China Presentation George ILIEV AUBG Published On Linkedin

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George Iliev: China Biz/Econ Presentation at the American University in Sofia

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  • Source: http://barnabyisright.com/tag/housing-bubble/ (May 2010)
  • These huge reserves offend economic logic, since they mean poor countries, which should have abundant investment opportunities of their own, are lending cheaply to richer ones, mainly America. Such lending helped precipitate the financial crisis by pushing down America’s long-term interest rates. 
  • Source: World Population Prospects: The 2004 Revision (2005)http://www.prb.org/Articles/2006/ChinasConcernOverPopulationAgingandHealth.aspx
  • China's openness to trade (imports & exports divided by GDP) equals less than 60%, which makes the country almost three times more open to trade than the USA or Japan. Even in heavily-trading China, the value added by exports contributed only 12% to China's GDP in 2007.
  • http://www.economist.com/node/14363126
  • https://www.mckinseyquarterly.com/China/A_truer_picture_of_Chinas_export_machine_2676
  • Source: China Economic Review
  • G3 (TD-SCDMA)http://www.chinaanalysis.com/opinion/2010/09/china%E2%80%99s-technology-standard-strategy-more-than-a-standard-war/
  • China Presentation George ILIEV AUBG Published On Linkedin

    1. 1. China Business and Economy<br />George ILIEV<br />george.iliev@alumni.lse.ac.uk<br />American University in Bulgaria<br />Nov 28, 2010<br />
    2. 2. 1. China’s economy: GDP and growth<br />2. Exchange rate & forex reserves<br />3. Foreign trade<br />4. Investment flows & stock market<br />5. China’s relationship with the West<br />2<br />Contents<br />
    3. 3. 1) China Business Development Manager at VC network Merar<br />2) Three years of teaching Economy of China at Sofia University<br />3) Four years of editing Chinese and Japanese business news for publications on Dow Jones Factiva and Reuters Business Briefing<br />4) Author of a series of articles on the Chinese economy and business for Bulgaria's main business weekly Kapital<br />5) Six-month advertising internship in China<br />6) BA in Chinese Studies from Sofia University, 2002<br />7) MSc on China from the London School of Economics, 2008<br />8) One-year exchange at Anhui University in China, 2000-2001<br />9) One-semester at the Hong Kong University of Science and Technology(2009), part of an MBA at Emory University<br />3<br />My China Background<br />
    4. 4. 4<br />1. GDP and GDP growth<br />
    5. 5. 5<br />Source: The Economist<br />
    6. 6. Source: World Bank<br />
    7. 7. Nov 20, 2007<br />Privatisation & Globalisation. <br />WTO & China’s Trading Blocks<br />Flying Geese Model:International Division of Labour<br />
    8. 8. 8<br />Flying Geese Model within China<br />Source: The Economist<br />
    9. 9. <ul><li>1980-2005: China was a cost-cutting destination
    10. 10. 2008 Beijing Olympics showcased a high-tech China with growing R&D spending
    11. 11. Chinese tourists abroad buy more per head (since 2005) than any other nation
    12. 12. Large luxury goods market:
    13. 13. Audi now sells more cars in China </li></ul> (including Hong Kong) than in Germany<br /><ul><li>Sales to Chinese (at home and travelling) </li></ul> make up 18% of Louis Vuitton’s revenue<br />9<br />Moving up the value chain<br />Source: The Economist<br />
    14. 14. Growth below 7-8% poses social problems<br />Growth above 10% leads to overheating and formation of bubbles (in stocks, real estate, industrial capacity, infrastructure)<br />10<br />China’s breakneck growth<br />Source: The Economist<br />
    15. 15. 11<br />
    16. 16. 12<br />China Stock MarketRoller Coaster<br />
    17. 17. 2. Forex Reserves & Exchange Rate<br />13<br />
    18. 18. Accumulation of <br />reserves in Asia &<br />easy credit<br />precipitated 2007/8<br />financial crisis<br />14<br />China Forex Reserves<br />Source: The Economist<br />
    19. 19. <ul><li>Nominal (to the</li></ul>US dollar): 24% up<br /><ul><li>Real (including</li></ul>labor costs): another 21% up<br /><ul><li>Labor shortages</li></ul>since 2004<br /><ul><li>Japan in 1960/70s as comparison </li></ul>15<br />China’s exchange rate since 2005<br />Source: The Economist<br />
    20. 20. 16<br />China wages<br /><ul><li>Migrant labor is driven by a four-stroke engine
    21. 21. The option of going to the countryside means there are no ghettos in China</li></ul>Source: The Economist<br />
    22. 22. 17<br />China’s high savings rate<br />Source: IMF<br />
    23. 23. 18<br />China demography<br />2050<br />2000<br />Source: prb.org<br />
    24. 24. 19<br />3. China exports & imports<br />
    25. 25.
    26. 26. Transformation from public ownership (blue) to private ownership (purple) <br />late 1970s mid-1980s early 1990s 2009 <br />
    27. 27. Source: 中国统计年鉴<br />
    28. 28. Discrepancy between Chinese and foreign trade surplus statistics results from:<br />1. Re-exports via <br />Hong Kong <br />not counted<br />2. Exports at FOB, <br />Imports at CIF<br />3. Disguised capital<br />inflows<br />23<br />China’s trade surplus conundrum<br />Source: The Economist<br />
    29. 29. Source: 中国统计年鉴<br />
    30. 30. 25<br />Domestic Value Added Exports<br />Source: McKinsey Quarterly<br />
    31. 31. <ul><li>G20 excluding</li></ul>USA is in trade<br />balance with<br />China<br /><ul><li>Vast exports to</li></ul>China (machines,<br />raw materials)<br />26<br />China’s role as importer<br />Source: The Economist<br />
    32. 32. 27<br />4. Investment flows & stock market<br />
    33. 33. FDI in China (scale up to $100 B.)<br />Note: Figures from 2006 onward include investment in capital markets & financial institutions.<br />Source: 中國統計年鑑<br />
    34. 34. In some years China is the biggest FDI destination in <br /> the world<br />IPOs of Chinese companies in Hong Kong, London, <br /> New York, Singapore<br />Foreign investments in China<br />29<br />Source: The Economist<br />
    35. 35. Source: 中国证券期货统计年<br />
    36. 36. Combined: second biggest in the world (A+H shares): USD 3.3 trillion market cap at end-2009<br />Mainland China only: <br />third largest market cap<br />ninth highest free float<br />second highest daily trading volume (churn)<br />A shares & H shares: arbitrage opportunities<br />31<br />China and Hong Kong stock markets<br />
    37. 37. Hong Kong Stock Exchange<br />32<br />156 H-share companies & 97 red chip companies listed in Hong Kong as of June 2010<br />
    38. 38. China ranked the world's fifth largest outbound direct investor in 2009, up from 12th place in 2008<br />China’s FDI abroad was $56.5 billion in 2009<br />China Investment Corporation (sovereign wealth fund), created in 2007 with $200 billion of China’s forex reserves. (Now $300 billion)<br />Provincial sovereign wealth funds, like Guangdong Rising Asset Management, have also been launched<br />33<br />Chinese investments abroad<br />
    39. 39. 34<br />Source: <br />The Economist,<br />Nov 11, 2010<br />
    40. 40. 35<br />Source: <br />The Economist,<br />Nov 11, 2010<br />
    41. 41. 1. To reduce inflationary pressure and RMB revaluation (appreciation) pressure<br />2. To make use of the USD in its currency reserve while the dollar is still valuable<br />3. To buy up assets before other emerging powers like India and Brazil have started buying<br />36<br />Reasons for China’s shopping spree<br />
    42. 42. Resources: oil, metals, agricultural products (Rio Tinto; assets in Australia, Canada, Kazakhstan, Africa)<br />Financial investments (Blackstone, Morgan Stanley, Fortis, Standard Bank, Barclays, Rothschild, AIA)<br />Technology & telecoms (Volvo, Hummer, Saab, Rover)<br />37<br />What China invests in<br />
    43. 43. well-known Chinese brands<br />
    44. 44. Chinese investments abroad are getting rebuffed:<br />CNOOC’s 2005 blocked offer for U.S. Unocal<br />Failed acquisitions in Australia, Canada<br />Foreign investments in China are getting rebuffed: <br />Coca Cola’s $2.4 bn bid for juice company Huiyuan<br /> Carlyle’s bid for Xugong Construction Machinery<br /><ul><li>Yet, some (timely) Chinese investments have been welcomed: CIC owns 10% in Morgan Stanley</li></ul>39<br />Investment hurdles<br />
    45. 45. China no longer takes its cues from the West (nor from Russia)<br />WTO member since 2001 (though lacking market economy status till 2016)<br />$2.6 trillion of forex reserves (mostly treasuries)<br />Huge government purchases in friendly countries<br />Own technological standards (3G, RFID); R&D in GMOs, nuclear fusion<br />Only a US/EU weapons embargo remains (since 1989)<br />40<br />5. China’s relationship with West<br />
    46. 46. 41<br />Yin & Yang<br />
    47. 47. Thank yougeorge.iliev@alumni.lse.ac.uk<br />

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