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Miller China Trade Miller China Trade Presentation Transcript

  • China – International Trade Matt Miller March 1st, 2005
  • Outline :
    • History/Background
    • Current Demographics
    • Labor Market
    • Economics
    • International Trade
  • Background History
    • Timeline :
    • 1949 – People’s Republic of China (PRC) founded
    • 1953-57 The Transition to Socialism
    • 1958-60 The Great Leap Forward
    • 1966-76 The Cultural Revolution Decade
    • 1966-68 The Militant Phase
    • 1969-71 The 9 th National Congress Party to the Demise of Lin Biao
    • 1972-76 End of the Era of Mao Zedong
    • 1976-78 The Post-Mao Period
    • 1979-82 Four Modernizations of China
    • 1980-88 Reforms
    • 2001 – Admission to the WTO
    • Capital: Beijing
    • Largest City:
    • Shanghai
  • Demographics:
    • 4 th Largest Country in the World
      • Highest Population ≈ 1.3 Billion people
        • Speculation that figures underestimate true total population
      • Geographic area slightly smaller than U.S.
    • Age Structure
      • 0-14 years = 22.3% of population
      • 15-64 years = 70.3% of population
      • 65 years and over = 7.5% of population
    • Median Age = 31.8 years
    • Population Growth Rate = 0.57% (2004 est.)
    • Birth Rate = 12.98 births/1,000 population
    • Death Rate = 6.92 deaths/1,000 population
    • Sex Ratio
      • At birth = 1.12 males/females
      • Total Population = 1.06 males/females
    • Infant Mortality Rate = 25.28 deaths per 1,000 live births
    • Life Expectancy at birth = 71.96 years
    • Literacy Rates = 90.9% over 15 years of age can read and write
    • Multi-ethnic nation - 56 recognized ethnicities
      • Han Chinese = 93% of total population
    • Several different Chinese dialects
    Demographics:
  • Labor Market
    • Labor Force ≈ 778.1 Million (2003)
    • Labor Force by Occupation:
      • Agriculture = 50%
      • Services = 28%
      • Industry = 22%
    • Unemployment Rate
      • 2003 = 10.1% (CIA.gov) World Factbook
      • 2003 = 4.4% (Official NBS figures)
        • NBS figures do not include underemployment or the migrant population
    • Major Industries
      • Iron & Steel, Coal, Machine Building, Textiles & Apparel, Petroleum, Cement, Footwear, Toys, Food Processing, Automobiles, Consumer Electronics, Telecommunications, etc.
  • Economy
    • GDP - $1.409 Trillion USD (2003) 6th
    • GDP (PPP) - $6.449 Trillion USD (2003) 2nd
    • GDP Real Growth Rate = 9.1% (2003)
    • GDP per Capita = $1,227 USD (2003) 113th
    • GDP per Capita (PPP) = $5,000 (2003) 91 st
    • Population below poverty line = 10% (2001)
    • Distribution of Household Consumption Income/Consumption
      • Lowest 10% = 2.4%
      • Highest 10% = 30.4% (1998)
    9.1% 8.0% 7.5% 8.0% 7.1% 7.8% 2003 2002 2001 2000 1999 1998
  • Economy
    • GDP Composition by Sector (2003)
      • Industry & Construction = 52.9%
      • Services = 32.3%
      • Agriculture = 14.8%
    • Ave Rural income ≈ 1/3 of Urban areas
    • Currency = Renminbi (yuan)
    • Inflation on the rise due to high food prices
      • CPI hit 5.3% in July & August 2004 after averaging 3.6% in the first half of 2004. Steepest rise in over 6 years.
    1.2% -0.8% 0.7% 0.4% -1.4% -0.8% 2003 2002 2001 2000 1999 1998
  • Economy
    • Gross Fixed Investment = 43.4% of GDP (2003)
    • Budget (2003)
      • Revenues = $265.8 Billion USD
      • Expenditures = $300.2 Billion USD
    • Government Deficit: (figures in Billions of RMB)
    • Budget Deficit ≈ 2.7% of GDP
    • Public Debt = 30.1% of GDP (2003)
    • Tax Revenues increased 20.3% in 2003 from 2002
    • Foreign Reserves = $403.3 Billion (2003) - up 40% from 2002
    319.8 315.0 251.7 249.1 174.4 92.2 2003 2002 2001 2000 1999 1998
  • Foreign Investment in China
    • Despite the government’s efforts to cool the economy, FDI in China continues to rise
    • In 2004, the total number of contracts signed was up 15%
    • In 2004, the contracted amount of FDI rose 42.7%
    • Retail investment has increased
      • Wal-mart
      • 7-Eleven
    • Financial Institutions – HSBC Holdings
  • Foreign Investment in China
    • Government is trying to spur investment in northeastern & western China
    • Intel Corp. announced a $375 million chip testing & packaging facility in Chengdu
    • Other major investors in Western China include:
      • Ford Motor Co.
      • Tenneco Automotive
      • Lear Corp.
    • High Tech companies are also establishing operations in western China
  • Origins of FDI in China (2004) $1.89 Billion Taiwan $2.43 Billion United States $2.95 Billion Japan $3.51 Billion South Korea $3.79 Billion British Virgin Islands $10.84 Billion Hong Kong Amount Country of Origin
  • Trends and Issues to Watch
    • Power Shortages continue
    • R&D Investment keeps rising
    • Rising costs of popular destinations
    • Trading & Distribution rights – New rules
    • Regulatory Developments
      • Anti-Monopoly Law
      • Bankruptcy Law
      • Direct Selling Law
  • International Trade
    • China’s Trade with the World ($ Billion)
    % Change: 31.5% 7.5% 21.8% 37.1% 851.2 620.8 509.8 474.3 360.6 Total 412.8 295.2 243.6 225.1 165.7 Imports 438.4 325.6 266.2 249.2 194.9 Exports 2003 2002 2001 2000 1999
  • ** Figures in ($ Billions)
  • International Trade - Exports
    • Exports = $438.4 Billion f.o.b. (2003)
    • Export Commodities
      • Machinery & Equipment, Textiles & Clothing, Footwear, Toys, Sporting Goods, Mineral Fuels, etc.
    • Top Export Partners (2003):
      • U.S. = 21.1%
      • Hong Kong = 17.4%
      • Japan = 13.6%
      • South Korea = 4.6%
      • Germany = 4%
  • China’s Top Exports (2003) ** Figures in ($ Billion) 33.7% 11.517 8.615 Iron & Steel 7 29.1% 11.555 8.953 Furniture 6 15.7% 11.651 10.069 Footwear 5 14.0% 12.239 10.734 Toys & Games 4 24.2% 41.287 33.250 Apparel 3 62.9% 73.958 45.404 Power Generation Equipment 2 33.7% 78.473 58.691 Electrical Machinery & Equipment 1 %Change 2003 2002 Commodity Rank
    • China maintains export bans and restrictive licensing procedures on certain items.
    • Prohibited Exports:
      • Musk, Copper, Platinum, Specified Chemical Compounds, and products whose export is banned under international treaties.
    • Products subject to strict licensing controls include dual-use chemicals, chemical precursors, heavy water, and exports of fish, fresh vegetables and fruits to Hong Kong & Macao.
    • Foreign-invested companies are restricted to exporting only products that they manufacture.
    Export Regulations: Chinese Export Controls
    • Imports = $412.8 Billion f.o.b. (2003)
    • Import Commodities
      • Machinery & Equipment, Mineral Fuels, Plastics, Iron & Steel, Chemicals
    • Top Import Partners (2003)
      • Japan = 18%
      • Taiwan = 11.9%
      • South Korea = 10.4%
      • U.S. = 8.2%
      • Germany = 5.9%
    International Trade – Imports
  • China’s Top Imports (2003) ** Figures in ($ Billion) 42.8% 16.902 11.839 Chemicals 7 19.9% 18.928 15.795 Plastics 6 84.6% 22.192 12.020 Optics & Medical Equipment 5 60.2% 23.291 14.536 Iron & Steel 4 49.8% 26.349 17.588 Mineral Fuel & Oil 3 37.1% 64.245 46.867 Power Generation Equipment 2 41.1% 92.910 65.842 Electrical Machinery & Equipment 1 %Change 2003 2002 Commodity Rank
  • Import Regulations: Chinese Import Controls
    • The following items are prohibited from entering China:
      • Arms, ammunition, explosives, counterfeit currencies, printed matter, magnetic media, films or photographs that are deemed detrimental to the political, economic, cultural, or moral interests of China, lethal poisons, illicit drugs, disease-carrying animals and plants, foods, medicines, and other articles, and old/used garments
    • In addition rules went into effect in 1999 that further restrict or prohibit importation of certain commodities related to the processing trade.
  • International Trade
    • China posted a trade deficit for the first time in over a decade in 2004
    • Overall trade grew roughly 39% in the first half of 2004 – same as in first half of 2003
    • US-China Trade expanded the largest margin the past decade
      • Mostly due to jump in exports to U.S.
      • Grew a record 36%
    • In 2004, China export mix remained mostly the same except toys failed to make the top 10 export list for the first time in more than 15 years!
  • China’s Competitive Advantage
    • Labor-rich country
      • Low-skilled, Labor-intensive goods
      • Manufacturing (Low-Tech)
    • Capital-poor country
      • FDI
  • Trade Barriers
    • While China has an increasingly open and competitive economy, substantial barriers have yet to be dismantled!
    • Tariffs
    • Import Quotas
    • Tariff-Rate Quotas
    • Import Licensing
    • Export Licenses
    • Transparency
    • Legal Framework
    • Trading Rights
    • Distribution Rights
    • Import Substitution
    • Standards/Testing
    • Anti-Competitive Practices
    • Services Barriers
  • U.S.– China Trade
    • In 2003, US/China Trade topped $190 Billion
      • US Trade Deficit with China totaled $134 Billion
    • U.S. exports to China are increasing
      • US has benefited from China’s demand for raw materials
      • US Cotton exports to China increased over 500%!
      • US Soybean exports to China rose over 188%!
    • US/China trade grew more than 30% in first half of 2004
  • U.S.– China Trade * Figures in $ Billion U.S. Balance: -74.7 -91.3 -90.2 -111.4 -134.9 191.7 155.6 128.6 123.9 100.9 Total 163.3 133.5 109.4 107.6 87.8 U.S. Exports 28.4 22.1 19.2 16.3 13.1 U.S. Imports 2003 2002 2001 2000 1999
    • U.S. Benefits
    • Firms ---  gain a large export market
    • Consumers ---  opportunity to purchase cheap imports from China
    • China Benefits
    • Obtain raw materials to convert into products for export
    • Obtain agricultural imports from U.S.
    U.S.– China Trade
  • THE END