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Debunking the myths of china
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  • Average output per citizen is just 17% of the US average.
  • Inset regional map of China
  • Apple’s growth in China share Sales in greater China accounted for about 20 percent of Apple's $39.2 billion quarterly revenue, a three-fold increase from a year earlier. The numbers showcased Apple's sky-rocketing growth in China, which made up just 4.5 percent of its revenue in fiscal 2010.
  • High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/2/d68614ec-e2be-11e0-897a-00144feabdc0.html#ixzz2CbCobpFmThe ultimate intention of Beijing Design Week is to reposition China, and particularly Beijing, as a place where ideas are created rather than appropriated. “As the well-worn saying goes, we want to replace the words ‘Made in China’ with ‘Designed in China’
  • AMC Wanda now biggest theatre owneer?
  • Oil: imported crude oil dependence: 1999: 19%... 2010: 55%
  • In less than 30 years China will halve the number of people in the 22-25 bracket… entering workforceLabor supply to remain abundant. China will continue to benefit from a low demographic dependency ratio and abundant labor supply through 2020. The deceleration in the growth of the working-age population is unlikely to stall China’s overall economic expansion.
  •  financial conditions have loosened significantly.Sequential growth of M1, M2, deposits and loans all registeredhigher readings in December than in November. In addition,the monetary easing was accompanied by a significantdrawdown in fiscal deposits during the month, reflecting acombination of fiscal expenditure increase and public-sectorretiree wage raise. We believe the policy move will likely boostthe growth momentum in domestic demand in 1Q2012.In December, Chinese banks ramped up new loan creationto Rmb640.5 bn(vs. November’s Rmb562.2 bn), beating ourforecast of Rmb600 bn and market consensus of Rmb575 bn.The full-year figure stood at Rmb7.47 trn, in line with PBOC’simplicit annual target of
  • The renminbi closed on Friday at 6.2672

Debunking the myths of china Presentation Transcript

  • 1. Mr. Tanweer; Head of Economics; Oundle School;@MoTanweer; M.T@cantab.net
  • 2. China’s growth miracle In 1978, 1/20th of U.S - now over ½ 2010: 19% of US world GDP The World’s Workshop growth Socialism with Chinese characteristics 2007-2011 – grown by more Xiaoping’s market than 40pc… oriented economic reforms WTO Great Leap Forward 2012: 7.5% target
  • 3. GDP/c Japan vs China GNI per capita: 91/184 HDI: 0.687 – 101/187 GBR: INSERT GRAPH OFAt PPP levels:below Ecuador Below Libya and CHINA’S GDP per capitaand just above Albania Iran levels… vs USA/UK/Japan/Brazil
  • 4. 1990s China vs the ‘modernChina’…
  • 5. Cluster agglomeration
  • 6. The ‘new China’… China is now a major exporter of higher-value added productsSource: US Comtrade, The Beijing Axis Analysis
  • 7. Shift towards higher-valueadd… ‘Magic Seven’ industries to become 15% of GDP by 2020 R&D expenditure to rise to 2.5% of GDP by 2015
  • 8. Designed in China… No longer purely importing sophisticated inputs and assembling them into consumer goods for the West Huawei 2008
  • 9. SWF…
  • 10. Broad generalisations… Complex, but not necessarily malign China in Africa is not a new phenomenon…
  • 11. Imported crude oilAfrica’s oil… dependence 1999: 19%... 2010: 55% 1/3 of Angola’s oil More than 2/3 of goes to China Africa’s exports to China consist of crude oil China relies on Angola for c.12% of its oil M But… 40% of Nigeria’s oil goes to USA
  • 12. China’s neo-colonialismSource: Mofcom (2011)
  • 13. China-Africa trade… Two-way process… This is a little over 5% of China’s global trade. U.S net importerfrom Africa of $60bn EU and US bilateral trade value -
  • 14. China’s motivation Oil-for-infrastructure China’s Exim Bank Preferential export buyer’s credits Export-secured finance Addis-Djibouti road forlandlocked Ethiopia access to
  • 15. rica’s exports. Political vs Commercial investments Poor CSR Alternatives 3% of Chinese outward 2007: Exim ? FDI Bank: Project 5% of Africa’s inward FDI environmental The US gives more official China and social finance to Africa than China complement impact s US/EU aid assessments of Agency restraint China’s land grab… Commercial agreements
  • 16. Win-win? Chad petroleum refinery DRC Hydropower station Over 30 schools, anti-malaria centres Agricultural demonstration centres
  • 17. Changing nature ofinvestment…Special Economic Cooperation Zones – 6 in Africa:Egypt, Ethiopia, Mauritius, Zam bia and Nigeria Chinalco + Rio Tinto – iron ore project Private investments: $300m syndicated loan – CCB, Citi, HSBC, Mizuho Sinopec+Technip – Ghana gas pipeline
  • 18. The largest migration inhistory Extensive vs Intensive growthCatch-up growth
  • 19. Lewis Turning Point? China will grow old, before it grows rich 1978: ‘One Child Policy’ TFR 1.5 vs 2.08; (Shanghai 0.6) Population set to peak in 2026 Shanghai 2020: >1/3 over 60
  • 20. Working age population vs activepopulation In recent years, economic growth has not been driven by working age population growth Productivity growth
  • 21. Human capital 12 million people p.a are newly added to the job market, outnumbering the population of Greece 6.3 mln college grads p.a Structural adjustment issue; not a labour constraint issue
  • 22. It is RULC’s that matter… Productivity improvements
  • 23. Urban-rural ratio still low…Re-allocation of labour Hukuo Overemployment in agriculture: 10%:40%
  • 24. Minimum wages rise… Target of min.wage 2011: Migrant minimum to be 40% of local wages rose 21% salaries by 2015 But: Wage growth is key to execute the blueprint of the 12th Five Year Plan rebalancing and sustainabilitySource: Roubini Group Economics 2006-10: Average minimum wage increase: 12.5% p.a
  • 25. The 2008 stimulus… And its cost… Infrastructure binge: High speed rail, roads, bridges, h Credit fuelled binge ousing, universities, towns Credit surged to 171% of $8 trillion since 2008 GDP by 2010
  • 26. China’s Investment bubble… Chanos – Dubai x 1000 2010: Capital stock per capita 7% of USA’s
  • 27. 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’
  • 28. Short term fixes… 1998;2004: $500bn writeoffDistressed debt Free market vs China
  • 29. China’s currencymanipulation Appreciated 25% in 7 years…
  • 30. Current account imbalances… China’s current acc surplus fallen to <2.8% of GDP 2011 ‘Fair value’ currency
  • 31. It’s all China’s fault…
  • 32. U.S bluster: Structural problems
  • 33. Global forex reserves Internationalisation of the yuan… 3x Japan’s Cross-border trade in RMB RMB denominated Jan 2012: bonds x3 in Yuan/Yen 2012 has direct trading Overall, the country trimmed 5 percent of itsholdings over the entire year of 2011.
  • 34. Myths… Currency Type ofmanipulator exports… … Labour constraint… China in Africa… Hidden debts…
  • 35. Mo Tanweer; Head of Economics; Oundle School;@MoTanweer; M.T@cantab.net