Overview Of China’S Economy


Published on

Published in: Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • Overview Of China’S Economy

    1. 1. Overview of China’s Economy and Market Opportunities Craig Allen Senior Commercial Officer U.S. Embassy, Beijing
    2. 2. Headline News - 2005 <ul><li>China’s GDP grows 9.9 percent, surpassing USD 2 trillion </li></ul><ul><li>Per capita GDP up to approximately USD 1,500 </li></ul><ul><li>China’s banking system recapitalized with FDI </li></ul><ul><li>FX reserves increased USD 208.9b to 818.9 b </li></ul><ul><li>RMB de-pegged, but still not reflecting market forces </li></ul><ul><li>China’s multilateral trade surplus up to 5 percent of GDP </li></ul><ul><li>China plans to quadruple GDP in 20 years, which implies an average 7.3% annual growth. </li></ul>
    3. 3. U.S. Exports to China Jan – Dec yoy
    4. 4. Leading U.S. Exports to China (4 digits) (Jan. - Dec. 2005) <ul><li>Product Value (USD) %Change </li></ul><ul><li>aircraft and parts 3.84b 137.23% + </li></ul><ul><li>digital integrated circuits 3.12b 16.98% + </li></ul><ul><li>soybeans 2.25b 3.25% - </li></ul><ul><li>cotton 1.40b 1.51% - </li></ul><ul><li>ferrous metal scrap 1.26b 34.39% + </li></ul><ul><li>auto parts / accessories 1.03b 72.04% + </li></ul><ul><li>auto data processing equip. 0.78b 0.13% + </li></ul><ul><li>copper scrap 0.76b 42.31% + </li></ul><ul><li>aluminum scrap 0.72b 94.20% + </li></ul><ul><li>Waste of paper 0.69b 42.79% + </li></ul><ul><li>Electric Apparatus 0.57b 7.79% + </li></ul><ul><li>Raw hides&skins of Bovine equine animal 0.56b 16.6% + </li></ul>
    5. 5. Composition of U.S.- China Trade 2005 Top 12 (2 digits) <ul><li>U.S. Imports ( from China) %Change </li></ul><ul><li>Elect. Machinery 32.09% </li></ul><ul><li>Machinery 20.29% </li></ul><ul><li>Toys/Sports equipment 11.13% </li></ul><ul><li>Furniture and bedding 18.27% </li></ul><ul><li>Footwear 12.10% </li></ul><ul><li>Plastic 27.82% </li></ul><ul><li>Knit apparel 60.26% </li></ul><ul><li>Leather Goods 9.61% </li></ul><ul><li>Iron/steel products 34.22 % </li></ul><ul><li>Vehicles 24.54% </li></ul><ul><li>Optic/Medical inst. 8.95% </li></ul><ul><li>Misc Textile 29.63% </li></ul><ul><li>U.S. Exports (to China) %Change </li></ul><ul><li>Electric.machinery 20.41% </li></ul><ul><li>Machinery 12.60% </li></ul><ul><li>Aircraft,spacecraft 124.59% </li></ul><ul><li>Optic/Medical inst. 15.03 % </li></ul><ul><li>Grain,seed,fruit -3.45% </li></ul><ul><li>Plastic 25.77% </li></ul><ul><li>Iron and steel 14.37% </li></ul><ul><li>Organic chemicals -4.87% </li></ul><ul><li>Cotton+yarn,fabric -1.44% </li></ul><ul><li>Wood pulp, etc. 33.34% </li></ul><ul><li>Copper 40.02% </li></ul><ul><li>Vehicles 43.24% </li></ul>
    6. 6. U.S-China Bilateral Trade Balance
    7. 7. Chinese Trade Balances In USD billion
    8. 8. China’s Multilateral trade balances by industry
    9. 9. Economic Snapshot of 2005 <ul><li>9.9% GDP growth in 2005: 9.9% in Q1, 10.1% in Q2, 9.8% in Q3, 9.8% in Q4 </li></ul><ul><li>12.9% growth of retail sales in 2005. </li></ul><ul><li>25.7 % growth in net fixed asset investment. </li></ul><ul><ul><li>11.4% growth in industrial production (48% of GDP) </li></ul></ul><ul><ul><li>5.2% growth in agricultural production (12% of GDP) </li></ul></ul><ul><ul><li>9.6% growth in service growth (40% of GDP) </li></ul></ul>
    10. 10. Fiscal and Monetary Policy Stability 229b 600b -2.5% 19.3% 3.9% 2004 - 818b +1% - 1.8% 2005 182b 403b -3.1% 21.7% 1.8% 2003 300b 219b 171b Gov. Res. 168b 164b 149b Ex. Debt -3.3% -3.2% -3.6% Bud. Bal 18.5% 17.1% 15.3% Rev/gdp 0.1% 0.7% 0.4% Inflation 2002 2001 2000
    11. 11. Factors of Sustainable Growth in the future <ul><li>Demographics and work force composition </li></ul><ul><li>Benign geo-political environment </li></ul><ul><li>Stable monetary and fiscal policy </li></ul><ul><li>High saving and investment rates </li></ul><ul><li>Rapid adoption of technology </li></ul><ul><li>Trend toward market-oriented legislation </li></ul><ul><li>Booming private sector </li></ul><ul><li>Market depth – strategic range </li></ul><ul><li>Foreign Direct Investment (FDI) </li></ul>
    12. 12. Market Entry Roadmap <ul><li>Direct Exports </li></ul><ul><li>Sales Agent / Distributor </li></ul><ul><li>Resident Representative Office </li></ul><ul><li>Wholly Foreign-Owned Enterprise </li></ul><ul><li>Foreign-Invested Commercial Enterprise (FICE) </li></ul>
    13. 13. Direct Exports <ul><li>Evaluate Prospects </li></ul><ul><ul><li>Are You China Ready? </li></ul></ul><ul><ul><li>Market Research </li></ul></ul><ul><ul><li>Regulatory Environment </li></ul></ul><ul><li>Create a Marketing Plan </li></ul><ul><li>Develop Trade Leads </li></ul><ul><ul><li>Attend a trade show in China, many supported by CS </li></ul></ul><ul><ul><li>Participate in a trade mission, organized by USDOC, state government or trade association </li></ul></ul><ul><ul><li>Monitor the CS International Buyer Program via your USEAC </li></ul></ul><ul><ul><li>Monitor CBIC tender announcements, ADB and World Bank </li></ul></ul><ul><ul><li>Featured U.S Exporter (FUSE) </li></ul></ul><ul><ul><li>CNUSA, Chinese edition </li></ul></ul>
    14. 14. 2006 CS China Trade Show Calendar China Building (BJ) Dental Expo (GZ) SIMM 2006 (GZ) SEMICON (SH) Pollutec (SH) World Travel Fair (SH) SINOCES Consumer Electronic (Qingdao) China Int’l Building Decoration Fair (GZ) Printed Circuit & Electronics Assembly (GZ) CIPPE (BJ) Water Expo (BJ) NEPCON (SH) Hotelex (SH) China Refrig (SH) Sporting Goods (CD) Con Expo (BJ) Broadcast Network & Expo Comm (GZ) ELE/PT Comm China (SH) Book Fair (BJ) CIFTEE (BJ) Analytica China 2006 (SH) CIEME Equip (Shenyang) Security China (BJ) EP China (BJ) PTC Asia/ Metal Working (SH) Zhuhai Air Show (GZ) CCFA Franchising (SH) SITL Logistics (GZ) MEDTEC China (SH) MEDTEC China (GZ) Dec Nov Oct Sep Aug Jul Jun May Apr Mar
    15. 15. Sales Agent / Distributor ( I ) <ul><li>Advantages </li></ul><ul><ul><li>no investment in office overhead </li></ul></ul><ul><ul><li>no registration requirements, no physical presence </li></ul></ul><ul><ul><li>lower likelihood of non-payment </li></ul></ul><ul><ul><li>no responsibility for customs clearance </li></ul></ul><ul><li>Responsibilities </li></ul><ul><ul><li>Comply with safety and quality certifications, China Compulsory Certification, other standards requirements </li></ul></ul><ul><ul><li>Comply with the U.S. Foreign Corrupt Practices Act </li></ul></ul><ul><ul><li>Comply with U.S. Export Control regulations </li></ul></ul><ul><ul><li>Prepare a contract that protects your legal interests, see a local attorney </li></ul></ul><ul><ul><li>Closely monitor the agent / distributor’s activity </li></ul></ul>
    16. 16. Sales Agent / Distributor ( II ) <ul><li>Manage Expectations </li></ul><ul><ul><li>use worldwide selection criteria, then evaluate skill sets </li></ul></ul><ul><ul><li>explore their view of market prospects, approach to business development </li></ul></ul><ul><ul><li>ask to see a prior marketing plan and market research report </li></ul></ul><ul><ul><li>discuss cost sharing for Chinese language brochures, participation in trade shows, demonstration equipment, training in the U.S. </li></ul></ul><ul><ul><li>contract should contain clear reporting requirements and performance goals to monitor whether the Chinese company can do what it purports to be able to do </li></ul></ul><ul><ul><li>evaluate capacity to stock and warehouse </li></ul></ul>
    17. 17. Sales Agent / Distributor ( III ) <ul><li>Due Diligence </li></ul><ul><ul><li>Many exaggerate trade experience, check trade references </li></ul></ul><ul><ul><li>Ask for a copy of the firm’s business license, SAIC inspection, trading rights license, visit business premises </li></ul></ul><ul><ul><li>Triangular debt common for entities lacking trading rights and foreign exchange </li></ul></ul><ul><ul><li>Obtain a DD report through local service providers or CS. </li></ul></ul><ul><ul><li>China lacks a corporate credit rating system </li></ul></ul><ul><ul><li>Government system for verification of business registration on line is emerging – SAIC Red Shield (Hong Dun) Program </li></ul></ul>
    18. 18. Sales Agent / Distributor ( IV ) <ul><li>Contract Terms </li></ul><ul><ul><li>seek professional legal advice before contracting, do not rely upon your Chinese business partner </li></ul></ul><ul><ul><li>ensure the dispute resolution clause limits time for “friendly discussion or mediation” </li></ul></ul><ul><ul><li>do not accept obligations outside of your control: visas, export licenses </li></ul></ul><ul><ul><li>do not export on open account or D/P terms </li></ul></ul><ul><ul><li>ensure contract has non-competition and non-disclosure clauses to protect trade secrets, in the event the relationship ends badly </li></ul></ul>
    19. 19. Resident Representative Office <ul><li>RRO may perform a useful government liaison and marketing function, contract implementation. Useful for getting into government procurement projects. </li></ul><ul><li>Restrictions on business scope apply: </li></ul><ul><ul><li>not allowed to engage in profit-making activity </li></ul></ul><ul><ul><li>not allowed to directly import and distribute product </li></ul></ul><ul><ul><li>not allowed to service equipment or warehouse spare parts </li></ul></ul><ul><li>Establishment of physical presence now requires only local registration. The c ost to support a modest RRO $250,000-500,000 depending on location and size. </li></ul><ul><li>Registered capital in the amount of $10,000 still required. </li></ul>
    20. 20. Foreign-Invested Commercial Enterprise <ul><li>Market entry vehicle for domestic wholesale and retail distribution </li></ul><ul><li>Scope of operation includes “trading rights,” meaning the right to import or export goods manufactured by third parties into or out of China. </li></ul><ul><li>Scope of operation includes “distribution rights,” meaning right to sell products for its own account on retail or wholesale basis, import for sale within China, purchase domestic products for export and perform related services. </li></ul>
    21. 21. Hong Kong as a Gateway <ul><li>Ease of Doing Business </li></ul><ul><ul><li>Rule of Law </li></ul></ul><ul><ul><li>Free Trade Port </li></ul></ul><ul><ul><li>Secure banking system </li></ul></ul><ul><li>Strategic Asia Hub </li></ul><ul><ul><li>Location </li></ul></ul><ul><ul><li>Test products for market </li></ul></ul><ul><ul><li>Regional HQ </li></ul></ul><ul><ul><li>Huge re-export market to China </li></ul></ul><ul><ul><li>Closer Economic Partnership Agreement (CEPA) </li></ul></ul><ul><ul><li>Access to Pearl River Delta – China’s manufacturing hub </li></ul></ul>
    22. 22. Anticipate Problems - Macro <ul><li>Intellectual Property Rights </li></ul><ul><ul><li>Patent - Trade Secrets </li></ul></ul><ul><ul><li>Copyright - Trade Mark </li></ul></ul><ul><li>Industrial Standards and Certification Problems </li></ul><ul><li>Transparency/Corruption </li></ul><ul><li>Payment issues </li></ul><ul><li>Dispute Resolution </li></ul><ul><li>Price Competition </li></ul>
    23. 23. Anticipate Problems - micro <ul><li>Management-level human resources </li></ul><ul><li>Bureaucracy </li></ul><ul><li>Unclear Regulations </li></ul><ul><li>Lack of Transparency </li></ul><ul><li>Inconsistent Regulatory interpretation </li></ul><ul><li>Corruption </li></ul><ul><li>Contract Enforcement </li></ul><ul><li>Local protectionism </li></ul>
    24. 24. U.S. Companies Profit/Risk in China - 2005 <ul><li>72% U.S. firms increased product offering in China </li></ul><ul><li>86% increased revenue substantially </li></ul><ul><li>63% increased profitability </li></ul><ul><li>34% have higher margins than global averages </li></ul><ul><li>92% are optimistic </li></ul>
    25. 25. Find the right markets and partners with our products and services <ul><li>CNUSA – Chinese edition </li></ul><ul><li>Featured U.S. Exporter </li></ul><ul><li>International Partner Search </li></ul><ul><li>Customized Market Research </li></ul><ul><li>Gold Key Service </li></ul><ul><li>International Company Profile </li></ul><ul><li>Single Company Promotions </li></ul><ul><li>Trade Missions, Trade Fairs and Catalog Exhibitions </li></ul>
    26. 26. American Trading Centers: <ul><li>Harbin Nanjing </li></ul><ul><li>Dalian Ningbo </li></ul><ul><li>Qiangdao Chongqing </li></ul><ul><li>Tianjin Kunming </li></ul><ul><li>Xiamen Zhuhai </li></ul><ul><li>Wuhan Shenzhen </li></ul><ul><li>Hangzhou Xiamen </li></ul>
    27. 27. ATC Program Coordinators (86 20)8667-4011 *22 (86 21) 6279-7630 *6145 (86 10)8529-6655 * 809 [email_address] [email_address] [email_address] Mr. Barry Zhang Ms. Cindy Qian Ms. Julie Jiang Guangzhou Shanghai Beijing
    28. 28. China in a Time of Transitions <ul><li>China is simultaneously undergoing a series of dramatic transitions: </li></ul><ul><ul><li>Confucian to modern </li></ul></ul><ul><ul><li>Communist to market-driven (not capitalist) </li></ul></ul><ul><ul><li>Rural and agrarian to urban and industrial </li></ul></ul><ul><ul><li>Economic Autarchy to global integration </li></ul></ul>