After the Economic Crisis?


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Presentation made by Polarwide the 5th Asian Aromatics & Derivatives Conference,
Singapore, July 2011

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After the Economic Crisis?

  1. 1. After the economic crisis: Possible next Asian scenarios2007 • China’s Development and its impact 2009 • What role: India? • How will this impact the chemical industry? ? By: Daniël de Blocq van Scheltinga Polarwide Ltd. The 5th Asian Aromatics & Derivatives Conference, July 2011 1
  2. 2. Current Situation Boost food prices and other end products High oil and commodity prices Inflationary pressures in Asian countries Current Situation Developed countries: Emerging economies: recovery or another growing at pre-crisis pace new crisis? 2
  3. 3. Current Situation EUROPE - Greek Debt Issue - Under austerity - How to boost GDP? USA - Continually high unemployment rate - Weak dollar - Housing prices are still falling - 2% growth rate – weakest in 9 decades - QE3? ASIA - China - India - Japan 3
  4. 4. IN ASIA... (China) - World’s largest merchandise exporter - World’s second largest economy • Holds foreign reserves of over $2.5 trillion  Inflationary pressure  Losing comparative advantage over other emerging economies – rising costs Inflation Rates by June 2011 China, US, France India: -2.6% 9.1% UK: -4.9% GDP Annual Growth in 2009 4
  5. 5. IN ASIA... (India)  A stable political regime and democracy  Huge deficit in infrastructures – power, roads, ports, etc.  Broaden economic base – gradually move up the agricultural value chain (3/4 of population depends on farming)  Low labour costs (competitive edge in certain industries)  Edge in technology in manufacturing industries (China: labour-intensive) Agriculture, Forestry & Fishing Mining and Quarrying India GDP Manufacturing Composition Construction in 2010 Hotel, Transport, Communication & Trade Real Estate, Insurance, Financing, & Bus Service Social, Personal & Community, Services From: Business Maps of India 5
  6. 6. What‘s next? 1) Asian region will have a continued rapid growth in demand for consumer goods and raw materials a) Migration of high-end and low-end manufacturing industries b) Large scale import of natural resources 2) High oil prices and increasing awareness of environmental issues lead to growth of investment in new energy sources 6
  7. 7. Impact on the chemical industry 1) Growth of China and emerging markets - It is expected that the China chemical industry will be able to increase its world market share to 13% from present 8% within 2015. Chemical production (excluding pharmaceuticals) in 2010 Real change compared with the previous year (%) South America 6.4 Japan 8.8 Asia (exclude Japan) 13 United States 5 E.U. 10.1 World 9.3 0 2 4 6 8 10 12 14 7
  8. 8. Impact on the chemical industry 1) Growth of China and emerging markets - There will be a gradual shift in the chemical market: from North America, Western Europe and Japan to China, India and other Asian emerging regions - Increased M&As of worldwide chemical companies M&A Trends Acquisitions of Worldwide Chemical Companies – Number of Deals The volume of transactions completed worldwide held steady at about 70 to 80 per year from 1999 to 2007. In 2008 and 2009 there was dramatic slow down. Volume has picked-up in 2010 with 64 deals completed. 8
  9. 9. Impact on the chemical industry 2) Constrained resources - Insufficient oil supply - Surging demand - A drive for sustainable and green innovation Source: IEA WEO 2008, BP Statistical Review of World Energy 2008 9
  10. 10. Possible Scenario (1) : If China succeeds... Europe – US – Japan Long term shift US - China In China: - Still remainining heavily dependent on investment from public sectors and exports - More infrastructure construction projects are still needed to direct the migration of rural labour - Reforms are needed to maintain the edge of lower cost - Result: China will maintain a growth of 9% and surpass US to be the world’s number one energy importer 10
  11. 11. Possible Scenario (2): If China fails... Europe – US – Japan Long term shift US – India-emerging markets In China: - Insufficient returns from the heavy investments in infrastructures  Bad debts in the banking systems  Burst of a property price bubble - Tight monetary policies may have hurt economic growth and caused credit crunch for companies - Widening inequality in income - Inadequate legislation, social welfare and medical care system 11
  12. 12. Conclusion • Not yet clear if the global slowdown is a soft patch, or something more serious; • With both Europe and the US facing sovereign debt issues, fiscal tightening and austerity, Asia is key ; • Oil prices remain important to watch; • China’s hard or soft landing is vital to Asia, and hence globally; • Scenario 1 or 2: “flip a coin” ! 12
  13. 13. Thank you! 13
  14. 14. Contact Details Daniel de Blocq van Scheltinga Tel: +852-2530-0611 E-mail: Website: Truly Objective and Independent Financial Advisory & Consultancy Services Polarwide Limited, Registered in Hong Kong 14