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prc<br />iMBA 562 <br />Coast2Coast<br />Andrew Kohn, Joanne Newborn, Brian Renaud, Carrie Requist & Shimir Varia<br />
Economy<br /><ul><li>GDP - $9.872 trillion
Labor Workforce - 780 million
Agriculture: 38.1%
Industry: 27.8%
Services: 34.1%
Unemployment Rate – 4.3%
Inflation Rate – 5%
Imports – $1.31 trillion</li></ul>Source: CIA Factbook from https://www.cia.gov/library/publications/the-world-factbook/ge...
Background<br /><ul><li>People’s Republic of China founded October 1st 1949.
Socialist Market Economy
Growing Private sector
70% of Market GDP1
74% of China’s Enterprises2
Employs over 180 Million2
Total Capital investment $2.9 Trillion2</li></ul>1 Source: The Economist from http://www.economist.com/node/18332610?story...
Characteristics<br /><ul><li>Largest global population1
Aging population2
Median age 35.2 years
One Child Policy2
Instituted in 1980 to control rapidly growing population
Rapidly Aging population2
Low Buying power due to </li></ul>   non-market based exchange rates<br />1 Source: About.com from http://geography.about....
MARKET POTENTIAL INDICATORS1<br />MARKET POTENTIAL INDICATORS<br /><ul><li>Eight Dimensions are given
Each Emerging Market is Evaluated Against Those Eight</li></ul>EIGHT DIMENSIONS<br /><ul><li>Commercial Infrastructure
Market Size
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Team Coast2Coast iMBA 562 PRC Analysis

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Team Coast2Coast iMBA 562 PRC Analysis

  1. 1. prc<br />iMBA 562 <br />Coast2Coast<br />Andrew Kohn, Joanne Newborn, Brian Renaud, Carrie Requist & Shimir Varia<br />
  2. 2. Economy<br /><ul><li>GDP - $9.872 trillion
  3. 3. Labor Workforce - 780 million
  4. 4. Agriculture: 38.1%
  5. 5. Industry: 27.8%
  6. 6. Services: 34.1%
  7. 7. Unemployment Rate – 4.3%
  8. 8. Inflation Rate – 5%
  9. 9. Imports – $1.31 trillion</li></ul>Source: CIA Factbook from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html<br />
  10. 10. Background<br /><ul><li>People’s Republic of China founded October 1st 1949.
  11. 11. Socialist Market Economy
  12. 12. Growing Private sector
  13. 13. 70% of Market GDP1
  14. 14. 74% of China’s Enterprises2
  15. 15. Employs over 180 Million2
  16. 16. Total Capital investment $2.9 Trillion2</li></ul>1 Source: The Economist from http://www.economist.com/node/18332610?story_id=18332610<br />2 Source: China Daily from http://www.chinadaily.com.cn/opinion/2011-02/12/content_11990049.htm<br />
  17. 17. Characteristics<br /><ul><li>Largest global population1
  18. 18. Aging population2
  19. 19. Median age 35.2 years
  20. 20. One Child Policy2
  21. 21. Instituted in 1980 to control rapidly growing population
  22. 22. Rapidly Aging population2
  23. 23. Low Buying power due to </li></ul> non-market based exchange rates<br />1 Source: About.com from http://geography.about.com/library/faq/blqzlargecountry.htm<br />2 Source: China Mike from http://www.china-mike.com/chinese-culture/society/china-population-growth-crisis/<br />
  24. 24. MARKET POTENTIAL INDICATORS1<br />MARKET POTENTIAL INDICATORS<br /><ul><li>Eight Dimensions are given
  25. 25. Each Emerging Market is Evaluated Against Those Eight</li></ul>EIGHT DIMENSIONS<br /><ul><li>Commercial Infrastructure
  26. 26. Market Size
  27. 27. Market Growth Rate
  28. 28. Market Consumption Capacity
  29. 29. Market Intensity
  30. 30. Economic Freedom
  31. 31. Market Receptivity
  32. 32. Country Risk</li></ul>1Source: Global Edge http://globaledge.msu.edu/resourcedesk/mpi/<br />(*The data for China does not include Hong Kong, Macao and Taiwan.)<br />
  33. 33. MARKET POTENTIAL INDICATORS1<br /><ul><li>Ranked 2nd Overall
  34. 34. Ranked 1st in Two Categories
  35. 35. Market Size
  36. 36. Market Growth Rate
  37. 37. Ranked Near Last or Last in Three Categories
  38. 38. Market Intensity
  39. 39. Economic Freedom
  40. 40. Market Receptivity</li></ul>1Source: Global Edge http://globaledge.msu.edu/resourcedesk/mpi/<br />(*The data for China does not include Hong Kong, Macao and Taiwan.)<br />
  41. 41. MARKET POTENTIAL INDICATORS<br />ADVANTAGES<br /><ul><li>Market Size1
  42. 42. 1.334 Billion
  43. 43. 46.6% Residing in Urban Areas
  44. 44. Growing at 0.59% Annually
  45. 45. By 2030 Estimated 1 Billion in Urban Areas
  46. 46. Market Growth Rate2
  47. 47. 9.1% Annual Change for 2009
  48. 48. 10.75% 5-Year CAGR3
  49. 49. Ranked In Top 5 Emergency Economies for 10 Years Running</li></ul>1Source: Wikipedia.orghttp://en.wikipedia.org/wiki/Urbanization_in_the_People's_Republic_of_China<br />2Source: Google, Inc. http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_kd_zg&idim=country:CHN&dl=en&hl=en&q=gdp+growth+rate+of+china<br />3Source: 2011 Index of Economic Freedom http://www.heritage.org/index/country/China<br />
  50. 50. MARKET POTENTIAL INDICATORS<br />DISADVANTAGES<br /><ul><li>Market Intensity1
  51. 51. Private Spending Low at 36% of GDP
  52. 52. Declining Since 20022
  53. 53. (Potential Opportunity = Expected to Increase to 45% by 2015)
  54. 54. Economic Freedom3
  55. 55. 135th Freest in the World
  56. 56. Average Rating of “52” on 100 Point Scale
  57. 57. World Average of “59.7”
  58. 58. Free Economies of “84.1”</li></ul>1Source: China Daily http://www.chinadaily.com.cn/bizchina/2011-03/22/content_12208548.htm<br />2Source: Research Institute of Economy, Trade & Industry, IAA http://www.rieti.go.jp/en/china/09062901.html<br />3Source: 2011 Index of Economic Freedom http://www.heritage.org/index/country/China<br />
  59. 59. MARKET POTENTIAL INDICATORS<br />DISADVANTAGES<br /><ul><li>Market Receptivity
  60. 60. Low Import of US Goods1
  61. 61. Imported ~$92 Billion
  62. 62. Exported to US ~ $365 Billion
  63. 63. Trade As a Percentage of GDP2
  64. 64. Declining since 2006</li></ul>1Source: U.S. Census Bureau http://www.census.gov/foreign-trade/statistics/highlights/top/top1012yr.html<br />2Source: World Bank http://data.worldbank.org/indicator/NE.TRD.GNFS.ZS<br />
  65. 65. Foreign Direct Investments<br />INWARD<br /><ul><li>China rose to 2nd place after the United States in 2009
  66. 66. Country received over FDI of $108 billion in 2008
  67. 67. Policy measures to promote foreign investments
  68. 68. Barriers to FDI- opaque & inconsistently enforced laws
  69. 69. The largest number of foreign-affiliate employees is now in China
  70. 70. Economic recovery: inflows to China rapidly expanding </li></ul>Source: World Investment Report 2010 http://www.unctad.org/en/docs/wir2010_en.pdf<br />(The data for China does not include Hong Kong, Macao and Taiwan.)<br />
  71. 71. Foreign Direct Investments<br />OUTWARD<br /><ul><li>China among the top 20 investors in the world
  72. 72. China’s “go global” policy encouraged domestic enterprises to</li></ul> invest globally<br /><ul><li> FDI from China in non-financial sectors grew (by 7% $43 billion)
  73. 73. One of the most significant foreign investors in African countries
  74. 74. Oil & Gas
  75. 75. Mining
  76. 76. Metal
  77. 77. Increasing investments in Least Developed Countries</li></ul>Source: World Investment Report 2010 http://www.unctad.org/en/docs/wir2010_en.pdf<br />(The data for China does not include Hong Kong, Macao and Taiwan.)<br />
  78. 78. Foreign Direct Investments<br />M&A’s<br /><ul><li> Cross-border M&A purchases by developing-economy </li></ul>firms – mainly from China – were on the rise. <br /><ul><li> China’s outward investment in the non-financial sector </li></ul>continued to expand, driven by the M&A opportunities<br />created by global industrial restructuring.<br />Source: World Investment Report 2010 http://www.unctad.org/en/docs/wir2010_en.pdf<br />(The data for China does not include Hong Kong, Macao and Taiwan.)<br />
  79. 79. Foreign Direct Investments<br />COUNTRY RANKINGS<br /><ul><li>Global investors show an ever-growing interest in developing economies
  80. 80. Asia is viewed as the most attractive region for FDI
  81. 81. Among the 6 largest foreign investment recipients in the world in 2009, China was the 2nd most popular</li></ul>Source: World Investment Report 2010 http://www.unctad.org/en/docs/wir2010_en.pdf<br />(The data for China does not include Hong Kong, Macao and Taiwan.)<br />
  82. 82. Current U.S. FDI Relationship<br />CURRENT DEVELOPMENTS<br /><ul><li>China FDI in U.S.
  83. 83. Chinese companies invested $2.81 billion in U.S. projects or acquisitions during the first nine months of 2010. 1
  84. 84. 2010 - Chinese companies acquired or announced they were establishing more than 50 companies in U.S. 1
  85. 85. Recent greenfield investments 1
  86. 86. Tianjin Pipe - $1 billion steel pipe mill in Corpus Christi, TX
  87. 87. Suntech Power Holdings – Solar panel assembly plant in AZ
  88. 88. American YonchengGravue – Cylinder plant in Spartanburg, SC</li></ul>1 Source: China-U.S. Trade Law from http://www.chinaustradelawblog.com/2011/02/articles/investment/the-united-states-welcomes-chinese-foreign-direct-investment-the-handful-of-deals-blocked-by-cfius-are-aberrant/<br />
  89. 89. current u.s. fdi relationship<br />ADVANTAGES AND DISADVANTAGES…<br /><ul><li>China FDI in U.S.
  90. 90. ADVANTAGES
  91. 91. Allows Chinese companies to better serve customers
  92. 92. Takes advantage of Buy American provisions in government contracting
  93. 93. Avoid trade barriers
  94. 94. DISADVANTAGES
  95. 95. High labor costs
  96. 96. Recent negative press for Chinese FDI in U.S. 2</li></ul>1 Source: Reuters from http://www.reuters.com/article/2009/02/16/us-usa-stimulus-buyamerican-idUSTRE51F4BF20090216<br />2 Source: China-U.S. Trade Law from http://www.chinaustradelawblog.com/2011/02/articles/investment/the-united-states-welcomes-chinese-foreign-direct-investment-the-handful-of-deals-blocked-by-cfius-are-aberrant/<br />
  97. 97. current u.s. fdi relationship<br />CURRENT DEVELOPMENTS<br /><ul><li>U.S. FDI in China
  98. 98. 2009 - U.S. FDI in China was $49.4 billion 1
  99. 99. Only represented 1.4% of U.S. outward FDI worldwide
  100. 100. Netherlands and United Kingdom receive the most U.S. outward FDI
  101. 101. U.S. FDI in China by sector (of the $49.4 billion) 1
  102. 102. Manufacturing – 45.8%
  103. 103. Computer and electronic products – 11.6%
  104. 104. Chemicals – 10.1%
  105. 105. Since 1994 - Employment at Chinese affiliates of U.S. companies has grown 390% 2
  106. 106. Employment by U.S. affiliates in China is larger than any other country</li></ul>1 Source: UCSC: http://www.uscc.gov/hearings/2011hearings/written_testimonies/11_03_30_wrt/11_03_30_fung_testimony.pdf <br />2 Source: Univ. of Colorado at Boulder from http://www.nber.org/books_in_progress/china07/yeaple7-29-08comment.pdf<br />
  107. 107. current u.s. fdi relationship<br />ADVANTAGES AND DISADVANTAGES…<br /><ul><li>U.S. FDI in China
  108. 108. ADVANTAGES
  109. 109. A 1% increase in U.S. FDI in China will increase exports to other Asian markets by 0.37% 1
  110. 110. Lower cost of employment and bigger employment pool
  111. 111. DISADVANTAGES
  112. 112. 2009 - Inconsistent regulatory interpretation
  113. 113. 2008 – Management-level human resource constraints</li></ul>1 Source: UCSC: http://www.uscc.gov/hearings/2011hearings/written_testimonies/11_03_30_wrt/11_03_30_fung_testimony.pdf <br />
  114. 114. International Trade<br />Exports and Imports<br /><ul><li>Except for worldwide economic impact in 2009, China’s international trade has grown steadily in the past decade.
  115. 115. Total Trade:
  116. 116. 2010= $2,972.4 billion
  117. 117. 2010 35% vs. ‘09 and 16% vs.‘08
  118. 118. Exports - 2010 31% vs. ‘09 and 10% vs.‘08
  119. 119. Imports - 2010 39% vs. ‘09 and 23% vs.‘08</li></ul>Source: www.econographer.com from http://seekingalpha.com/article/245695-china-exports-continue-growth-imports-hit-record-in-december<br />
  120. 120. Trade Balance<br /><ul><li>Strongly towards Exports
  121. 121. Pressure from major trading partners to decrease trade imbalance:
  122. 122. 2010  9% vs. ‘09 and  39% vs. ‘08 </li></ul>Source: www.econographer.com from http://seekingalpha.com/article/245695-china-exports-continue-growth-imports-hit-record-in-december<br />
  123. 123. International Trade<br />Major Exports 2010<br />Major Imports 2010<br />Source: PRC General Administration of Customs, China’s Customs Statistics from http://www.uschina.org/statistics/tradetable.html<br />
  124. 124. Top Ten Trading Partners<br />Source: PRC General Administsration of Customs, China’s Customs Statistics from http://www.uschina.org/statistics/tradetable.html<br />
  125. 125. Top 10 Export and Import<br />Top 10 Export Destinations<br />Top 10 Import Suppliers<br />Source: PRC General Administsration of Customs, China’s Customs Statistics from http://www.uschina.org/statistics/tradetable.html<br />
  126. 126. Trade with United States<br /><ul><li>Continued strength towards Exports
  127. 127. Significant impact in 2009 due to economic downturn in global economy
  128. 128. In 2010 United States imported 23% of China’s total export volume.</li></ul>Source: US-China Trade Statistics and China's World Trade Statistics from http://www.uschina.org/statistics/tradetable.html<br />
  129. 129. Trade with United States<br />Major Imports 2010<br />Major Exports 2010<br />Source: US-China Trade Statistics and China's World Trade Statistics from http://www.uschina.org/statistics/tradetable.html<br />
  130. 130. Trade Advantages & disadvantages<br /><ul><li>Advantages
  131. 131. Large population of consumers
  132. 132. Government policy measures are promoting FDI
  133. 133. 1.334 Billion People with 46.6% in Urban Areas
  134. 134. Market Growth Rate at 10.75% 5-Year CAGR
  135. 135. Disadvantages
  136. 136. Currency value set by fiat, not by free trade, artificially makes goods less expensive on the world market but limits consumer buying power.
  137. 137. Ranked 135th for “Freest Economies” in the World
  138. 138. Only 36% of GDP is “Private Spending”</li></li></ul><li>Conclusions<br /><ul><li>Advantages outweigh the disadvantages
  139. 139. PRC is opening up to more inward FDI
  140. 140. PRC is expected to play a key role in the global economy in the coming years.
  141. 141. For the right international firms the opportunities are excellent</li></ul>Source: CIA – The World Factbook<br />https://www.cia.gov/library/publications/the-world-factbook/maps/maptemplate_ch.html<br />

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