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

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 China Presentation George ILIEV AUBG Published On Linkedin Presentation Transcript

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