The Beijing Axis has just released The China Compass - August 2012, a publication that: combines basic country data of China, as well as other major world economies, with more detailed analysis of a wide range of macroeconomic and social data; presents a comprehensive picture of the ever-changing and evolving Chinese landscape; contains up-to-date statistics, topical themes and insights; and is presented in a reader-friendly format as a useful desk reference for executives with a China agenda. Available for download now from The Beijing Axis website.
1. The China Compass – August 2012
Figures, Forecast and Analysis
China-focused
International Advisory and Procurement www.thebeijingaxis.com
2. Disclaimer
This document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of this
document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein.
Opinions, projections and estimates are subject to change without notice. This document is for information purposes only,
and solely for private circulation. The information contained here has been compiled from sources believed to be reliable.
While every effort has been made to ensure that the information is correct and that the views are accurate, The Beijing
Axis cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not
constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment
strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments
discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance;
the value, price or income from investments may fall as well as rise. The Beijing Axis, and/or a connected company may
have a position in any of the investments mentioned in this document. All concerned are advised to form their own
independent judgement with respect to any matter contained in this document.
The Beijing Axis 1
3.
4.
5. Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 4
The Beijing Axis
6. Foreword
In the same manner that a compass highlights the cardinal points of north, south, east, and west, The China Compass is intended to serve
as a navigational instrument for determining China’s position and direction in the context of the world’s economic landscape. The growth of
China’s economy is without precedent and its rise has been a unique and complex experience – requiring the adoption of a customised
and dedicated planning approach. Access to reliable information and channels of strategic knowledge are not always easy to come by and
are, more often than not, the product of a long-term investment in research, analysis and strategic thinking. It is against this background
that this publication aims to make a modest contribution as a desk reference.
At present, the developed world has been unable to escape from a self-induced sovereign debt crisis, which has fuelled speculation as to
whether China’s economy is headed for a ‘soft’ or ‘hard’ landing. While China's GDP growth has subsequently slowed to 9.2% in 2011 and
7.8% y-o-y in H1 2012, fears of ‘hard’ landing seem overblown. Even growth of 7.6% in the second quarter fits with our core view that
China’s annual growth rate for 2012 is still expected to be around 8%. As China attempts to rebalance its economy towards a more
sustainable growth pattern that puts a greater emphasis on domestic consumption and shelter the economy from the global slowdown, we
expect many cyclical and structural changes and volatility. However, we still do not foresee a hard landing.
In this August 2012 edition, we provide the latest macroeconomic data available for a wide range of indicators, for China as well as for
other major world economies, and include a new section titled ‘What’s New: China Moves Towards Growth Moderation and Sustainability’.
We trust that this edition will be useful for those that are in the midst of planning, and that it will shed light on past developments and future
prospects of a uniquely Chinese story of human development.
As always, we welcome all feedback.
Kobus van der Wath
Founder & Group Managing Director, The Beijing Axis
kobus@thebeijingaxis.com
The Beijing Axis 5
7. Snapshot of key economic indicators for the second quarter
Selected Q2 2012 Economic Indicators
Economic Indicator Y-o-Y Growth Q-o-Q Growth
GDP 7.6% 1.8%
Exports 10.5% 22.0%
Imports 6.4% 6.2%
Retail Sales 13.3% -0.8%
CPI* 3.3% N/A
PPI* -0.6% N/A
Monthly Loans 24.4% -2.6%
Urban Fixed Asset Investment 20.8% 114.9%
*Note: CPI and PPI growth are based on H1 figures
Source: The Beijing Axis Analysis The Beijing Axis 6
8. With a GDP of USD 7.3 tn, China now accounts for more than one-tenth of
the world economy
USD 70 tn USD 70 tn USD 25 tn USD 7.3 tn USD 7.3 tn USD 7.3 tn USD 7.3 tn USD 7.3 tn
100% Northwest
Other China
90% Developing Southwest Tertiary
Others Countries China
80% Others Industry
Developed South
70% Gross Capital
Canada Countries China Formation
60% Russia Hunan
Italy
UK Shanghai
50% Brazil Sichuan
France Developing Asia Liaoning
Germany (excl. China) China Hebei Final Consumption
40% Secondary
Japan Henan Eastern Expenditure
Developing Industry
30% Zhejiang China (Household +
Countries (excl. Government)
China
China) Shandong Northeast
20%
Jiangsu China
10% China Primary
Net Exports
US China Guangdong North China Industry
0%
-10%
World GDP World GDP Developing China GDP China GDP China GDP China GDP China GDP
2011 2011 Countries GDP 2011 2011 2011 2011 2011
2011
Source: IMF; UNCTAD Statistics; China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 7
9. Emerging economies are outperforming the developed world in terms of
economic growth. The Asia-Pacific region is expected to account for one-
third of world GDP by 2015
Regional GDP Comparison (2015F)
GDP Average Growth Rate (%, 2011-2015F) A bubble this size represents
10 Asia-Pacific is expected to account GDP = USD 1,000 bn
for the largest share of world GDP Asia-Pacific
(34%) by 2015F
Shaded bubbles represent 2011E
figures 25,807
Rising real incomes and Other Asia
high commodity prices will
continue to drive growth Forecast
4,486 Developed economies world average
2,259 are expected to 2011 to 2015F GDP growth
continue to lose share until 2015F:
5 Africa
4,280 South America in world GDP in the 3.95%
coming years
BRICS 2015F GDP(USD bn) 2011 Growth Rate (%) 2011 GDP Per Capita (USD)
China 10,904 9.2% 5,414 North America
India 2,359 7.4% 1,389 19,634
Russia 1,926 4.1% 12,993
Brazil 2,547 2.9% 12,789 20,337
Europe
South Africa 426 3.1% 8,066 2011 to 2015F % of World GDP (2015F)
0
0% 5% 10% 15% 20% 25% 30% 35% 40%
Note: Other Asia includes Bangladesh, Sri Lanka, Nepal, Pakistan, Bhutan, Burma, North Korea, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan.
Source: IMF; The Beijing Axis Analysis The Beijing Axis 8
10. As Asia’s largest and fastest-growing economy, China plays a crucial role in
the region’s ongoing transformation
GDP Comparison of Asia-Pacific Economies (USD bn, 2011)
A bubble this size represents
GDP Growth Rate (%, 2011)
GDP = USD 1,000 bn
15
China is the largest and
fastest growing economy
in the region
China
10
7,298 SE economies are
India collectively the third-
largest in the region
1,676 Indonesia
846 Malaysia World average
123 Hong Kong
Singapore GDP growth for
5 Vietnam
279 Taiwan 243 260 2011: 3.9%
213 4671,116 S. Korea
Though large, Japan is a
Philippines Australia
slow growing economy
New Zealand 1,488
Thailand 162 Japan
0 346 GDP Per Capita (2011)
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
Note: The regional breakdown accords to UNCTAD. Regional breakdown numbers will not add to the total due to overlap
Source: IMF; The Beijing Axis Analysis The Beijing Axis 9
11. Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 10
The Beijing Axis 10
12. Backdrop
• With the on-set of the global financial crisis and a booming commodity market, developing regions in Asia, Africa and Latin America
continue to perform above the world average, while developed nations will remain a drag on global growth
• With regard to China, the country was able to remain buoyant during the global financial crisis in 2008-09 due to its large monetary
and fiscal stimulus
• But it came at a price – runaway bank lending, increased local government debt, an overheating property sector and mounting
bottlenecks and price pressures
• In late 2011, the Chinese government began taking measures to slow the domestic economy sufficiently, but not to over-tighten
policy and risk a destabilising hard landing. By early 2012, policy had tilted to become expansionary, especially in light of the weak
global backdrop
• With growth rates above 10% no longer an option, 2011 overall GDP growth stood at 9.2%. In Q1 2012, this had fallen to 8.1% and
to 7.6% in Q2 2012
• However, we anticipate a slight rebound in H2 2012 for a full year GDP growth rate of close to 8%
• Finally, China’s latest Five-Year Plan sets out a path in which the economy will be driven by domestic consumption, marking a large
shift from an export-driven model. This, along with a once-in-a-decade leadership transition set to begin in late-2012, means that
China is facing possibly its toughest policy challenge ‘ever’ in the next 5-10 years
Source: The Beijing Axis Analysis The Beijing Axis 11
13. China’s economy is heading for a soft landing, with the long-term trend
leaning towards more moderate and more sustainable growth
China’s Quarterly Y-o-Y GDP Growth Rate (%, 2009- Contribution to China’s GDP (%, 1998-2012F)
2012F)
15% 140
Net Exports of Goods and Services
Gross Capital Formation
120
Final Consumption Expenditure (Household + Government)
3-year (2009-2011) Policy easing to
provide room for 100
average: 9.4% Gross capital formation remains
growth moderation
10% 80 the largest contributor
60 Effect from stimulus
package
40
Government stimulus 2012F y-o-y GDP:
5% package (USD 586 bn) 8.0% 20
0
2011 y-o-y GDP: Falling net exports
9.2% -20 contribution
0% -40
Q1 Q1 Q1 Q1 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F
2009 2010 2011 2012F
Source: CNBS; World Bank; IMF; The Beijing Axis Analysis The Beijing Axis 12
14. In 2011, China registered its smallest trade surplus since 2005 as import growth
outpaced export growth. Weakened overseas demand is putting pressure on
China to expedite its move away from an export-oriented growth model
China’s Monthly Exports & Imports (USD bn, 2010- China’s Monthly Trade Balance (USD bn, 2010-
June 2012) June 2012)
180 40
Exports Imports
140
30
100
20
60
10
20
0
20
-10
60
-20
100
-30
140
180 -40
J FMAM J J A SOND J FMAM J J A SOND J FMAM J J F MAM J J A S ON D J F MAM J J A S ON D J F MAM J
2010 2011 2012 2010 2011 2012
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 13
15. Chinese consumers have remained optimistic thus far in 2012, largely due
to easing inflationary pressures as well as brighter income prospects
China’s Consumer Confidence Index (%, 2010-May 2012)
120
Although consumer confidence
decreased, it was still among the
115 highest in the world
110 107.9 108.0 107.8 107.6
104.7 105.8 105.6
105 108.9 107.3104.4 102.9 108.1 103.4 103.9 104.2
106.6 106.6
104.2 99.9 105 105 100
103.8 103
100 97 100.5
100.4 99.6 100.5
95 When CCI is over the 100 mark, it
indicates that consumers are optimistic
90
85
80
Aug-10
Sep-10
Aug-11
Sep-11
Feb-10
Mar-10
Apr-10
May-10
Feb-11
Mar-11
Apr-11
May-11
Feb-12
Mar-12
Apr-12
May-12
Oct-10
Nov-10
Dec-10
Oct-11
Nov-11
Dec-11
Jan-10
Jun-10
Jul-10
Jan-11
Jun-11
Jul-11
Jan-12
Note: In China, the consumer confidence index measures the level of optimism that consumers have about the performance of the economy.
Source: CEIC Data; Eastmoney; The Beijing Axis Analysis The Beijing Axis 14
16. Increased domestic consumption remains in line with the 12th Five-Year Plan.
The dramatic increase in retail sales over the past decade still falls short of
China’s goal of making domestic consumption a key pillar of the economy
China’s Annual Retail Sales (USD bn, 1979-2012F) China’s Monthly Retail Sales (USD bn, 2006-June
2012)
3,200 Annual retail sales 300 279
reached USD 2,851 Seasonal peaks
bn in 2011 due to Chinese
2,800 250 New Year holiday
2,400
200
2,000
1,600 150
1,200
100
800
50
400
0 0
79 83 87 91 95 99 03 07 11 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: China Statistical Yearbook; China Monthly Economic Indicators; National Bureau Statistics of China; The Beijing Axis Analysis The Beijing Axis 15
17. Housing prices in China’s major cities have steadily fallen since Q2 2010.
The latest readings indicate China’s residential housing market is bottoming
out as policymakers move to ease purchase restrictions
Sales Price of Residential Buildings in Selected Sales Price of Residential Buildings in Selected
Cities (%Y-o-Y, 2010-June 2012) Cities (%M-o-M, 2010-June 2012)
120 Beijing Shanghai 105 Beijing Shanghai
Guangzhou Tianjin Guangzhou Tianjin
Chongqing Shenzhen Chongqing Shenzhen
115 103
110 101
105 99
100 97
95 95
J FMAM J J A SOND J FMAM J J A SOND J FMAM J J F MAM J J A S ON D J F MAM J J A S ON D J F MAM J
2010 2011 2012 2010 2011 2012
Source: National Bureau of Statistics of China; The Beijing Axis Analysis The Beijing Axis 16
18. CPI fell to a two-and-a-half year low of 2.2% in June 2012. Policymakers now
have more room to bolster economic growth amidst a global economic slowdown
Consumer Price Index (2010-June 2012)
General Rural Urban
108
104 is the designated inflation target
Room for
set by the Chinese government
policy easing
104 China’s CPI averaged
105.4 in 2011
100
96
92
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2010 2011 2012
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 17
19. However, with inflation forecast to continue falling, there are now real
concerns that deflation will emerge as a new problem. Food prices, which
constitute roughly a third of CPI, is the main driver of slowing inflation
CPI Breakdown (2011-June 2012)
Food Tobacco, Liquor and Articles
120
Clothing Household Facilities, Articles and Services
Health Cares & Personal Articles Transportation & Communication
115 Recreation, Education, Culture Articles and Services Residence
A reduction in food prices has
been the main driver behind
110 slowing inflation
105
100
95
J F M A M J J A S O N D J F M A M J
2011 2012
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 18
20. China’s rapidly falling PPI indicates producer prices are easing not just
because of declining commodity and other input prices, but also due to
weak demand for Chinese goods in the global downturn
Producer Price Index (2010-June 2012)
110
PPI for 2011
was 106.0
105
Depressed overseas
market demand and
sluggish domestic
manufacturing activity
100
95
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2010 2011 2012
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 19
21. Falling producer prices have led to renewed calls from top policymakers to take
more aggressive action to support growth. However, there is great emphasis
on the need to ‘fine-tune’ such policies in order to prevent an overcorrection
PPI Breakdown by Industries (2011-June 2012)
Mining & Quarrying Industry Raw Materials Industry Manufacturing Industry
120 Food Clothing Articles for Daily Use
Durable Consumer Goods
115
110
105
100
95
J F M A M J J A S O N D J F M A M J
2011 2012
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 20
22. After bottoming out in late 2011, China’s manufacturing industry has remained
in expansionary territory. However, weak readings in recent months has
renewed calls for a more expansionary stance and a more liberal credit policy
China’s Purchasing Managers’ Index of the Manufacturing Industry (2010-June 2012)
PMI 2 Month Moving Average (PMI)
60
A reading above 50 reflects expansion;
below 50 reflects contraction
50
40
30
Nov-11
Dec-11
Nov-10
Dec-10
Feb-10
Apr-10
Feb-11
Apr-11
Feb-12
Apr-12
May-10
Oct-10
Oct-11
Mar-10
Mar-11
May-11
Mar-12
May-12
Jan-10
Jun-10
Jul-10
Aug-10
Sep-10
Jan-11
Jun-11
Jul-11
Aug-11
Sep-11
Jan-12
Jun-12
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 21
23. After bottoming out in January 2011, lending rates in China have steadily
increased as the government moves to counter a slowing economy
Monthly Bank Loans (USD bn, 2010-June 2012)
Monthly Loan Size Y-o-Y Growth Rate (rhs)
USD bn %
Fall in lending as demand
250 for credit eased in a
100
slowing economy 80
200 60
40
150
20
0
100
-20
50 -40
-60
0 -80
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2010 2011 2012
Source: China Monthly Economic Indicators; The Beijing Axis Analysis The Beijing Axis 22
24. After nearly two years of raising interest rates, the PBOC cut the cost of
borrowing in June 2012, signaling the government’s commitment
towards spurring growth
Benchmark Lending Rates (%, 1997-2012)
Longer than 5 years 3 years to 5 years (including 5 years)
12
1 year to 3 years (including 3 years) 6 months to 1 year (including 1 year)
10 First loan interest rate
First loan interest rate
decrease in six years
decrease since global
financial crisis
8
6
4
10-Jun-99
19-Aug-06
21-Jul-07
22-Aug-07
15-Sep-07
16-Sep-08
9-Feb-11
23-Oct-97
6-Apr-11
25-Mar-98
7-Dec-98
21-Feb-02
29-Oct-04
18-Mar-07
19-May-07
30-Oct-08
20-Oct-10
1-Jul-98
28-Apr-06
9-Oct-08
27-Nov-08
23-Dec-08
26-Dec-10
7-Jul-11
5-Jul-12
7-Jun-12
21-Dec-07
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 23
25. The PBOC* has responded to a slowing economy by lowering the reserve
requirement ratio. The cut in November 2011 signalled a policy shift from
curbing inflation to boosting growth
Bank Deposit-Reserve Ratio (%, 1998-July 2012)
First cut in
20 Economic Inflationary two years
Economic slowdown pressures
overheating
15
10
5
0
21-Sep-03
15-Aug-06
15-Jan-07
15-Aug-07
25-Sep-07
25-Jan-08
25-Jun-08
15-Sep-08
13-Jan-10
14-Jan-11
14-Jun-11
25-Feb-07
15-Oct-08
25-Feb-10
2-May-10
18-Feb-11
18-Feb-12
25-Apr-04
5-Jul-06
16-Apr-07
5-Jun-07
25-Oct-07
21-Mar-98
21-Nov-99
15-Nov-06
15-May-07
26-Nov-07
25-Dec-07
25-Apr-08
7-Jun-08
25-Mar-08
20-May-08
26-Nov-08
10-Nov-10
19-Nov-10
10-Dec-10
17-Apr-11
18-Mar-11
12-May-11
30-Nov-11
12-May-12
Note: PBOC- People’s Bank of China is China’s central bank. The Bank Deposit-Reserve Ratio is a standard determined by a central bank. It governs the relationship between the amount of money that
banks must keep on hand and the amount that they can lend. By raising and lowering the ratio, the central bank can decrease or increase money supply
Source: BNET Business Dictionary; The Beijing Axis Analysis The Beijing Axis 24
26. China's first deposit rate cut since the global financial crisis in June 2012
underpins the country’s economic growth concerns
Deposit Interest Rates (% p.a., 1998-July 2012)
5 years 1 year 6 months 3 months
10
First cut since
8 global financial
crisis
6
4
2 Recent adjustments in 2012 to widen the range at
which banks can set deposit rates mark an
important step towards interest rate liberalisation
0
10-Jun-99
19-Aug-06
19-Aug-06
21-Jul-07
22-Aug-07
15-Sep-07
9-Feb-11
25-Mar-98
7-Dec-98
21-Feb-02
29-Oct-04
18-Mar-07
19-May-07
30-Oct-08
20-Oct-10
6-Apr-11
1-Jul-98
21-Dec-07
9-Oct-08
27-Nov-08
23-Dec-08
26-Dec-10
7-Jul-11
7-Jun-12
5-Jul-12
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 25
27. The PBOC has set an M2 growth target of 14% for 2012 in order to prevent
contraction in an economy as market liquidity remains tight
Money Supply (USD tn, 2010-June 2012)
M2 M1 M0
16
14
12
10
8
6
4
2
0
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2010 2011 2012
Source: China Monthly Economic Indicators; People’s Bank of China; The Beijing Axis Analysis The Beijing Axis 26
28. The NDRC* has quickened the appraisal of major infrastructure projects in
response to a slowing economy. Thus far, it has rejected calls for a massive
investment stimulus package similar to the 2008 stimulus program
Fixed Asset Investment (USD bn, 1997-2012F)
Fixed Asset Investment Growth Rate
5,000 50%
40%
4,000
Global financial
crisis induced 30%
3,000 stimulus
20%
2,000
10%
1,000
0%
0 -10%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
*Note: National Development and Reform Commission - China’s top economic planning agency
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 27
29. Stressing quality and efficiency to keep local debt levels in check, the central
government is promoting reasonable investment growth in urban infrastructure
projects such as airports, railways and affordable housing
Monthly Urban Fixed Asset Investment (USD bn, 2010-June 2012)
Urban Fixed Asset Investment 2 Month Moving Average (PMI)
700 Investments gaining strength
from favourable policies
600
500
400
300
200
100
0
J-F M A M J J A S O N D J-F M A M J J A S O N D J-F M A M J
2010 2011 2012
Source: China Monthly Economic Indicators; National Bureau of Statistics of China; The Beijing Axis Analysis The Beijing Axis 28
30. Looking ahead: short, medium and long term
• For 2012, we anticipate slower growth of around 8.0%. We view such a sub-9% slowdown as essential for the future
structural integrity and sustainability of China’s economic success
• For 2015, and beyond: As the picture for the global environment becomes clearer, China will continue to grapple
with the challenge of having to meet its pressing social and developmental objectives while growing at a rate of
GDP growth of ‘only’ around 8.0% through 2015, well below the 9.2%-14.2% GDP growth rate seen in the past five
years
• Despite these difficult challenges, China’s broad transformation is expected to continue and will present an
environment that is characterised by a long term and sustained shift towards a middle-income economy. This trend
appears firmly entrenched, representing a profoundly different new global landscape
• This will see a further increase in China’s share of global GDP, having risen from 6.5% of world output in 2006 to a
resource hungry 10.4% in 2011
• Looking ahead it looks inevitable that China will become a USD 10 tn economy, making up 15% of global output
within five years
Source: The Beijing Axis Analysis The Beijing Axis 29
31. China faces a number of important risks on the domestic front. Similarly, the
world faces a set of variables and risks as China’s rise unfolds
Internal
• Handover to the fifth Short-term External
generation of leaders in Bubble size: Probability of occurrence
late 2012 is crucial as it
sets the tone for policy • Commodity producers are the
Degrees of China
and political reform during most exposed to a slowdown
Politics and power dependency
the years ahead in China
transition
• Unclear whether banks or Property • Local governments are
local governments can Domestic bubble pushing for a rollback of
bear burden of NPLs if government property market curbs to prop
economy were to slow finances (debt)
up their economies
sharply Low Risk High Risk
FX risk EU debt • Worsening of euro zone debt
• RMB must be closely crisis
crisis threatening to further
watched as a more dampen overseas demand for
volatile period could lie Ageing population Chinese goods
ahead and social safety
Social net
• Social unrest - wealth gap cohesion
• Shrinking labour pool unable
continues to widen, to shoulder social costs of
potentially undermining rapidly ageing population
social stability Long-term
Source: IMF; The Beijing Axis Analysis The Beijing Axis 30
32. Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 31
The Beijing Axis 31
33. According to the latest forecasts from the IMF, China’s annual GDP growth
rate will reach 8.0% in 2012, the lowest in a decade, due to ‘weak’ growth
prospects for the global economy
China Nominal GDP Growth Rate (% y-o-y, 1978-2012F)
16
Past periods of
overheating Overheating
concerns
7-10% GDP Soft landing amid
12 growth band global uncertainties
7-8% GDP
growth band
8
4
0
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F
Source: World Bank; China Statistical Abstract; OECD; IMF; The Beijing Axis Analysis The Beijing Axis 32
34. China’s GDP is highly concentrated in five coastal provinces, which together
account for 40% of the country’s total GDP. This figure however has dropped
over the years as other provinces have increased output
GDP by Province (USD bn, 2011) Geographical Distribution of China’s GDP (2011)
0 250 500 750
1 Guangdong
2 Jiangsu
3 Shandong
4 Zhejiang
5 Henan
6 Hebei
7 Liaoning
Sichuan
Gansu
8
9 Hunan Top 5 provinces’
Hubei
10
11 Shanghai GDP equate to 40% 27 Ningxia
Fujian
12
13 Beijing of total GDP
14 Anhui 29
15 Inner Mongolia
Heilongjiang
30 Qinghai 3 Shandong
16
Shaanxi 5 Henan
17
18 Guangxi 31 Tibet
19 Jiangxi
Tianjin
2 Jiangsu
20
21 Shanxi
22 Jilin 4 Zhejiang
23 Chongqing
24 Yunnan
25 Xinjiang
26 Guizhou 1
27 Gansu
Hainan
28
29 Ningxia Guangdong
28
30 Qinghai
Tibet
Top 5 Provinces by GDP
31
Bottom 5 Provinces by GDP Hainan
Highlighted on map on right
Note: Also includes the centrally-administered municipalities of Beijing, Tianjin, Chongqing and Shanghai
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 33
35. With the exception of Tianjin, the coastal regions are no longer the fastest
growing regions of China. The government has placed greater emphasis on
developing the inner provinces including establishing special economic zones
GDP Growth Rate by Province (USD bn, 2011) China’s Fastest and Slowest Growing Provinces (2011)
0 10 20
1 Tianjin
2 Chongqing
3 Sichuan
4 Guizhou
5 Inner Mongolia
6 Shaanxi
7 Hubei
8 Jilin
Yunnan
9
10 Anhui
5
Inner Mongolia
Qinghai
11
12 Shanxi Beijing
Hunan 31
13
14 Tibet
1 Tianjin
15 Jiangxi
16 Gansu 27 Shandong
17 Guangxi
Heilongjiang
Sichuan
18
Fujian
19
Liaoning 3 Chongqing 30 Shanghai
20
Hainan
21
22 Ningxia
2
29 Zhejiang
23 Xinjiang 4 Guizhou
24 Henan
25 Hebei
26 Jiangsu 28
27 Shandong
Guangdong
28
29 Zhejiang Guangdong
30 Shanghai
Beijing
Top 5 Provinces by GDP growth
31
Bottom 5 Provinces by GDP growth
Highlighted on map on right
Note: Also includes the centrally-administered municipalities of Beijing, Tianjin, Chongqing and Shanghai
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 34
36. The provinces with the highest per capita income are all located on the eastern
coast. Tianjin, Shanghai and Beijing, three of the centrally-administered
municipalities, lead the way with a per capita greater than USD 12,000
GDP Per Capita by Province (USD, 2011) Provinces With Highest and Lowest GDP Per Capita
in China (2011)
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000
1 Tianjin
2 Shanghai
3 Beijing
4 Jiangsu
5 Zhejiang
6 Inner Mongolia
7 Guangdong
8 Liaoning
9 Fujian
10 Shandong Beijing
11 Jilin
12 Total
Chongqing 3
13
Hubei Gansu 1
14
15 Hebei Tianjin
16 Shaanxi 30
17 Ningxia
Heilongjiang
18
Shanxi 29 Tibet 4 Jiangsu
19 28
20 Xinjiang
Hunan
Anhui 2 Shanghai
21
Qinghai
22
23 Henan Highlighted on 5 Zhejiang
Hainan
24
25 Jiangxi map on right Yunnan 31 Guangxi
26 Sichuan 27
27 Guangxi
28 Anhui
29 Tibet
30 Gansu
Yunnan
Top 5 Provinces by GDP per capita
31
Bottom 5 Provinces by GDP per capita
Note: Also includes the centrally-administered municipalities of Beijing, Tianjin, Chongqing and Shanghai
Source: Various; The Beijing Axis Analysis The Beijing Axis 35
37. China’s secondary sector remains the largest contributor to the country’s
GDP. However, the tertiary sector has grown steadily in recent years and its
development remains a centerpiece of China’s 12th Five-Year Plan
Composition of GDP by Sector (1997-2012F)
Primary Sector Tertiary Sector
USD bn %
Secondary Sector Growth Rate of Primary Sector (rhs)
9,000 8
8,000
7,000 6
6,000
4
5,000
4,000
2
3,000
2,000 0
1,000
0 -2
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
Note: CAGR only includes the primary sector.
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 36
38. China’s secondary sector and larger economy is still sustained by industry, a
remnant of past government policies focusing on industrialisation. The
secondary sector now accounts for 47% of China’s output
Value-added Breakdown of Secondary Sector (USD China’s Industrial Structure (2011)
bn, 1997-2011)
Industrial Sector Construction Sector
4,000
3,500
3,000 Primary
10%
2,500
Secondary
2,000 47%
1,500
Tertiary
1,000 43%
500
0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 37
39. Since China joined the WTO a decade ago, national economic restructuring
has lead to rapid growth in the tertiary sector. However, the sector remains
significantly smaller than other countries on a similar development scale
Value-added Breakdown of Tertiary Sector (USD bn, China’s Industrial Structure (2011)
1997-2011E)
Transport, Storage and Post
3,300
Wholesale and Retail Trades
3,000
Hostels and Catering Services
2,700
Financial Intermediation
2,400 Real Estate
2,100 Others
1,800 Tertiary Secondary
1,500 43% 47%
1,200
900
Primary
600 10%
300
0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Note: 2011 breakdown of tertiary industry will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 38
40. Gross capital formation and final consumption expenditures, which are both
mainly driven by the government, substantially outpace net exports’ as the two
key drivers of China’s GDP growth
Contribution to the Growth of GDP¹ (%, 1997-2011E²)
Net Exports of Goods and Services Gross Capital Formation
Final Consumption Expenditure (household + gov)
10
8
6
4
2
0
-2
-4
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Note: (1) The three components of GDP by expenditure approach are final consumption expenditure (composed of household and government consumption), gross capital formation and net exports of goods and
services. For 2009, the 92% gross capital formation, 52% final consumption expenditure and the -44% net exports of goods and services were reduced proportionately to form the bar representing 100%
(2) 2011 GDP growth contribution will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 39
41. China’s gross capital formation remains concentrated in coastal provinces,
while western provinces have far higher capital formation rates as a percent
of GDP
China’s Gross Capital Formation (2011E)
A bubble this size represents 1% of total
% of Provincial GDP Northern & Northeastern
Provinces in central and western China have
Eastern
Tibet higher capital formation rates Central & Southern
110 Western & Southwestern
Ningxia
Capital formation takes place mostly
Jilin Guangxi in coastal provinces
Yunnan Inner Mongolia
80 Qinghai
Tianjin
Shanxi Liaoning
Xinjiang Chongqing Shaanxi Henan Shandong
Heilongjiang
Anhui
50 Hainan Guizhou
Hebei Zhejiang
Jiangxi
Gansu Sichuan Jiangsu
Hubei Guangdong
Beijing Hunan
Fujian
Shanghai
Total Capital Formation (USD bn)
20
0 50 100 150 200 250 300 350 400
Note: Provincial breakdown of 2011 gross capital formation will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis The Beijing Axis 40