chinese stocks of non-state-controlled companies from outside of mainland China that are listed on the Hong Kong Stock Exchange (HKD).

Hongkong (HKD) Tencent Holdings

Foreign Listings (S-Chips/N-Chips)

Chinese stocks (including American Depositary Receipts/ADRs) outside of China (Chinese mainland, Hong Kong, Macao and Taiwan) that are listed and traded on the Singapore ex-change in Singapore dollars (SGD) and on the NYSE Euronext-New York, NASDAQ or NYSE AMEX in USD.

Singapore (SGD) New York (USD)

Alibaba Group Holding

Source: Credit Suisse Asset Management (Switzerland) Ltd.

This article is neither a recommendation nor advice to buy or sell securities, units in investment funds,  or to follow a particular investment strategy.

30 Scope | 1/2018

Real estate has become an increasingly important part of the asset allocation of both

(U)HNWI and international investors over the past decade. While cross-border capital in

real estate markets has historically been predominantly of US and European origin, this

pattern has shifted since the Great Financial Crisis.

Global Real Estate

Discover LondonChinese Real Estate

Investors AreReshaping Their

PreferencesChristopher Chiang

Head of Real Estate, Asia Pacific chris.chiang@credit-suisse.com

Zoltan Szelyes

Head of Global Real Estate Research zoltan.szelyes@credit-suisse.com

Scope | 1/2018 31

Global Real Estate

Then We Take LondonEurope’s megacities are increasingly taking the place of Manhattan and the Asia-Pacific region. Demand on the part of Chinese investors for attractive properties, such as for example the Monument Building in the heart of London, is continuing unabated.

32 Scope | 1/2018

Cross-border commercial real estatetransaction volumes

As this figure only measures direct discretionary transaction activity, we estimate the true volume of Chinese exposure to international real estate to be substantially higher,

as many investors invest abroad by means of real estate funds that are managed by foreign asset managers and these flows do not go into this statistics.

Sources: Real Capital Analytics, Credit Suisse; Last data point: December 2017

140

120

100

80

60

40

20

0

07 Q

1

07 Q

3

08

Q1

08

Q3

09

Q1

09

Q3

10 Q

1

10 Q

3

11 Q

1

11 Q

3

12 Q

1

12 Q

3

13 Q

1

13 Q

3

14 Q

1

14 Q

3

15 Q

1

15 Q

3

16 Q

1

16 Q

3

17 Q

1

17 Q

3

Buyers from Hong Kong and China Hong Kong buyers in China and Chinese buyers in Hong Kong

Buyers from other countries

Global Real Estate

Scope | 1/2018 33

Global Real Estate

To successfully implement real estate in an international context, knowledge of local market dynamics, general practices and regulations remains important. In some Eu-ropean markets such as Germany, Spain, France, the Netherlands and the UK, access to private networks in real estate acquisitions, asset management, construc-tion and development as well as financing remains essen-tial to be able to achieve the targeted returns. Real estate continues to maintain the character of a private market, with the strong benefit of local networks. That’s why we recommend to investors who are diversifying into over-seas property to go with strong partners that have a deep understanding of the local situation of each market and possess a consistent track record. Ongoing perso-nal contact with that partner remains equally important as we believe trust is the essential element of a success-ful professional relationship. This is based on our historical experience in Switzerland, where we have a trust-based relationship with many companies from non-financial in-dustries for over 150 years.

We believe we are well positioned to become a preferred partner for many Chinese investors who want to invest. Our team of 160 real estate professionals brings the ne-cessary expertise to the table. Proximity and understan-ding client needs are equally important. We have a regi-onal presence with a team of real estate specialists in Singapore. Additionally, the dedicated asset management distribution teams and the client relationship managers can connect clients with the real estate professionals. De-pending on their needs, different approaches to diversify into international real estate will be applied. As a first step, we recommend investing in diversified European or glo-bal funds. Such funds give access to a diversified profes-sionally managed portfolio. They also typically give clients who want to co-invest with the fund access to co-invest-ment opportunities that they wouldn’t be able to access without the proper network. Other clients prefer discreti-onary solutions or large deals.

In any case, the individual solution can be defined with the client in cooperation with relationship management and real estate professionals.

Asian investors now take up a larger share of global transaction volumes, and investors from China have be-come the most dominant segment of the Asian buyer group. In 2017, investors from mainland China and Hong Kong directly bought international commercial real es-tate totalling roughly USD 114 billion, which accounts for 32% of total global cross-border capital flows, accord-ing to Real Capital Analytics. The chart on the opposite page depicts the evolution of quarterly transaction vol-umes since 2007. The data illustrates that these investors have gained significant global importance over the past 10 years. It also documents the sheer scale of bilateral investments volumes between China and Hong Kong. Of this USD 114 billion of cross-border activity in 2017, USD 65 billion was from mainland Chinese investors buying in Hong Kong or else Hong Kong buyers in China.

In 2017, the focus of Chinese investors was on Europe and Asia Pacific while declining activity in the US also reflects the general weakness of transaction volumes in that market. In UK commercial real estate, however, Chi-nese investors were the most important buyer group not only in terms of transaction volumes but also in terms of making the headlines with the two largest deals since Brexit. The “Cheesegrater” and “Walkie Talkie” buildings in the City of London, with a transaction volume of GBP 1.3 billion and GBP 1.2 billion, respectively, have greatly impacted the market.

Anecdotal evidence in the last quarter of 2017 points to a slowdown of activity even as the highlighted numbers were still high due to the time lag between signing and closing. This slowdown has been mainly driven by the imposed restrictions on overseas investments by the Chi-nese government. The motivations behind the imposition of these restrictions are manifold. We believe they are re-lated to concerns of the government with regard to the strong growth of international investments by some Chi-nese institutions in recent years combined with the high use of domestic leverage when buying international real estate, as well as the limited specialist skills of some of the investors, such as in running hotels.

While we forecast that in 2018 international transaction volumes of Chinese investors will decline versus 2017, we continue to believe they will remain an important player in international real estate markets for the foreseeable fu-ture. This is due to the size of the Chinese economy and the need for international diversification of companies and UHNWI abroad.

Fully LeasedThe Monument Building at 11–19 Monument Street in London was completed in 2016 and today is fully leased out. As of end-February 2018, it is held by an international real estate fund of Credit Suisse Asset Management Global Real Estate.

34 Scope | 1/2018

Experience China

Kunming on the Lakeside PromenadeThe temple, situated on the right-hand shore of Lake Zurich, was opened in 1994 and symbolizes the city partnership between Kunming, a city of more than eight million inhabitants, and Zurich.

What does Zurich have in common with Nairobi, Denver, Cochabamba (Bolivia), Chittagong (Bangladesh), Calcutta (India) and Jyväskylä (Finland)? The answer is a city in the Chinese province of Yunnan by the name of Kunming. With a population of around eight million, Kunming maintains partner-ships with all of these cities. In the case of its twin city Zurich, the symbols of its partnership are twofold: first, the drinking water supply in Kunming, which was expanded with the help of Zurich’s technical and scientific assistance, and, second, the Chinese Garden located on the promenade along Lake Zurich.

The Chinese Garden was opened in 1994 and was a gift from the city of Kunming to the people of Zurich. Classed as a temple garden, it is one of the highest ranking gardens outside of China. The garden was geographically situated in keeping with the principles of geomancy, which relies on traditional criteria to identify ideal locations that promote har-mony between man and nature.

Garden of FriendshipFor 24 years, the Chinese Garden on Zurich’s lakeside promenade has symbolized the city part-nership between Zurich and Kunming.

Engel & Völkers Ascona · Piazza G. Motta 57 · 6612 AsconaTel. +41 91 785 14 80 · Ascona@engelvoelkers.com · www.engelvoelkers.ch/ascona

Engel & Völkers is the best address for anyone looking to sell their home. Ourreal estate agents not only have unparalleled local market knowledge and expertise, but they also have access to our global network consisting of thousands of qualified, distinctive clients. From the initial property valuationto the showing of your property, right through to the drafting and signing of a successful sales contract, Engel & Völkers is there for you ever step of theway. So sit back and relax – your property needs are in good hands with us!

Enjoy life’s important moments - while we care for your property needs

Advertisement

36 Scope | 1/2018

Guest View

Dr. Urs Buchmann Vice Chairman, Greater China

urs.buchmann@credit-suisse.com

Life is work and work is life, both spheres go hand in hand in a nation that is waging fundamental transformation.

Accordingly the work-life balance notion assumes a slightly different meaning than in a Western context. Work is

perceived as the all-encompassing dimension guiding us through our lives in the sense that the performance of

meaningful professional activities forms the essential basis from which our existence evolves. In this context work

and its contribution to family members, friends and the society at large assumes an essentially positive function and is

thus much less conceived in terms of the challenge and attrition as also experienced in professional activity and thus to

be complemented in life outside the work realm.

Hand in Hand

Scope | 1/2018 37

Guest View

Lunch-break calligraphy courseHaving arrived in China in 1987 I was initially seconded as a trainee to a Chi-nese bank, most likely the institution’s first-ever foreign employee and thus a thoroughly exotic experience for all par-ties involved. While trying to cope with my professional responsibilities I continued to work on my Chinese. From the very beginning I was profoundly impressed with the hospitality and genuinely inte-grating attitude of my new superiors and colleagues and at a later stage also the bank’s clients manifest in such aspects as the mentoring by specific business area and product responsibles helping me to cope with my new assignment as well as their frequent invitations for lunches, dinners and outings. I was also encour-

aged to join the bank’s calligraphy class-es organized over lunch breaks or in the evenings. In participating I discovered that work and fun often go hand in hand as far as a Chinese reality is concerned as there is a regular interchange between work and ensuing relaxation with cuisine, sports and culture performing essential functions. Some observers argue that China’s awesome culinary traditions serve a crucial role in digesting and overcoming the equally impressive complexities and rigidities of the country’s bureaucratic systems and achievements. The chal-lenge is serious enough to have prompt-ed a refined sense of humor, another aspect that adds to the enjoyment of a Chinese existence and as evident in the anecdote recently related by one of

China’s most senior decision-makers. One of his friends had booked an over-seas journey with a travel operator who requested an emergency contact number, should anything happen during his ex-cursion. “I give you my mother’s mobile number” he said whereupon the travel agency asked “Can you prove that she is your mother?”

The holistic nature of the Chinese per-sona and work reality implies a mutual interest and respect for extracurricular activities. Many of my Chinese business partners and friends are accomplished calligraphers, painters and Wei Qi players, to some extent the country’s highly so-phisticated equivalent to chess. One part-ner and senior executive of a leading

Sit back and enjoyChina’s rich culinary tradition helps to

temper the complexity of Chinese daily life in a most congenial way.

38 Scope | 1/2018

Guest View

Calligraphy as life principleCalligraphy is highly revered in Chinese

society. Also practiced by business people, the art of beautiful writing offers at least

23,000 characters to choose from.

Scope | 1/2018 39

Guest View

financial institution occasionally practises calligraphy while discussing a transac-tion with me. He maintains that this ac-tivity reinvigorates him and significantly enhances his creativity, notably also in a business context. All this happens in a very playful manner, a Tang dynasty poem being recited while a major asset management mandate emerges in in-creasingly distinct shape. Our meetings normally begin with his inquiring into my musical activities and regularly cover aspects of our family lives such as his mother’s career as an accomplished vio-linist or his daughter’s work with a lead-ing architectural firm in the US. Needless to say that our business interaction has transcended into personal friendship over time.

As interpersonalrelations are highly im-portant in China, the

experience of workingand living there is an

enriching one.

Colorful working environmentDespite China’s highly inviting cultural features the scope of exchange with the outside world remains surprisingly limited. The intercultural dialogue is regularly challenged by the significant linguistic barriers that have to be over-come on both sides. Moreover the conti-nental features of China’s civilization and economy entail a society that is rel-atively self-contained. Consequently as an outsider one has to wage the first step in engaging Chinese counterparts. For those willing to do so the reaction is

regularly forthcoming and genuinely re-warding. I positively recall briefing ses-sions at Chinese companies as well as lectures at some of the country’s leading universities, which were not only met with great interest, but regularly entailed fur-ther and mostly expanded cooperation.

A few years ago I was asked to contrib-ute a presentation on working conditions in the financial industry in China, an in-vitation that provided me with ample op-portunity to reflect on my existence and the question why I actually enjoyed my assignment in the country and what was possibly different to other working realms. In preparation and illustration of daily con-ditions I went for a stroll in Shanghai and I recall the incredibly rich and colourful facades and notably balcony structures of some large-scale housing estates. Each of them reflected the significant levels of freedom and tolerance that permeate the personal life and for that matter also working spheres in China. Similarly color-ful conditions may easily prevail within the office landscape, where notably for-eign managers might be challenged to enact aspects such as clean desk poli-cies as overly rigid rules and notably their implementation might be resented as an intrusion into the personal life sphere. As entrepreneurs work themselves into their mandates they may also discover that aspects such as atmosphere represent essential assets and that the so-called soft factors quite regularly become the hard facts in winning the race. At the same time they may realize that the value Chinese society attaches to interper-sonal relationships forms one of the most rewarding aspects in working and living in China.

Dr. Urs BuchmannUrs Buchmann serves as Vice-Chairman Greater China of Credit Suisse as of Janu-ary 1, 2017. He joined Credit Suisse Group in 1985 and became the bank’s Chief Rep-resentative in 1987 and was eventually promoted to the Country Head for CSFB’s China organization. From 1997 he served as the Head for Credit Suisse Financial Ser-vices in China and as of 2007 as Head China Corporate Banking. In August 2015 he was appointed as a Vice-Chairman Corporate & Institutional Clients APAC. In this capacity he coordinated the activities of the various Credit Suisse business units in the corporate and institutional areas in China and Asia.

Prior to joining Credit Suisse he worked on the editorial board of Neue Zürcher Zeitung (NZZ), Switzerland’s leading business daily covering macro-economic and corporate topics. Urs Buchmann was educated in Bel-gium and Switzerland, graduating with a Ph.D. in International Public Law from the University of Berne.

“Outsiders must take the first stepto engage their Chinese counterparts.”

40 Scope | 1/2018

In retail trade, China is becoming the front-runner in innovative technologies, new sales channels and

changing consumer behavior. No fewer than 20% of all retail purchases are already made online. The big

winners are integrated offline-online platforms, which cover all touchpoints of the customer journey – from

information gathering through to the physical delivery of products. Growth is driven most significantly by the

generation of Chinese born after 1990, who demonstrate an above-average willingness to spend.

China’s New Retails Seamless Platforms,

Distinct Consumer Behavior

Dr. Dong Tao Vice Chairman Greater China dong.tao@credit-suisse.com

Daphne Li

Research Analyst daphne.li@credit-suisse.com

“New Retail” has been a hot topic in the last couple of years. We believe that the “New Retail” concept will revolutionize the sector and change the future of the retail sector in China and the world.

New Retail – New concept “New Retail” means the seamless connection between the online and offline world. China’s online retail giants plan to transform the retail industry by building a retail ecosystem that integrates online and offline strengths. In this new world there will be no difference between online and offline commerce, consumers will be the cen-ter of the new omni-channel retail world; consumer be-havior, preferences and feedback will be the main drivers of how merchants plan their business. Both online and offline merchants can benefit from this model by engag-ing their customers with personalized content and

experience. Also, players benefit from marketing, inven-tory management, innovation, new brands development and logistics to better fit ever-changing customer needs.

How China online retail could be a market leader According to the National Bureau of Statistics, China’s online retail sales reached CNY 7,175 billion in 2017, accounting for 20% of total retail sales. Figure 1 shows that China’s e-commerce increased sharply from 2010 to 2015, outperforming major European countries, the US and some emerging markets. We believe that the main drivers behind these jaw-dropping numbers are

1. seamless and integrated online-offline platforms,2. distinct Chinese consumer behavior, and3. a personalized online experience.

Insight

Scope | 1/2018 41

Sources: Economist Intelligence Unit, Internet World Stats, International Telecommunication Union, World Bank, Euromonitor, BCG analysisNote: Internet penetration = the number of internet users divided by the populatoin. An internet user is someone at least two years of age who has been online in the past 30 days.

Figure 1: China’s e-commerce expanded sharply in 2010–2015

E-commerce share of retail (%)

2010 2015

20

15

10

5

020 60 8040 100

IndiaThailand

China

Brazil

Malaysia

US

South Korea

Japan

UK

France

Internet penetration (%)

Insight

42 Scope | 1/2018

Seamless and integrated online-offline platforms in China China is a front-runner in e-commerce and online retail thanks to its distinctive online and offline platforms which provide a one-stop ‘station’ for consumers. Consumers can visit an integrated platform, ranging from pre-pur-chase search to product delivery: They can 1) discover new trends; 2) select their targeted products based on users’ reviews, sellers’ comments, online shows, cyber celebrities’ recommendations, and discussions in differ-ent online communities; 3) compare products in different online shops and virtually try the products online; 4) pay for the products; and 5) decide where to pick up the prod-ucts, either by courier, physical stores, other local distri-bution centers or some convenient stores on the one-stop single platform. The Tmall Double 11 Shopping Festival is a typical successful case in this ecosystem. Tmall’s one-day sale on November 11, 2017 reached CNY 168 billion, which is equivalent to the 10-month average attribut-able sales of the top 10 Chinese property developers in 2016 and to the average contracted sales of the top 5 Hong Kong property developers in the last 9.6 years. Tmall embarked upon a digital revolution across sectors and built a new retail ecosystem in China. In the US, the online shopping providers also offer unlimited product selection, product recommendations, users’ reviews and payment systems for clients. While it also has to manage product inventory (which Tmall does not), it does not connect buyers and sellers directly. US buyers have to search for the products themselves and select the sellers with the users’ reviews, and they cannot decide how they are going to receive the products. Chinese consumers are experiencing totally different and more advanced online shopping activity.

Chinese consumer behavior fosters a great environment Major online consumers in China are youngsters born in the 1990s or 2000s, the so-called Generation Y and Generation Z, or the post-’90s generation. They are the new engine behind New Retail as they are aged 18 to 28 and are a young working population with strong inter-net savvy. Based on our observation, China’s post-’90s generation displays distinct consumption behavior:

1. instinctive buyers,2. upgrading their consumption,3. health conscious,4. shifting preference from foreign brands to local brands,5. “individualism”.

The post-’90s generation is generally highly knowledge-able about the internet, some of them even skipping the PC era and moving straight to mobile devices. They are usually well educated and have a positive economic outlook; hence, they are willing to buy more and spend a lot of time online. According to the OMD industry report, only 26% of them save part of their income, 38% of them spend their entire income, and 36% even overspend. According to Boston Consulting Group, every day Chinese

consumers spend three times longer e-shopping than US consumers. At the same time, China’s new generation is also upgrading its consumption, is keen on buying pre-mium products with good quality, does not mind spending more on quality goods and is really brand conscious. According to McKinsey & Company, nearly 20% of all Chinese consumers are trading up in key FMCG cate-gories, compared to only 8% and 12% in the US and Germany, respectively.

They are health conscious and, given that they are more well educated and earning more than older generations, are willing to spend more on healthful and organic prod-ucts and spend more time participating in sports activi-ties. They are on the lookout for new health trends and purchase organic health products online.

Although the new generation is brand conscious, it is increasingly indifferent to the distinction between foreign and local brands. In the past, Chinese consumers pre-ferred well-known foreign brands, but nowadays they are shifting to local brands. According to McKinsey & Com-pany, Chinese consumers prefer local brands in half of their surveyed categories because of better after-sales service, value for money and quality products.

“Individualism” is popular among the youth, who are more individualistic than their parents and focus more on their self-image, self-experience, and self-development than they do on social responsibility, family responsibility, or even job stability. They have a different interpretation of what it means to be “successful”. According to McKinsey & Company, only 27% of the new generation believes that getting rich is successful, which is the traditional value in the Chinese community.

Personalized shopping experience In China, online consumers are like shoppers in a virtual mall, where they engage with sellers via different channels, online shows, videos, news, games and online chatting communities. They see the online experience as enter-tainment, fashion, social engagement and fun. Tmall’s “Retail as Entertainment” leverages China’s social media; youngsters enjoy their online shopping experience, while all their shopping data, including product preferences, shopping habits, behavior, feedback, and payment meth-ods, are collected. Over 454 million active buyers use one of the online retail giants’ platforms, which provides ample data to develop accurate consumer models and offer a personalized shopping experience. Consumers en-joy bespoke newsfeeds, display ads, new brands, prod-uct recommendations and personalized sales experiences with direct connections to sellers. Online merchants can manage inventories efficiently, understand consumers’ needs and enhance product development.

“New Retail” consolidates online-offline logistics and mega data into one single platform which ties consumers and sellers together, and we believe China will remain the global e-retail leader.

Insight

THE SWISS ARCHITECTS FOR HOUSE DESIGN AND ARCHITECTURE

BAUTEC AG www.bautec.swiss info@bautec.ch 032 387 44 00

ARCHITECTURE HOUSE APARTMENT BUILDING MODIFICATION

Advertisement

44 Scope | 1/2018

Knowledge Nuggets

ChinaInteresting facts about

The modern word “China” is likely derived from the Qin (pronounced “chin”)

Dynasty. Qin Shi Huang, the first emperor of the Qin Dynasty (260–210 B.C.),

unified the Chinese empire in 221 B.C., which marked the beginning of the Imperial

period that lasted until 1912.

Official designation: People’s Republic of China (Zhonghua Renmin Gongheguo)Form of government: Communist stateCapital city: BeijingPopulation: 1,393,783,836Official language: Chinese, MandarinCurrency: Yuan (or renminbi)Surface area: 9,596,960 km2Biggest mountain range: HimalayaLongest rivers: Yangtze, Yellow River

PandaAll the giant pandas in the world are loaned out by China. When a baby panda is born, it is shipped back to China by FedEx to help spread the gene pool. The Chinese regard pandas not only as a sym-bol of peace and friendship but also as intelligent and strong as a tiger with magic powers to ward off nat-ural disasters or evil spirits.

EconomyChina overtook the US in 2014 as the world’s largest economy. Its per capita gross domestic product (IMF, adjusted for pur-chasing power) averages USD 8,900. Chinese companies in-vested USD 57.6 billion in Eu-ropean firms in 2017. If Walmart were a country, it would be Chi-na’s sixth largest export market. The People’s Republic of China is the world’s largest exporter and second largest importer of goods. In 2015, Chinese com-panies manufactured 90% of all cell phones. China’s status as “world factory” is also confirmed by the following facts and fig-ures: China produces 80% of all computers and air conditioners, 60% of all color TVs, 50% of all refrigerators, 40% of all ships and 28% of all automobiles.

Time zoneChina is roughly the size of the continental US. Whereas the latter has four time zones, China has collapsed its original five time zones into one. This means that the sun rises only at 10 a.m. in some areas of the Republic of China.

SustainabilityChina is at the heart of the global energy revolution, driven by falling costs of renewable energy sources. China invests more than any other country in sustainable power. In early 2017, the Republic of China announced that it planned to in- vest USD 360 billion in renewable energy by 2020 while suspending the planned construction of 85 coal-fired power stations.

Luxury goodsWith 71% of the Chinese people identifying success by the things they own, China is consid-ered to be the world’s most materialistic country. Estimates in recent years have put the percentage share of the personal luxury goods market world-wide of Chinese consumers at 32%, with a global market volume of around USD 262 billion. While the Swiss watch industry exported 652 million wristwatches to China in 2016, a year later 24.2 million passenger cars were sold there.

Scope | 1/2018 45

Knowledge Nuggets

Nice to knowThe most basic dic-tionary of the Chineselanguage recordsover 23,000 charac-ters with more than370,000 definitions.

In 2015, a Chinesebillionaire used hiscredit card to buy aUSD 170 millionpainting in order touse his credit cardpoints for free flights.

During peak periods,Alipay processes120,000 transactionsa second.

One in every threesocks is manufactured in the Datang districtof Zhuji, China, alsoknown as “Sock City”.

China is the world’slargest market for red wine consumption.

Fortune cookies,popular the world over, are not a Chinesetradition. Instead, theywere invented in SanFrancisco in the early1900s.

BuildingsChina consumed more cement over the three-year period of 2011 to 2013 than the US used in the entire 20th century. China gains a new skyscraper every five days. At 632 meters in height, the Shanghai Tower is the second tall-est building in the world. In 2021, it will be su-perseded by the Suzhou Zhongnan Center, which will reach 729 meters. The Beipanjiang Bridge is the highest in the world, spanning 500 meters above the gorge of the Beipan River. The world’s longest bridge is the Hong Kong- Zhuhai Bridge, which is alleged to cut travel time between Hong Kong and Zhuhai down from six hours to 30 minutes.

MegacitiesChina has 15 megacities with upward of 10 mil-lion inhabitants, in addition to almost 100 cities in which more than 1 million people live. Around 20 million people reside in Beijing, a city that is over 3,000 years old, while 19 million live in Shanghai. The planned city of Shenzhen, which plays an important role in terms of foreign invest-ment, is one of the fastest growing cities in the world.

BeijingBeijing is the world’s most expensive city for tenants to rent housing, with rental costs roughly 1.2 times higher than the average monthly wage. The Chinese government controls the central heating for every home in Beijing.

Hong KongHong Kong has more skyscrapers than any other city in the world.

DragonsChinese dragons are legendary creatures in Chinese mythology. Dragons tradition-ally symbolize auspicious powers, notably control over water, rainfall, typhoons and floods. Moreover, the Chinese dragon is a symbol of power, strength and good luck. The Emperors of China often used it as a symbol of imperial power and strength, with some even claiming to be the descen-dants of a dragon.

Great WallThe mortar required for building the Great Wall was made with sticky rice!

ChopsticksChina uses 45 billion chopsticks a year, for which 20 million 20-year-old trees are chopped down annually in China.

PopulationIt is estimated that by the year 2020 between 30 and 40 million men in China will be looking for a partner of the opposite sex (in 1973 Chi-na proposed to send 10 million Chinese women to the US to boost the latter’s population). A total of 21% of the population in China bear the three most common Chinese surnames – Wang, Li and Zhang. Female students in China outper-form their male colleagues by such a consider-able margin that a number of universities have introduced a quota system for male students. In addition, the “Elderly Rights Law” prescribes that everyone must regularly visit their parents once the latter have reached the age of 60. Further-more, the Chinese are by far the largest source of revenue for the international tourism market.

WealthWith 190 billionaires and over 2 million million-aires, China ranks second after the US in terms of the number of high-net-worth individuals. A new billionaire is added every five days in China.

46 Scope | 1/2018

ContactAddress

Credit Suisse Asset Management (Switzerland) Ltd.Kalandergasse 4, 8045 Zurich, Switzerland

Email communication.assetmanagement@credit-suisse.com

SubscriptionTo subscribe or cancel, or if you would prefer in future

to read “Scope” in e-paper format: credit-suisse.com/scope

Newsletter subscriptionOur electronic newsletter gives you information

on a periodic basis or as needed about Credit Suisse Asset Management news, offers and services. Register now and get everything sent directly to

your inbox quickly and free of charge.credit-suisse.com/am/subscribe

ImprintPublisher

Credit Suisse Asset Management (Switzerland) Ltd.Kalandergasse 4, 8045 Zurich, Switzerland

Editor-in-chiefDaniela Zulauf Brülhart

Head of Marketing & CommunicationCredit Suisse Asset Management (Switzerland) Ltd.

Project managementGabriele Rosenbusch

Caroline Stössel Communication

Credit Suisse Asset Management (Switzerland) Ltd.

Design and realizationadvertising, art & ideas ltd., adart.ch

Steiner Kommunikationsberatung, steinercom.ch

PrinterMulticolor Print AG, multicolorprint.ch

Translation/proofreadingCLS Communication AG, cls-communication.com

Publication frequencyThree times a year

SourcesData sources

Unless otherwise noted, the statements and information used in this publication are based on sources

from Credit Suisse AG.

Picture sourcesCover: iStockphoto LP;

page 3: Iris C. Ritter/Finanz und Wirtschaft pages 4, 27, 38: iStockphoto LP;

pages 6, 9: Marc Wetli;page 14: Keystone AG;page 19: © Adam Mork;

pages 21, 37: Getty Images International;page 23: Hufton+Crow;

page 31: CAMimage/Alamy Stock Photo;page 34: www.schweizfotos.ch

The Year ofthe Dog

Unlike in Western astrology, in which the zodiac constellation changes every month, in Chinese astrology each of the 12 animal zodiac signs lasts a whole year. A different animal each year, but they always recur in the same sequence: Rat, Ox, Tiger, Rabbit,

Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog and Pig. The year 2018 is represented by the Chinese astrological

sign of the Dog and runs from February 16, 2018, to February 4, 2019. The years

of the Dog are 1934, 1946, 1958, 1970, 1982, 1994, 2006 and 2018.

The Dog stands for loyalty, reliability and vigilance. Those who offend his sense of justice must expect to face sanctions.

According to astrological interpretation, peo-ple born under the sign of the Dog tend

to pursue public service careers. Would-be typical careers for (two-legged) Dogs in-

clude priest, judge, politician, police officer, professor, nurse and scientist.

[ GOU ]

Take-away

Source: www.chinarundreisen.com

Scope | 1/2018 47

higher fees and expenses associated that may offset profits, (viii) no re-quirement to provide periodic pricing or valuation information to investors, (ix) complex tax structures and delays in distributing important tax information and (x) fewer regulatory requirements than registered funds.

The underlying indices are registered trademarks and have been licensed for use. The indices are compiled and calculated solely by licensors and the licen-sors shall have no liability with respect thereto. The products based on the indices are in no way sponsored, endorsed, sold or promoted by the licensors.

Copyright © 2018 Credit Suisse Group AG and/or its affiliates. All rights reserved.

“Ограничение ответственности” Настоящий документ подготовлен компанией Credit Suisse AG и (или) ее аффилированными лицами (далее по тексту – “CS”) с максимальной степенью тщательности и исходя из имеющейся у нее информации и мнений. При этом CS не дает гарантий относительно его содержания и полноты и не несет ответственности за убытки, могущие возникнуть в результате использования представленной информации. Мнения, вы-раженные в настоящем документе, принадлежат CS, относятся к мо-менту написания настоящего документа и могут быть изменены в лю-бое время без предварительного уведомления. Если не указано иное, количественные данные, содержащиеся в настоящем материале, не проходили процедуру аудиторской проверки. Настоящий документ предоставляется исключительно в информационных целях и лишь для использования получателем. Настоящий документ не является пред-ложением или рекомендацией купить или продать финансовые инстру-менты или банковские услуги и не освобождает получателя от необхо-димости делать собственные выводы. Получателю особенно рекомендуется убедиться, что представленная информация соответ-ствует его обстоятельствам с точки зрения юридических, норматив-но-правовых, налоговых и прочих последствий (если необходимо – с привлечением профессиональных консультантов). Настоящий доку-мент не может полностью или частично воспроизводиться без предва-рительного письменного согласия CS. Настоящий документ не предна-значен для лиц, которые в силу своего гражданства или места проживания не могут иметь доступ к указанной в нем информации в соответствии с применимым законодательством. Настоящий документ и его копии не могут отправляться или ввозиться в США, распростра-няться на их территории и среди лиц США (в значении, установленном Положением S Закона США «О ценных бумагах» 1933 г. в действующей редакции). Любые инвестиции подвержены риску – в частности, риску колебаний их стоимости и доходности. Инвестиции в иностранной ва-люте несут дополнительный риск, связанный с возможностью сниже-ния курса соответствующей валюты по отношению к базовой валюте инвестора. Прошлые показатели доходности и сценарии ситуаций на финансовом рынке не являются гарантией определенной динамики в настоящем или будущем. В показателях инвестиционных инструментов не учитываются комиссии, взимаемые при подписке и (или) погашении. Также не дается гарантий того, что описываемые инвестиционные ин-струменты достигнут базовых показателей или превзойдут их. Автор-ские права © 2018 принадлежат Credit Suisse Group AG и (или) ее аф-филированным лицам. Авторские права защищены.

Disclaimer/important informationThe information provided herein constitutes marketing material. It is not invest-ment advice or otherwise based on a consideration of the personal circum-stances of the addressee nor is it the result of objective or independent research. The information provided herein is not legally binding and it does not constitute an offer or invitation to enter into any type of financial transaction.

The information provided herein was produced by Credit Suisse Group AG and/or its affiliates (hereafter “CS”) with the greatest of care and to the best of its knowledge and belief.

The information and views expressed herein are those of CS at the time of writing and are subject to change at any time without notice. They are de-rived from sources believed to be reliable.

CS provides no guarantee with regard to the content and completeness of the information and does not accept any liability for losses that might arise from making use of the information. If nothing is indicated to the contrary, all figures are unaudited. The information provided herein is for the exclusive use of the recipient.

Neither this information nor any copy thereof may be sent, taken into or distributed in the United States or to any US person (within the meaning of Regulation S under the US Securities Act of 1933, as amended).

It may not be reproduced, neither in part nor in full, without the written permission of CS.

Investment principal on bonds can be eroded depending on sale price, mar-ket price or changes in redemption amounts. Care is required when investing in such instruments. Investments in foreign currencies involve the additional risk that the foreign currency might lose value against the investor’s refer-ence currency.

Private equity is private equity capital investment in companies that are not traded publicly (i.e., are not listed on a stock exchange). Private equity in-vestments are generally illiquid and are seen as a long-term investment. Private equity investments, including the investment opportunity described herein, may include the following additional risks: (i) loss of all or a substan-tial portion of the investor’s investment, (ii) investment managers may have incentives to make investments that are riskier or more speculative due to performance-based compensation, (iii) lack of liquidity as there may be no secondary market, (iv) volatility of returns, (v) restrictions on transfer, (vi) potential lack of diversification, (vii) high fees and expenses, (viii) little or no requirement to provide periodic pricing and (ix) complex tax structures and delays in distributing important tax information to investors. Equities are subject to market forces and hence fluctuations in value, which are not entirely predictable.

The key risks of real estate investments include limited liquidity in the real estate market, changing mortgage interest rates, subjective valuation of real estate, inherent risks with respect to the construction of buildings and environmental risks (e.g., land contamination).

Commodity investments and derivatives or indices thereof are subject to particular risks and high volatility. The performance of such investments depends on unpredictable factors such as natural catastrophes, climate influ-ences, hauling capacities, political unrest, seasonal fluctuations and strong influences of rolling-forward, particularly in futures and indices.

Emerging market investments usually result in higher risks such as political, economic, credit, exchange rate, market liquidity, legal, settlement, market, shareholder and creditor risks. Emerging markets are located in countries that possess one or more of the following characteristics: a certain degree of political instability, relatively unpredictable financial markets and economic growth patterns, a financial market that is still at the development stage or a weak economy.

Investments in hedge funds may involve significant risks, including the loss of the entire investment. The funds may be illiquid, as there is no secondary market for interests in the funds and none is expected to develop. There may be restrictions on transferring interests in the funds, investments may be highly leveraged and the investment performance may be volatile.

Investments in Insurance Linked Strategies, including the investment oppor-tunity described herein, are speculative and risks include, among other things: (i) loss of all or a substantial portion of the investment due to lever-aging, short-selling, use of derivatives or other speculative practices, (ii) incentives to make investments that are riskier or more speculative due to performance based compensation, (iii) lack of liquidity as there may be no secondary market for insurance-linked interests and none is expected to develop, (iv) volatility of returns, (v) restrictions on transfer, (vi) potential lack of diversification and resulting higher risk due to concentration, (vii)

Z u r i c h I G e n e v a I F r a n k f u r t I M a d r i d I L o n d o n

DEGUSSA: THESIMPLEST WAYTO INVEST INPRECIOUS METALS.Gold has been the strongest currencysince 2001 B.C. and is therefore con-sidered a solid long-term investment. As the largest independent precious metal trader in Europe outside the banking system, Degussa is able to offer you comprehensive advice in our Swiss branches in Zurich and Geneva. We help you compile your personal investment portfolio with a wide selection of Degussa-branded gold bars that include a security number. We also offer bullion coins as an alternative investment opportu-nity. In addition, we have collectible coins and high carat precious metal gifts. For safe storage, we offer state of the art safe deposit box facilitiesprotecting your assets 24/7. Furtherinformation and online shop at:

DEGUSSA- GOLDHANDEL.CH

Showrooms:

Bleicherweg 41 · 8002 ZurichPhone: 044 403 41 10

Quai du Mont-Blanc 5 · 1201 GenevaPhone: 022 908 14 00

BS265640_DG_Anzeige_Scope_CH_210x297_39L.indd 1 30.11.17 15:00