everyone’s hard work, we achieved a two-digit growth rate, with our mix of consulting and outsourcing services providing strength in depth. We set seven goals in 2011 to improve ourselves, our technology and most importantly our quality of service; we are almost on track to achieve all of them.

CF: What are you looking forward to in 2012? Stefan: After 40+ years of working day-in-day-out, not to mention building Fiducia from humble beginnings to one of the most trusted consulting fi rms in China, my parents will be able to spend more time as they choose. I will take on more management responsibilities.Jürgen: Next year, we are in for a bumpy ride as the world, in a nutshell, is still feeling the effects of weak economic performance from the West. Yet we are expecting that the China growth story will continue at full steam. The impact of these two opposing forces on us and our clients will make for an exciting 2012.

CF: Fiducia will very soon turn 30, this must be a proud moment for you?Jürgen: Our longevity is a statement of clients’ continued trust in our abilities. Against the background of fast-paced change in China, our business model has remained virtually unchanged. It makes me proud that we, through quality and effi ciency, have increasingly strengthened our brand – the best basis for the future.Cynthia: Thank you to our clients who have been through the ups and downs with us, some for over 20 years. Moreover, I value our relationship with our staff, some also for over 20 years, who are honest and good people. We hope to stay connected with current and former teammates.

Next issue, we will announce details about our exciting plans for Fiducia’s 30th anniversary!

CONTENTA Quality 2011

Important China Tax Update

2012 Fiducia Calendar: 30 Years of Memories

Everyday is Christmas Day in Yiwu

Travel Destination: Huaxi

Fun at Fiducia

CHINA FOCUS • December 2011 • Page 1 of 4

CHINA FOCUSNewsletter on business trends and corporate strategies

DEC 2011If you wish to receive CHINA FOCUS via

email, please subscribe via our website www.fi ducia-china.com.

CF: What have been your highlights of 2011? Cynthia: Our fi rst grandchild, Ludwig Hunter Frank, was born on Thursday, November 10th, at 11.19 p.m. – a cute little boy weighing just over three kilograms. Now comes a new and exciting challenge for us...being grandparents!

Jürgen: We had a very successful year in terms of events, having presented at over 40 occasions in 2011. Some of the major topics come to mind, including ‘China’s 12th 5-Year Plan’, ‘Recruiting and Retention Issues’ and ‘The End of Cheap China’. Being able to engage a wide group of clients enables us to get a real picture of what is going on in the world – by listening and receiving valuable feedback, we gain a deeper understanding and can utilise the knowledge to support our clients appropriately. Stefan: For me, the highlight of the year was our annual meeting, this year in Xiamen, where the whole company left the hectic business environment for four days so that we could spend quality time together. This was an ideal opportunity for the three offi ces to see each other, since we welcomed many new team members in 2011. The outdoor teambuilding activities we carried out certainly reinforced our teamwork and communication.

CF: How do you feel Fiducia has developed this year? Stefan: 2010 was a year of quantitative growth, whereas in 2011 we grew qualitatively: We have implemented a full training and staff activity programme that makes it ‘fun’ to be at Fiducia. (see article Fun at Fiducia for details). Cynthia: Thanks to

A Quality 2011FIDUCIA’S MANAGEMENT JÜRGEN KRACHT, CYNTHIA KRACHT AND STEFAN KRACHT LOOK BACK AT THE JOYS THIS YEAR BROUGHT, AND WE ARE PREPARING FOR A VERY EXCITING 2012 AHEAD.

Mr. and Mrs. Kracht in Hamburg to be with their daughter Anja and to welcome the birth of Ludwig Hunter Frank.

Internal training workshop for staff to learn and test new software.

Staff, past and present, together to celebrate Fiducia alumnus Tim Wommelsdorff’s wedding.

CHINA FOCUS • December 2011 • Page 2 of 4

2012 is a big year for Fiducia Management Consultants, as we will celebrate 30 years of establishment in China.

Therefore, this year’s calendar is dedicated to Fiducia’s staff who are the key drivers in supporting the company to reach this special milestone. Alongside our own photos are also key milestones and events in China’s history over the last 30 years. Both sets of photos in the calendar show events throughout the years that correspond to the month in which they occurred.

We hope that this calendar can share with you our excitement in the run up to our actual anniversary date on June 18th, 2012. If you would like a copy of the calendar, please send a request to contact@fi ducia-china.com.

2012 Fiducia Calendar: 30 Years of MemoriesNEXT YEAR, WE HAVE A LARGER SIZED CALENDAR TO SHOWCASE FIDUCIA’S STAFF OVER OUR 30 YEARS, AS WELL AS TO COMMEMORATE DEVELOPMENT MILESTONES IN CHINA DURING THE SAME PERIOD.

During the month of December, there is an added atmosphere of festivity thanks to the sparkling lights, glittery balls and colourful trees. Without them, Nat King Cole’s Christmas Song would probably not have made it to the top of the music charts. Santa’s little helpers may be busy preparing presents in the North Pole, but who is preparing the decorations?

Enter China – the world’s decorations factory. Over 10,000 types of Christmas products from China are used to create that special festive feeling: Trees made in Shenzhen have entered the White House; in Hungary, for every three Christmas hats, one is made in Yiwu; and lights from Wenzhou have probably lit up your home.

A city of 1.2 million people, Yiwu in Zhejiang province is the world’s largest exporting base for Christmas products. Yiwu supplies half of all Christmas products, 70% of US market and over 40% of the European market. The city has more than 200 companies exclusively making Christmas products, and their combined annual overseas sales are over RMB 2 billion.

With all these sparkling lights, glittery balls and colourful trees in one place, every day is Christmas Day in Yiwu. Production peak times for Christmas items start as early as May. Germany especially has an early purchasing time in order for products to be displayed in stores by November. The global downturn hit this industry particularly hard, as orders went down by 20-30%. Customers are primarily European and American, and if their demand falls, it is not easy to shift the stock to Asian or Middle Eastern neighbours. Statistics from the Yiwu Christmas Product Industry Association show that after the fi nancial crisis, more than 100 manufacturers moved to Yiwu, mostly from Guangdong, Wenzhou and Taizhou, to take advantage of the industry cluster.

However, Chinese manufacturers are fi ghting back with the same entrepreneurial spirit that made them seize on a foreign holiday such as Christmas in the fi rst place. Suppliers now also concentrate on the Russian and South American markets. New ideas, such as blonde Snow Maidens in fur-trimmed mini-skirts, are replacing traditional Santa Claus fi gures. Others try to diversify into other special occasions such as Halloween, Valentine’s Day, Mother’s

Every day is Christmas Day in YiwuCHINA HAS BECOME THE MOST IMPORTANT MANUFAC-TURING BASE FOR CHRISTMAS: 80% OF CHRISTMAS DECORATIONS IN THE WORLD ARE MADE IN CHINA.

Sourcing for Christmas decorations in Yiwu...in May.

VAT Pilot Reform in Shanghai: January 1st, 2012

In one of the most signifi cant changes to China’s tax system, Business Tax will no longer apply for service companies, instead they will be subject to Value Added Tax (VAT). Business Tax will cease to be applied. The goal of this reform is to simplify tax payments for service companies in order to encourage further development in the “modern services” industry.

Shanghai has been selected to be the pilot region for this reform, effective January 1st, 2012, due to its developed service industry, but ultimately the change of tax system will be applied nationwide in China.

China Focus will have a full report on this major change in our next issue.

CHINA TAX UPDATE

Each month showcases a fun activity for Fiducia staff alongside a major milestone in China’s last 30 years.

CHINA FOCUS • December 2011 • Page 3 of 4

150km northwest of Shanghai, Huaxi was founded in 1961 as a socialist commune. Living conditions for the residents of Huaxi sound nothing short of miraculous; fully detached houses, cars, clothing, healthcare and even cooking oil are all distributed for free. The astonishing rise of this ordinary farming community has attracted a lot of media attention, and every day tours from across China fl ock into Huaxi to hear from the father of the success himself, 83 year-old Wu Renbao.

The community leader started out in the 1960s with small workshops, producing and repairing tools for the farmers of the surrounding areas. This was a risky deviation from the offi cial party line, especially during the years of the Cultural Revolution he often had to disguise workshops and send commune members back to the fi elds whenever offi cial inspections arrived. The experience of the early years, however, gave Huaxi a headstart in the reform era, and today Wu Renbao not only boasts the fabulous wealth he created, but also his top-level connections to Beijing.

Over the past decades, Huaxi has developed an industrial conglomerate consisting of mainly steel and textile industries, as well as chemical plants, liquor and tobacco. During that time, the commune has also grown in size, swallowing up 12 surrounding villages and currently with a total of around 60,000 inhabitants. While the original residents, and especially those close to the Wu family enjoy the best-paid jobs and most benefi ts, the residents of the other communities are less favoured. At the bottom of the social hierarchy are several tens of thousands migrant workers, who nonetheless enjoy subsidised food, medical care and better schooling than anywhere else.

Working hard is a common virtue of all Huaxinese; regular 7-day weeks with only two days per month for rest, and bars close no later than 10pm. The payoff from this industriousness has been especially big during the past seven years, when Huaxi’s sales revenues increased fi ve-fold. All profi t generated is distributed to a holding company, which pays out 20% to 2,000 shareholders and reinvests the remaining funds. To prevent a drain-out of economic and brain power, those who move away from Huaxi will not only loose their benefi ts, but also nearly all of their investment. In addition, Huaxi has attracted money from the outside as well by being one of the fi rst communities to list businesses

Travel Destination: HuaxiHUAXI IS A PICTURESQUE VILLAGE WORTH VISITING; IT IS CHINA’S RICHEST COMMUNITY WITH A PER-CAPITA INCOME SEVEN TIMES THE NATIONAL AVERAGE.

on the stock market.

The mixture of socialism and capitalism practiced in Huaxi may seem like a China en miniature – complete with spectacular economic success and gigantic public projects, but hand-in-hand with massive social differences and environmental problems. Several heavy-polluting chemical and textile plants have recently been shut down, as Huaxi seeks to leave the industrial legacy behind and reinvent itself as a service and commodities-trading centre. The new 328-metre skyscraper to celebrate Huaxi’s 50th birthday is a case in point, as it houses a 826-room hotel and conference centre facilities large enough for 5,000 visitors. Attractions like a reconstructed Chinese Great Wall, Arc de Triomphe and Sydney Opera House boost mass tourism, while helicopter fl ight tours cater to the more wealthy.

The traditional landscape of Huaxi is splendid in itself, with classic villages, rivers, waterfalls, and natural sceneries that change colour with the seasons. Will the increasing international attention mean that Huaxi will dissolve into another Chinese metropolis? Better to visit now while it is still “Huaxi” (literally translated as “Blossoming Mountain Creek”).

Real life in Huaxi resembles a fi ctional picture-perfect town in movies.

Day and Easter. One large supplier stated that South America is now their biggest client and it is diversifying a 10,000-strong product line to include cuddly hearts, Easter bunnies and Halloween monster masks.

Some try to expand into the Chinese domestic market, but many companies struggle to switch markets so easily. Some have export-only production licences, others have the daunting task of muscling into the crowded Chinese New Year products sector, or simply the challenge of selling a largely alien festival to their compatriots.

From all of us at Fiducia Management Consultants,we wish you

Merry Christmas and a Happy New Year!

祝您圣诞和新年快乐！

Frohe Weihnachten und einen guten Rutsch ins neue Jahr!

CHINA FOCUS • December 2011 • Page 4 of 4

For previous issues and newsletter subscription: www.fi ducia-china.comPublisher: Fiducia Management ConsultantsEditor & contact for press and article reprints: contact@fi ducia-china.com

All liabilities excluded. This newsletter is based on information obtained from sources (govern-ment, business associates, companies, publications, etc.) we believe to be reliable. However, Fi-ducia Management Consultants does not take any responsibility as to its accuracy, completeness or correctness. Copyright © 2011 Fiducia Ltd. All rights reserved. Protected by copyright laws.

Hong Kong Offi ce: 15/F OTB Building, 160 Gloucester Road, Hong Kong, Tel: +852-2523-2171, Fax: +852-2810-4494

Shanghai Offi ce: Unit 1907-1910, Central Plaza, No. 227 Huangpi North Road, Shanghai 200003 China, Tel: +86-21-6327-9118 Fax: +86-21-6327-9228Shenzhen Offi ce: Rm. 588, Shanghang Building, Hongli Rd. W., Futian District, Shenzhen City 518028 Guangdong, China, Tel: +86-755-8329-2303, Fax: +86-755-8329-0821

Fiducia Management www.ChinaSourcingInfo.org www.cdiglobal.comConsultants is a member of:

www.agn.org www.acg.org/china/www.caringcompany.net

CF: What is your role at Fiducia?FRC: I am the Training Offi cer, although my title only addresses part of my overall responsibilities here. Since I joined in May 2011, I have been planning, designing, developing and delivering in-house training programs for staff. This includes orientation courses, communication skills, leadership and work-style improvements, language classes, teambuilding activities and more. My programmes cover Hong Kong, Shanghai and Shenzhen offi ces. I have a goal to build a systematic training process and a training environment for our team. Besides training, I also aim to expand “Fidu-Share” – our social responsibility projects (see China Focus December 2010).

CF: What is Fidu-Share all about? FRC: The aim of Fidu-Share is to contribute back to the community. In recent years, we have supported the WWF, RSPCA, Room-to-Read and many other charitable organisations. Previously, our contributions were mostly monetary. Since my arrival, I have tried to instigate more active engagements. A number of us took part in Moontrekker – a hiking event to Lantau Peak, the 2nd highest mountain in Hong Kong, to raise funds for Room-to-Read. Also recently, our staff participated in the Sowers Action event – an extremely challenging 12 hour marathon to hike 42km, to raise funds for building schools in remote areas in China.

We are also pairing up with Playright, an organisation to help under privileged children in Hong Kong. We will take children from low-income groups on a countryside outing to appreciate and learn about our natural environment.

In addition, we still include monetary donations. Our contributions to WWF support their conservation and education projects. We also try to be a low-carbon company by using 3-in-1 printers, FSC recycled paper and our oldmachinery can be reused in schools. Next year, our low-carbon policy will extend even further, literally – for every mile we travel by air, we will offset through compulsory donations.

CF: Is the company improving internally?FRC: Since 2006, Fiducia has been a performance-driven company. Each year we set company annual goals, such as improving Fidu-Share and optimising operations. This year, we took this successful concept and set performance-tied bonuses based on SMART goals: Specifi c, Measurable, Attainable, Realistic, Timely.

In setting SMART goals, staff have a clearer picture of what they want to do and achieve, which importantly includes training. Colleagues are encouraged to suggest new ideas (each offi ce has its own suggestion box) for training that addresses their needs.

The response from training and other out-of-offi ce activities is a better team spirit, increased cross-departmental

Fun at FiduciaCHINA FOCUS MEETS FRANCES CHAN (FRC) TO DISCUSS HER UNIQUE ROLE OF TRYING TO MAKE MORE SMILES AT FIDUCIA.

communications and overall a more cohesive team.

CF:Any plans for 2012?FRC: I am planning to roll out projects in 2012 that are new to the company. For instance, there will be leadership training for high potentials and mind-mapping development to increase creativity and logical thinking. Skills-based learning include IT clinics and Personal Productivity Basics.

As for Fidu-Share, outdoor fun will be the main theme, with registrations already for the Hong Kong Marathon in February to raise charitable funds, and a trip to the beach to clean up the coastline. We all need to get out of the offi ce more!

Top: The team (together with Momo, Stefan’s dog) charged with energy before they embark on conquering the 12-hour hiking trail.

Bottom: Teammates offering their support (and food) along the way.