CAMBRIDGE UNIVERSITY, 2012         Mo Tanweer; Head of Economics; Oundle School;         Mohammed.Tanweer@cantab.net
Content China‟s position in the world The state of the Chinese economy 2008 Stimulus and its legacy 2012 – what now?
China driving the worldeconomy…
Contribution to 2012 world   growthSources: IMF, The Economist
China exports to EU/USSources: China Equity Strategy, DB
Bilateral trade relationship…                            U.S merchandise                            exports to China  100 ...
Chinese steel consumption is greaterthan US+EU+Japan+India combined              1980 – 5%; 2008 – 40%Mln tonnes
Already a large commodityconsumer                      Consumes half of the world‟s                          cement produc...
GDP/c Japan vs China                            HDI <      Lower     GNI/c <   Libya/Iran      middle   Botswana     incom...
China‟s growth miracle                      The World‟s Workshop                                 Socialism with           ...
Quarterly growth rates…    Average 9.5 % GDP growth rate annually since                       1978             600+ millio...
Overtaking them all…           “Since 2001, China‟s GDP has risen fourfold…          Economically speaking, China has crea...
Growth splutters…?                     2012 target: 7.5%
Consumption has underperformed as a                                       driver                           Export-led grow...
China‟s 2008 StimulusPackage (4 trillion yuan) fiscal stimulus    $586 bn                        Fixed investment growth a...
Infrastructure boom Easy money        Large pool of domestic savings;
2008-09: A new era and a new pace of infrastructure development…35 airports in one year   In 2010, 175 airports
Infrastructure boom             $228bn – 2011-2015 in aviation
High speed rail links…
Sustainability…                             2011: 70 new railways    Debts and ticket sales     2012: 9 new ones
Build it… but will they come?
= Over-investment…?               Chanos – Dubai x 1000            2010: Capital stock per              capita 7% of USA‟s
„Go West‟ programmes      West is an important growth              opportunity
The cost of 2008 stimulus…                  Credit fuelled binge                       $8 trillion since 2008Credit surged...
Local  Hidden debts                         govts          Shadow              RMB                                     ban...
Short term fixes…                1998;2004:              $500bn writeoff      2011-12Distressed   debt                    ...
Real estate…1998 housing   stock privatised       Land sales - $500 bn                    in 2010; x2 2009   1998-2011: In...
2005-09:Affordability                       Average house           14                        price tripled          12Tie...
A market of two halves…                                        140m urban homes; 85m                                      ...
% of cities where housing prices   are down month on month                 Average price p.s.m                 halved sinc...
Adversefeedback  loops
Fiscal stimulus 2.0?                       Healthcare; publicLeadership             goods; pensions; transition           ...
Please, sir, I want somemore…
Can China Save the World?              2012: A new growth                     model Political                           Fi...
CAMBRIDGE UNIVERSITY, 2012         Mo Tanweer; Head of Economics; Oundle School;         Mohammed.Tanweer@cantab.net
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Can China save world economic growth as it did in 2008?

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  • China has become the fastest growing market for European exports In 2011 our exports to China increased by 20.3% to reach a record €136.2 billion. The EU is also China’s biggest export destination with goods and services amounting 
  • Can china save the world 2012 cambridge upload

    1. 1. CAMBRIDGE UNIVERSITY, 2012 Mo Tanweer; Head of Economics; Oundle School; Mohammed.Tanweer@cantab.net
    2. 2. Content China‟s position in the world The state of the Chinese economy 2008 Stimulus and its legacy 2012 – what now?
    3. 3. China driving the worldeconomy…
    4. 4. Contribution to 2012 world growthSources: IMF, The Economist
    5. 5. China exports to EU/USSources: China Equity Strategy, DB
    6. 6. Bilateral trade relationship… U.S merchandise exports to China 100 have rocketed3rd China is U.S‟ in largest X market recent yearsEUR bn 8.9% of EU exports to 50 China 0 „07 „08 „09 „10 „11
    7. 7. Chinese steel consumption is greaterthan US+EU+Japan+India combined 1980 – 5%; 2008 – 40%Mln tonnes
    8. 8. Already a large commodityconsumer Consumes half of the world‟s cement production World‟s largest consumer of cotton World‟s second largest consumer of sugar World‟s second largest consumer of wheat
    9. 9. GDP/c Japan vs China HDI < Lower GNI/c < Libya/Iran middle Botswana income: WB GBR: INSERT GRAPH OF CHINA’S GDP per capita levels… vs USA/UK/Japan/Brazil
    10. 10. China‟s growth miracle The World‟s Workshop Socialism with Chinese characteristics Xiaoping‟s market oriented economic reforms WTO Great Leap Forward
    11. 11. Quarterly growth rates… Average 9.5 % GDP growth rate annually since 1978 600+ million out of poverty…
    12. 12. Overtaking them all… “Since 2001, China‟s GDP has risen fourfold… Economically speaking, China has created three new Chinas in the past decade” Jim O’Neill
    13. 13. Growth splutters…? 2012 target: 7.5%
    14. 14. Consumption has underperformed as a driver Export-led growth has been important too Economy is too reliant on investment as a driver “China has made remarkable Re-balancing required achievements…. But there is a lack of adequate balance, coordination orsustainability in our development” (Premier
    15. 15. China‟s 2008 StimulusPackage (4 trillion yuan) fiscal stimulus $586 bn Fixed investment growth accounted for over 90% of the growth in the Chinese economy in first 9 months of 2009
    16. 16. Infrastructure boom Easy money Large pool of domestic savings;
    17. 17. 2008-09: A new era and a new pace of infrastructure development…35 airports in one year In 2010, 175 airports
    18. 18. Infrastructure boom $228bn – 2011-2015 in aviation
    19. 19. High speed rail links…
    20. 20. Sustainability… 2011: 70 new railways Debts and ticket sales 2012: 9 new ones
    21. 21. Build it… but will they come?
    22. 22. = Over-investment…? Chanos – Dubai x 1000 2010: Capital stock per capita 7% of USA‟s
    23. 23. „Go West‟ programmes West is an important growth opportunity
    24. 24. The cost of 2008 stimulus… Credit fuelled binge $8 trillion since 2008Credit surged to 171% of GDP by 2010
    25. 25. Local Hidden debts govts Shadow RMB banking 10.7trn China‟s Govt Debt Breakdown Debt Item Amount (RMB) % of GDPPBC issued govt 3.8 trillion 10 bills China 5.0 trillion 13 Development Bank debt MoR network 1.5 trillion 4 financeLocal Govt Debt 10.7 trillion 27Bank system debt 3.4 trillion 9 Total 24.4 trillion 63Source: Dragonomics NPL‟s: 1.14% LGFV‟
    26. 26. Short term fixes… 1998;2004: $500bn writeoff 2011-12Distressed debt 1999: Bad debt Free market vs China Financial repression
    27. 27. Real estate…1998 housing stock privatised Land sales - $500 bn in 2010; x2 2009 1998-2011: Investment in housing grown at Real estate: 26%p.a 13% of GDP
    28. 28. 2005-09:Affordability Average house 14 price tripled 12Tier 1 cities 10Tier 2 cities 8 6Tier 3 cities 4 2 0 „06 „07 „08 „09 „10Source: UBS, Barclays Capital, FT
    29. 29. A market of two halves… 140m urban homes; 85m short of # of urban households Beijing 7.4 17.3 4.6 2001 2006 Social housing vs 2011Source: Barclays Capital, FT Luxury apartments – migrant needs vs speculators
    30. 30. % of cities where housing prices are down month on month Average price p.s.m halved since 2009 peak Govt policiesSource: SocGen Chinese vs American housing market
    31. 31. Adversefeedback loops
    32. 32. Fiscal stimulus 2.0? Healthcare; publicLeadership goods; pensions; transition housing; poverty Budget stimulus; not banking stimulus 2008 vs 2012 fiscalFiscal targets 2012… stimulus
    33. 33. Please, sir, I want somemore…
    34. 34. Can China Save the World? 2012: A new growth model Political Fiscal stability Growth is stimulus 2.0 only source Rebalancing of legitimacy Inequality Pragmatic Social unrest Socialism with capitalist characteristics?
    35. 35. CAMBRIDGE UNIVERSITY, 2012 Mo Tanweer; Head of Economics; Oundle School; Mohammed.Tanweer@cantab.net

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