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China – International Trade Matt Miller March 1st, 2005
Outline : <ul><li>History/Background </li></ul><ul><li>Current Demographics </li></ul><ul><li>Labor Market </li></ul><ul><...
Background History <ul><li>Timeline : </li></ul><ul><li>1949  – People’s Republic of China (PRC) founded </li></ul><ul><li...
<ul><li>Capital:  Beijing </li></ul><ul><li>Largest City:  </li></ul><ul><li>Shanghai </li></ul>
Demographics: <ul><li>4 th  Largest Country in the World </li></ul><ul><ul><li>Highest Population ≈ 1.3 Billion people </l...
<ul><li>Sex Ratio </li></ul><ul><ul><li>At birth = 1.12 males/females </li></ul></ul><ul><ul><li>Total Population = 1.06 m...
Labor Market <ul><li>Labor Force ≈ 778.1 Million (2003) </li></ul><ul><li>Labor Force by Occupation: </li></ul><ul><ul><li...
Economy <ul><li>GDP - $1.409 Trillion USD (2003)  6th </li></ul><ul><li>GDP (PPP) - $6.449 Trillion USD (2003)  2nd </li><...
Economy <ul><li>GDP Composition by Sector (2003) </li></ul><ul><ul><li>Industry & Construction = 52.9% </li></ul></ul><ul>...
Economy <ul><li>Gross Fixed Investment = 43.4% of GDP (2003) </li></ul><ul><li>Budget (2003) </li></ul><ul><ul><li>Revenue...
Foreign Investment in China <ul><li>Despite the government’s efforts to cool the economy, FDI in China continues to rise <...
Foreign Investment in China <ul><li>Government is trying to spur investment in northeastern & western China </li></ul><ul>...
Origins of FDI in China (2004) $1.89 Billion Taiwan $2.43 Billion United States $2.95 Billion Japan $3.51 Billion South Ko...
Trends and Issues to Watch <ul><li>Power Shortages continue </li></ul><ul><li>R&D Investment keeps rising </li></ul><ul><l...
International Trade <ul><li>China’s Trade with the World ($ Billion) </li></ul>% Change:   31.5%  7.5%  21.8%  37.1% 851.2...
** Figures in ($ Billions)
International Trade -  Exports <ul><li>Exports = $438.4 Billion f.o.b. (2003) </li></ul><ul><li>Export Commodities </li></...
China’s Top Exports (2003) ** Figures in ($ Billion) 33.7% 11.517 8.615 Iron & Steel 7 29.1% 11.555 8.953 Furniture 6 15.7...
<ul><li>China maintains export bans and restrictive licensing procedures on certain items. </li></ul><ul><li>Prohibited Ex...
<ul><li>Imports = $412.8 Billion f.o.b. (2003) </li></ul><ul><li>Import Commodities </li></ul><ul><ul><li>Machinery & Equi...
China’s Top Imports (2003) ** Figures in ($ Billion) 42.8% 16.902 11.839 Chemicals 7 19.9% 18.928 15.795 Plastics 6 84.6% ...
Import Regulations: Chinese Import Controls <ul><li>The following items are prohibited from entering China: </li></ul><ul>...
International Trade <ul><li>China posted a trade deficit for the first time in over a decade in 2004 </li></ul><ul><li>Ove...
China’s Competitive Advantage <ul><li>Labor-rich country </li></ul><ul><ul><li>Low-skilled, Labor-intensive goods </li></u...
Trade Barriers <ul><li>While China has an increasingly open and competitive economy, substantial barriers have yet to be d...
<ul><li>Tariffs </li></ul><ul><li>Import Quotas </li></ul><ul><li>Tariff-Rate Quotas </li></ul><ul><li>Import Licensing </...
U.S.– China Trade <ul><li>In 2003, US/China Trade topped $190 Billion </li></ul><ul><ul><li>US Trade Deficit with China to...
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...
<ul><li>U.S. Benefits </li></ul><ul><li>Firms ---   gain a large export market </li></ul><ul><li>Consumers ---   opportu...
THE END
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Miller China Trade

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  1. 1. China – International Trade Matt Miller March 1st, 2005
  2. 2. Outline : <ul><li>History/Background </li></ul><ul><li>Current Demographics </li></ul><ul><li>Labor Market </li></ul><ul><li>Economics </li></ul><ul><li>International Trade </li></ul>
  3. 3. Background History <ul><li>Timeline : </li></ul><ul><li>1949 – People’s Republic of China (PRC) founded </li></ul><ul><li>1953-57 The Transition to Socialism </li></ul><ul><li>1958-60 The Great Leap Forward </li></ul><ul><li>1966-76 The Cultural Revolution Decade </li></ul><ul><li>1966-68 The Militant Phase </li></ul><ul><li>1969-71 The 9 th National Congress Party to the Demise of Lin Biao </li></ul><ul><li>1972-76 End of the Era of Mao Zedong </li></ul><ul><li>1976-78 The Post-Mao Period </li></ul><ul><li>1979-82 Four Modernizations of China </li></ul><ul><li>1980-88 Reforms </li></ul><ul><li>2001 – Admission to the WTO </li></ul>
  4. 4. <ul><li>Capital: Beijing </li></ul><ul><li>Largest City: </li></ul><ul><li>Shanghai </li></ul>
  5. 5. Demographics: <ul><li>4 th Largest Country in the World </li></ul><ul><ul><li>Highest Population ≈ 1.3 Billion people </li></ul></ul><ul><ul><ul><li>Speculation that figures underestimate true total population </li></ul></ul></ul><ul><ul><li>Geographic area slightly smaller than U.S. </li></ul></ul><ul><li>Age Structure </li></ul><ul><ul><li>0-14 years = 22.3% of population </li></ul></ul><ul><ul><li>15-64 years = 70.3% of population </li></ul></ul><ul><ul><li>65 years and over = 7.5% of population </li></ul></ul><ul><li>Median Age = 31.8 years </li></ul><ul><li>Population Growth Rate = 0.57% (2004 est.) </li></ul><ul><li>Birth Rate = 12.98 births/1,000 population </li></ul><ul><li>Death Rate = 6.92 deaths/1,000 population </li></ul>
  6. 6. <ul><li>Sex Ratio </li></ul><ul><ul><li>At birth = 1.12 males/females </li></ul></ul><ul><ul><li>Total Population = 1.06 males/females </li></ul></ul><ul><li>Infant Mortality Rate = 25.28 deaths per 1,000 live births </li></ul><ul><li>Life Expectancy at birth = 71.96 years </li></ul><ul><li>Literacy Rates = 90.9% over 15 years of age can read and write </li></ul><ul><li>Multi-ethnic nation - 56 recognized ethnicities </li></ul><ul><ul><li>Han Chinese = 93% of total population </li></ul></ul><ul><li>Several different Chinese dialects </li></ul>Demographics:
  7. 7. Labor Market <ul><li>Labor Force ≈ 778.1 Million (2003) </li></ul><ul><li>Labor Force by Occupation: </li></ul><ul><ul><li>Agriculture = 50% </li></ul></ul><ul><ul><li>Services = 28% </li></ul></ul><ul><ul><li>Industry = 22% </li></ul></ul><ul><li>Unemployment Rate </li></ul><ul><ul><li>2003 = 10.1% (CIA.gov) World Factbook </li></ul></ul><ul><ul><li>2003 = 4.4% (Official NBS figures) </li></ul></ul><ul><ul><ul><li>NBS figures do not include underemployment or the migrant population </li></ul></ul></ul><ul><li>Major Industries </li></ul><ul><ul><li>Iron & Steel, Coal, Machine Building, Textiles & Apparel, Petroleum, Cement, Footwear, Toys, Food Processing, Automobiles, Consumer Electronics, Telecommunications, etc. </li></ul></ul>
  8. 8. Economy <ul><li>GDP - $1.409 Trillion USD (2003) 6th </li></ul><ul><li>GDP (PPP) - $6.449 Trillion USD (2003) 2nd </li></ul><ul><li>GDP Real Growth Rate = 9.1% (2003) </li></ul><ul><li>GDP per Capita = $1,227 USD (2003) 113th </li></ul><ul><li>GDP per Capita (PPP) = $5,000 (2003) 91 st </li></ul><ul><li>Population below poverty line = 10% (2001) </li></ul><ul><li>Distribution of Household Consumption Income/Consumption </li></ul><ul><ul><li>Lowest 10% = 2.4% </li></ul></ul><ul><ul><li>Highest 10% = 30.4% (1998) </li></ul></ul>9.1% 8.0% 7.5% 8.0% 7.1% 7.8% 2003 2002 2001 2000 1999 1998
  9. 9. Economy <ul><li>GDP Composition by Sector (2003) </li></ul><ul><ul><li>Industry & Construction = 52.9% </li></ul></ul><ul><ul><li>Services = 32.3% </li></ul></ul><ul><ul><li>Agriculture = 14.8% </li></ul></ul><ul><li>Ave Rural income ≈ 1/3 of Urban areas </li></ul><ul><li>Currency = Renminbi (yuan) </li></ul><ul><li>Inflation on the rise due to high food prices </li></ul><ul><ul><li>CPI hit 5.3% in July & August 2004 after averaging 3.6% in the first half of 2004. Steepest rise in over 6 years. </li></ul></ul>1.2% -0.8% 0.7% 0.4% -1.4% -0.8% 2003 2002 2001 2000 1999 1998
  10. 10. Economy <ul><li>Gross Fixed Investment = 43.4% of GDP (2003) </li></ul><ul><li>Budget (2003) </li></ul><ul><ul><li>Revenues = $265.8 Billion USD </li></ul></ul><ul><ul><li>Expenditures = $300.2 Billion USD </li></ul></ul><ul><li>Government Deficit: (figures in Billions of RMB) </li></ul><ul><li>Budget Deficit ≈ 2.7% of GDP </li></ul><ul><li>Public Debt = 30.1% of GDP (2003) </li></ul><ul><li>Tax Revenues increased 20.3% in 2003 from 2002 </li></ul><ul><li>Foreign Reserves = $403.3 Billion (2003) - up 40% from 2002 </li></ul>319.8 315.0 251.7 249.1 174.4 92.2 2003 2002 2001 2000 1999 1998
  11. 11. Foreign Investment in China <ul><li>Despite the government’s efforts to cool the economy, FDI in China continues to rise </li></ul><ul><li>In 2004, the total number of contracts signed was up 15% </li></ul><ul><li>In 2004, the contracted amount of FDI rose 42.7% </li></ul><ul><li>Retail investment has increased </li></ul><ul><ul><li>Wal-mart </li></ul></ul><ul><ul><li>7-Eleven </li></ul></ul><ul><li>Financial Institutions – HSBC Holdings </li></ul>
  12. 12. Foreign Investment in China <ul><li>Government is trying to spur investment in northeastern & western China </li></ul><ul><li>Intel Corp. announced a $375 million chip testing & packaging facility in Chengdu </li></ul><ul><li>Other major investors in Western China include: </li></ul><ul><ul><li>Ford Motor Co. </li></ul></ul><ul><ul><li>Tenneco Automotive </li></ul></ul><ul><ul><li>Lear Corp. </li></ul></ul><ul><li>High Tech companies are also establishing operations in western China </li></ul>
  13. 13. 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 $10.84 Billion Hong Kong Amount Country of Origin
  14. 14. Trends and Issues to Watch <ul><li>Power Shortages continue </li></ul><ul><li>R&D Investment keeps rising </li></ul><ul><li>Rising costs of popular destinations </li></ul><ul><li>Trading & Distribution rights – New rules </li></ul><ul><li>Regulatory Developments </li></ul><ul><ul><li>Anti-Monopoly Law </li></ul></ul><ul><ul><li>Bankruptcy Law </li></ul></ul><ul><ul><li>Direct Selling Law </li></ul></ul>
  15. 15. International Trade <ul><li>China’s Trade with the World ($ Billion) </li></ul>% 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
  16. 16. ** Figures in ($ Billions)
  17. 17. International Trade - Exports <ul><li>Exports = $438.4 Billion f.o.b. (2003) </li></ul><ul><li>Export Commodities </li></ul><ul><ul><li>Machinery & Equipment, Textiles & Clothing, Footwear, Toys, Sporting Goods, Mineral Fuels, etc. </li></ul></ul><ul><li>Top Export Partners (2003): </li></ul><ul><ul><li>U.S. = 21.1% </li></ul></ul><ul><ul><li>Hong Kong = 17.4% </li></ul></ul><ul><ul><li>Japan = 13.6% </li></ul></ul><ul><ul><li>South Korea = 4.6% </li></ul></ul><ul><ul><li>Germany = 4% </li></ul></ul>
  18. 18. China’s Top Exports (2003) ** Figures in ($ 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
  19. 19. <ul><li>China maintains export bans and restrictive licensing procedures on certain items. </li></ul><ul><li>Prohibited Exports: </li></ul><ul><ul><li>Musk, Copper, Platinum, Specified Chemical Compounds, and products whose export is banned under international treaties. </li></ul></ul><ul><li>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. </li></ul><ul><li>Foreign-invested companies are restricted to exporting only products that they manufacture. </li></ul>Export Regulations: Chinese Export Controls
  20. 20. <ul><li>Imports = $412.8 Billion f.o.b. (2003) </li></ul><ul><li>Import Commodities </li></ul><ul><ul><li>Machinery & Equipment, Mineral Fuels, Plastics, Iron & Steel, Chemicals </li></ul></ul><ul><li>Top Import Partners (2003) </li></ul><ul><ul><li>Japan = 18% </li></ul></ul><ul><ul><li>Taiwan = 11.9% </li></ul></ul><ul><ul><li>South Korea = 10.4% </li></ul></ul><ul><ul><li>U.S. = 8.2% </li></ul></ul><ul><ul><li>Germany = 5.9% </li></ul></ul>International Trade – Imports
  21. 21. China’s Top Imports (2003) ** Figures in ($ 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
  22. 22. Import Regulations: Chinese Import Controls <ul><li>The following items are prohibited from entering China: </li></ul><ul><ul><li>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 </li></ul></ul><ul><li>In addition rules went into effect in 1999 that further restrict or prohibit importation of certain commodities related to the processing trade. </li></ul>
  23. 23. International Trade <ul><li>China posted a trade deficit for the first time in over a decade in 2004 </li></ul><ul><li>Overall trade grew roughly 39% in the first half of 2004 – same as in first half of 2003 </li></ul><ul><li>US-China Trade expanded the largest margin the past decade </li></ul><ul><ul><li>Mostly due to jump in exports to U.S. </li></ul></ul><ul><ul><li>Grew a record 36% </li></ul></ul><ul><li>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! </li></ul>
  24. 24. China’s Competitive Advantage <ul><li>Labor-rich country </li></ul><ul><ul><li>Low-skilled, Labor-intensive goods </li></ul></ul><ul><ul><li>Manufacturing (Low-Tech) </li></ul></ul><ul><li>Capital-poor country </li></ul><ul><ul><li>FDI </li></ul></ul>
  25. 25. Trade Barriers <ul><li>While China has an increasingly open and competitive economy, substantial barriers have yet to be dismantled! </li></ul>
  26. 26. <ul><li>Tariffs </li></ul><ul><li>Import Quotas </li></ul><ul><li>Tariff-Rate Quotas </li></ul><ul><li>Import Licensing </li></ul><ul><li>Export Licenses </li></ul><ul><li>Transparency </li></ul><ul><li>Legal Framework </li></ul><ul><li>Trading Rights </li></ul><ul><li>Distribution Rights </li></ul><ul><li>Import Substitution </li></ul><ul><li>Standards/Testing </li></ul><ul><li>Anti-Competitive Practices </li></ul><ul><li>Services Barriers </li></ul>
  27. 27. U.S.– China Trade <ul><li>In 2003, US/China Trade topped $190 Billion </li></ul><ul><ul><li>US Trade Deficit with China totaled $134 Billion </li></ul></ul><ul><li>U.S. exports to China are increasing </li></ul><ul><ul><li>US has benefited from China’s demand for raw materials </li></ul></ul><ul><ul><li>US Cotton exports to China increased over 500%! </li></ul></ul><ul><ul><li>US Soybean exports to China rose over 188%! </li></ul></ul><ul><li>US/China trade grew more than 30% in first half of 2004 </li></ul>
  28. 28. 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
  29. 29. <ul><li>U.S. Benefits </li></ul><ul><li>Firms ---  gain a large export market </li></ul><ul><li>Consumers ---  opportunity to purchase cheap imports from China </li></ul><ul><li>China Benefits </li></ul><ul><li>Obtain raw materials to convert into products for export </li></ul><ul><li>Obtain agricultural imports from U.S. </li></ul>U.S.– China Trade
  30. 30. THE END
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