China—Challenges and Opportunities Sean Howley and Chip Ridley, Artisan Partners

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Source: Image based on 2013 data from US Census Bureau. Countries encircled are China, India, Indonesia, Bangladesh, Japan, Philippines, Vietnam, Thailand, Burma, South Korea, Nepal, Malaysia, North Korea, Taiwan, Sri Lanka, Cambodia, Laos, Mongolia and Bhutan.

Southeast Asian Geopolitics

Disputed South China Sea Territory

Source: Wikipedia

Source: Voice of America, “Vietnam, China Exchange Water Cannon Spray Near Disputed Oil Rig,” 12 May 2014, accessed 22 April 2016.

Source: The Wall Street Journal, “China Building Airstrip in Spratly Islands, Satellite Images Show,” 16 April 2015, accessed 22 April 2016. Photo: CNES 2015, Distribution Airbus DS/IHS: 1535921

China’s Territorial Ambitions?

China’s Macroeconomic Environment

0

100000

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600000

700000

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China GDP, Hundreds of Millions of CNY

China’s Rapid Economic Growth

Source: FactSet as of 21 April 2016.

-7

-2

3

8

13

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2015

China US UK Germany Japan

China’s Annual GDP Growth Rate vs. Developed World

Source: FactSet as of 22 April 2016, China 2015 GDP growth rate from World Bank 2015 estimate.

-10

-5

0

5

10

15

1999

2000

2001

2002

2003

2004

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2010

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2014

2015

China Brazil India South Africa Korea Mexico Russia Taiwan

China’s Annual GDP Growth Rate vs. Emerging World

Source: FactSet, Bloomberg, World Bank as of 21 April 2016.

0

5

10

15

20

25

1990

1991

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China Industrial Production, 12m rolling y/y%change

0102030405060708090

2004

2005

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2007

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2011

2012

2013

2014

2015

2016

Fixed Assets Investment, y/y % change

Source: FactSet, as of 22 April 2016.

But Infrastructure-Focused Activity Is Slowing in China

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Australia Iron Ore Exports (AUD) - Price

China’s Economy—Alternate Measures

Source: FactSet, as of 22 April 2016.

0

5

10

15

20

25

30

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2006

2006

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2007

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2009

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2010

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2011

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2013

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2014

2015

2015

Premier Li Keqiang Index (Electricity, Railway & Bank Loans)

China’s Economy—Alternate Measures

Source: Bloomberg, as of February 2016.

By 2030, the world’s middle class is projected to reach 4.9 billion people Most of that growth will take place in emerging Asia

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

2009 2020 2030

Middle East andNorth AfricaSub-Saharan Africa

Asia Pacific

Central and SouthAmericaEurope

2009 2020 2030

North America 338 18%

333 10%

322 7%

Europe 664 36%

703 22%

680 14%

Central and South America 181 10%

251 8%

313 6%

Asia Pacific 525 28%

1,740 54%

3,228 66%

Sub-Saharan Africa 32 2%

57 2%

107 2%

Middle East and North Africa 105 6%

165 5%

234 5%

Numbers (millions) and share (percent) of global middle class

Sources: The Brookings Institute and OECD Development Working Centre, 2010

Impact of Urbanization The world is experiencing a massive wave of urbanization. More than half of the world’s population—over thr

billion people—already live in towns and cities.

Changes in Urban and Rural Populations

34%

53%

66%

47%

0%

20%

40%

60%

80%

1960 2014

Urban Rural

Source: The World Bank

40

45

50

55

60

65

70

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80

85

90

1999

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China US UK Japan Germany Australia

Consumption as a % of GDP

Economic Opportunity in China

Source: World Bank, as of 22 April 2016.

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P pe

r Cap

ita (2

005

US

D)

Internet Users/100 People

EthiopiChina

Norway

Japan

United States

Internet Penetration

Source: The World Bank

Impact of Urbanization

1 Source: World Meteorological Organization, Press Release No. 1002. Sep-14 2 Source: European Commission, Joint Research Centre (JRC)/PBL Netherlands Environmental Assessment Age

Cities can act as powerful engines of economic growth but the resulting growth in industry and consumption comes along with negative environmental consequences.

The amount of greenhouse gases in the atmosphere reached a new record high in 2013, driven by a surge in carbon dioxide levels.1

2014 CO2 Emissions (kilotons)2

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11,000,000

China UnitedStates

India Russia Japan Germany Iran Korea Canada Brazil

Top Ten Emitting Countries in 2014 (% of World)

China 30% Germany 2%

United States 15% Iran 2%

India 7% Korea 2%

Russia 5% Canada 2%

Japan 4% Brazil 1%

Total 60%

China’s Capital Markets

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Jul-0

5N

ov-0

5M

ar-0

6Ju

l-06

Nov

-06

Mar

-07

Jul-0

7N

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l-08

Nov

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-09

Jul-0

9N

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9M

ar-1

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l-10

Nov

-10

Mar

-11

Jul-1

1N

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1M

ar-1

2Ju

l-12

Nov

-12

Mar

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Jul-1

3N

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l-14

Nov

-14

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-15

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ov-1

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ar-1

6

MSCI China A MSCI China H

China’s Developing Capital Markets

Source: FactSet as of 22 April 2016.

0.11

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0.14

0.15

0.16

0.17

Dec

200

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Dec

200

1

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200

2

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200

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200

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0

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201

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201

5

U.S. Dollar per China Renminbi

China’s Currency Peg

Source: FactSet as of 22 April 2016.

Questions

Biographies Sean J. Howley is a managing director of Artisan Partners and a business leader for the firm’s Global Equity team. Prior to joining Artisan Partners in March 2007, Mr. Howley was the managing director and product manager for international and global equity products at Putnam Investments, where he was responsible for overseeing communications on policy, strategy and tactics with institutional clients. Before that, he was head of sales and distribution for Pioneer Investment Management, where he developed sales and marketing channels in the United Kingdom and Ireland. Mr. Howley holds a bachelor’s degree in commerce from University College Dublin and a master’s degree in business administration from the Haas School of Business at the University of California-Berkeley. Chip Ridley, CFA, is a managing director of Artisan Partners and the business leader for the firm’s Growth and Emerging Markets teams. Prior to joining Artisan Partners in June 2006, Mr. Ridley was a director of business development and consultant relations for Grantham Mayo Van Otterloo & Co. LLC, where he managed the institutional marketing efforts for western North America and served as product manager for the Emerging Markets strategy. Before that, he was a corporate vice president and principal at Montgomery Asset Management. Mr. Ridley also spent nine years as an aviator in the United States Navy, where he flew and instructed in various types of fighter aircraft. Mr. Ridley holds a bachelor’s degree in economics and history from Duke University and a master’s degree in business administration from Mississippi State University.

Artisan Partners Growth Team

Notes and Disclosures

This presentation is prepared for the State Association of County Retirement Systems. This material represents the views and opinions of the speakers as of 11 May 2016 and are based on current market conditions, which will fluctuate, and are subject to change without notice. While the information contained herein is believed to be reliable, there no guarantee to the accuracy or completeness of any statement in the discussion. This material is for informational purposes only and should not be considered as investment advice or a recommendation of any investment service, product or individual security. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. International investments involve special risks, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Such risks include new and rapidly changing political and economic structures, which may cause instability; underdeveloped securities markets; and higher likelihood of high levels of inflation, deflation or currency devaluations. Artisan Partners is an independent investment management firm focused on providing high value-added, active investment strategies to sophisticated clients globally. Artisan Partners Limited Partnership (APLP) is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Artisan Partners UK LLP (APUK) is authorized and regulated by the Financial Conduct Authority and is a registered investment adviser with the SEC. APLP and APUK are collectively, with their parent company and affiliates, referred to as Artisan Partners herein. © 2016 Artisan Partners. All rights reserved. For Institutional Investors Only—Not for Onward Distribution