CHINA GONE GLOBAL Jack Garrity Executive Director Asia Society Washington May 10, 2011
“ All political power comes from the barrel of a gun.”
“ The economy is the basis for global power.”
Can the United States have  Guns  and  Butter  too?
US Still Out-Spends the Globe on Defense
However Military Spending Has Risen Across the Globe
China’s Booming Economy
Population Overview
China ‘ s GDP (1990-2010) 2010 GDP Growth Rate:  10.3
China‘s GDP Growth (1990-2010)
China‘s GDP Map 2010
Economic Powerhouse-GDP
China‘s GDP  Compared to Other Countries  (2000-2010)
Output and Outlook 1820-2001 India, China and US
Forecast of China’s and US GDP
China’s real per-capita GDP(1980-2000)
Rich- Poor Gap is Enlarging
China‘s GDP/per capita (2000-2010)
Gini Coefficients  1980-2006
China’s household saving
Hukou Household Registration
China’s Living Standard is still low <ul><li>China’s GDP per capita of $4,200 in 2010 was only 9 percent of that in US </l...
When will China become the largest economy
ECONOMIC CONCERNS AND CHALLENGES
Major Structural Problems: Stability /Sustainability of Chinese Economy
Unsustainable export level (Export over GDP ratio)
Unsustainable Low Domestic Consumption (Household consumption over GDP ratio US vs China)
Unsustainable Low Labor Income (Declining Labor income over GDP ratio
Unsustainable High Saving Rate. (China VS the rest of the world, 1978-2006)
Too much Enterprise and Government Savings
The Share of Household Saving in National Saving has declined substantially
Most government investment in China are Local Government Investments
Local government are in deficit. Poor regions have higher deficit
Is China’s real GDP growth sustainable ? Optimistic forecast versus official targets
How much progress can we expect from the 12th 5 Year Plan
The most challenging problems come from regional competition which has been essential for China’s growth
The institutional foundation of regional competition
Why regional competition is becoming a source of problems
Non-Market policies would not work
Market oriented policies may work
GROWTH DRIVEN BY INVESTMENT AND TRADE
CHINA’S FDI INFLOW
Domestic Infrustructure Spending <ul><li>Roads </li></ul><ul><li>Power </li></ul><ul><li>Ports </li></ul><ul><li>Airports ...
Railway Crossing| High-speed Network Lengths by Comparison
Map of High Speed Railway
Map of High Speed Railway (Planned)
Will High Speed Railway Speeding Up Economic Growth? <ul><li>It will spread economic development farther west, by slashing...
Capital  Growth
Foreign Direct Investment into China
Foreign Investment Spending <ul><li>Factories </li></ul><ul><li>Manufactoring facilities </li></ul>
China’s FDI inflow VS domestic investment Source: China National Bureau of Statistics  $bn $3596bn $68bn $379bn $20bn
Government Debt is Scrambling
China’s Public Debt is More Than 80% of GDP
CDB’s Foreign and Domestic Lending, 2005-2009
Investment Contribution to GDP Growth
Is China One of the Asia’s Flying Geese? <ul><li>China’s low returns are getting lower. </li></ul><ul><li>China achieves a...
Investors’ Complaints to China <ul><li>Intellectual property rights protection </li></ul><ul><li>Directed lending by state...
Intellectual property rights protection
TRADE
China’s Exports and Imports(2000-2010) China joins WTO in 2001
Garment trade with EU http://online.wsj.com/article/SB10001424052748704062604576105691622922576.html
Garment trade with US
China in the Global Economy, 2009 % share of the global total Sources: UNDP, NBS, UN Comtrade, SAFE, UNCTAD, IMF, World Ba...
China’s Production Surplus Production surplus
World Trade 2010- Top 10 exporters Source: WTO data  http://www.wto.org/english/news_e/pres11_e/pr628_e.htm
China and Developing states Projected to keep a favorable trade balance
China’s Rising Share of Global Trade $3,517 bn $15,518 bn $138 bn Surplus: $40 bn Surplus: $571 bn China: $3,122 bn
U.S.’s Share of Global Trade 1990 vs. 2010 20% 26% $3,517 bn $15,518 bn Deficit: $ -82 bn Deficit: $ -529 bn
China’s Global Trade by region 2000 VS 2010  $2,723.5 510.8 479.9 385.6 292.6 230.0 174.7 133.3 109.8 103.8 85.1 80.5 48.4...
China ‘s Global Trade by Region 2010 In Billion
China ‘s Global Trade 2000 VS 2010   2000    2010   Trade Exports Imports China's surplus/deficit    Trade Exports Imports...
China’s Share of World Trade (Shadow Chart) 1990-2010
China’s Share of World Total Exports
China’s Share of World Total Exports Clear
China’s Share of World Imports
Exports: Comparison among US, Germany, Japan and China
China's Top 10 Trade Partners in 2010 In billion USD
Top 10 China's Imports in 2010 In billion USD
Top 10 China's Exports 2010 In billion USD
China is the NO.1 trading partner of six G-20 nations
China is the NO. 2  trading partner of  Canada, U.S, Indonesia, Mexico and Brazil
As new powers grow…China is becoming ever more important to their trade.
China’s Current Account and percentage of GDP
China’s current account surplus
Trade Remedy Measures on China’s Exports Value ($ billion)
The Disappearing Cost Advantage
Comparison of population in China, Indonesia and Brazil China is now Indonesia's biggest export market, having almost doub...
Population Matters <ul><li>A Chinese slowdown is a risk. </li></ul><ul><li>Both brazil and Indonesia also have vibrant dom...
Aging Society
RMB EXCHANGE RATE
China’s currency has risen against the dollar recently, but against a broad basket of currencies it is basically flat.
RMB against USD 2000-2010
REER USD CNY
CNY/ EUR/ JPY
CNY/USD/JPY/EUR
Big Mac index, CNY is the most under valued currency Source: McDonald’s; The Economist.  At market exchange rate (2010 Oct...
The Yuan has strengthened against the dollar and euro over the past several years, leading some economists to say it is ap...
Does China Really Appreciate Their Currency
U.S. imports from China may shrink, they may be replaced by imports from other emerging markets
Yuan Internationalization
L imiting the international use of the Yuan <ul><li>China keeps a rein on capital moving into and out of the country. </li...
Currency  Change s  will be Difficult <ul><li>China now accelerating the appreciation of Yuan, now 6.49 = $1 – the lowest ...
Currency Pros and Cons <ul><li>Undervalued currency boosts trade surplus  </li></ul><ul><li>Has led to huge increase in fo...
Volume of dollar-Yuan swaps traded increases
Top 10 underwriters for offshore Yuan-denominated bonds
FOREIGN RESERVES
China’s foreign reserve holdings topped $3 trillion in March, nearly three times the holdings of Japan $1.15 trillion is U...
Foreign-exchange reserves keep rising
The Consequence of High Foreign Reserves <ul><li>China is the world’s largest foreign exchange holder, with reserves excee...
Internationalization of the Yuan
Using Yuan in Trade Settlement?
Criteria for being a dominant international reserve currency
The expectation of Yuan’s rise may lead to change of business strategy
INFLATION
Inflation may lead China to start revaluing its currency
China’s Consumer Prices
Inflation facts <ul><li>China’s annual inflation hit 5.3% </li></ul><ul><li>The increase in the amount and prices of impor...
COMMODITIES A copper-products plant in Nantong, China: The metal bounced back from recent lows
Commodity Prices may increase and Hamper Growth
Metal prices go up
China’s refined copper imports drop
Copper reserves for selected countries
Steel Market
CHINA‘S DEMAND FOR ENERGY
China’s power  picture
Typical urban household in China already has at least one air conditioners
Electricity consumption has soared in China
China is now the world Largest energy consumer
Power Output Source: China Electricity Council Unit: billion KWh
China and the US source their oil from different areas
Shanghai trucker strike as the price of oil surges.
In China, coal consumption has surged along with electricity consumption                                                  ...
World Gold Reserves in 2010
Gold Rush <ul><li>The amount individual buyers purchase as an investment is expected to surge two-fold annually. </li></ul...
China has gone from the world’s largest coal exporter to the largest importer
China’s nuclear
LABOR FORCE ISSUES
Guangdong Migrant Workers
EDUCATION
Graduate Employment Many college graduates are more willing to work in places where the cost of living is lower as a resul...
World Class-Average math and science scores for 15-year-olds in 2009
Chinese Travel
More Chinese Travelling Abroad  <ul><li>The number of outbound travelers totaled more than 57 million in 2010,a rise of 20...
Visitors from China spend more  Parting with cash Visitors  from China ranked among  the top 11  in head count and they we...
CHINA’S INVESTMENT OVERSEAS
China’s overseas investment is surging
China’s ODI is stepping up
Outward Direct Investment: Flows and Stocks, 1981-2010  USD bn, BOP flow data <ul><li>Source: PBoC, SAFE, RHG </li></ul>St...
China ODI flow 2003-2009, total $177.2 billion USD
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CHINA GONE GLOBAL (Part 1)

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CHINA GONE GLOBAL (Part 1)

  1. 1. CHINA GONE GLOBAL Jack Garrity Executive Director Asia Society Washington May 10, 2011
  2. 2. “ All political power comes from the barrel of a gun.”
  3. 3. “ The economy is the basis for global power.”
  4. 4. Can the United States have Guns and Butter too?
  5. 5. US Still Out-Spends the Globe on Defense
  6. 6. However Military Spending Has Risen Across the Globe
  7. 7. China’s Booming Economy
  8. 8. Population Overview
  9. 9. China ‘ s GDP (1990-2010) 2010 GDP Growth Rate: 10.3
  10. 10. China‘s GDP Growth (1990-2010)
  11. 11. China‘s GDP Map 2010
  12. 12. Economic Powerhouse-GDP
  13. 13. China‘s GDP Compared to Other Countries (2000-2010)
  14. 14. Output and Outlook 1820-2001 India, China and US
  15. 15. Forecast of China’s and US GDP
  16. 16. China’s real per-capita GDP(1980-2000)
  17. 17. Rich- Poor Gap is Enlarging
  18. 18. China‘s GDP/per capita (2000-2010)
  19. 19. Gini Coefficients 1980-2006
  20. 20. China’s household saving
  21. 21. Hukou Household Registration
  22. 22. China’s Living Standard is still low <ul><li>China’s GDP per capita of $4,200 in 2010 was only 9 percent of that in US </li></ul><ul><li>China’s standard of living today is roughly comparable to that of : </li></ul><ul><li>Japan in 1954 </li></ul><ul><li>Taiwan in 1972 </li></ul><ul><li>South Korea in 1976 </li></ul>
  23. 23. When will China become the largest economy
  24. 24. ECONOMIC CONCERNS AND CHALLENGES
  25. 25. Major Structural Problems: Stability /Sustainability of Chinese Economy
  26. 26. Unsustainable export level (Export over GDP ratio)
  27. 27. Unsustainable Low Domestic Consumption (Household consumption over GDP ratio US vs China)
  28. 28. Unsustainable Low Labor Income (Declining Labor income over GDP ratio
  29. 29. Unsustainable High Saving Rate. (China VS the rest of the world, 1978-2006)
  30. 30. Too much Enterprise and Government Savings
  31. 31. The Share of Household Saving in National Saving has declined substantially
  32. 32. Most government investment in China are Local Government Investments
  33. 33. Local government are in deficit. Poor regions have higher deficit
  34. 34. Is China’s real GDP growth sustainable ? Optimistic forecast versus official targets
  35. 35. How much progress can we expect from the 12th 5 Year Plan
  36. 36. The most challenging problems come from regional competition which has been essential for China’s growth
  37. 37. The institutional foundation of regional competition
  38. 38. Why regional competition is becoming a source of problems
  39. 39. Non-Market policies would not work
  40. 40. Market oriented policies may work
  41. 41. GROWTH DRIVEN BY INVESTMENT AND TRADE
  42. 42. CHINA’S FDI INFLOW
  43. 43. Domestic Infrustructure Spending <ul><li>Roads </li></ul><ul><li>Power </li></ul><ul><li>Ports </li></ul><ul><li>Airports </li></ul><ul><li>Apartment Blocks </li></ul>
  44. 44. Railway Crossing| High-speed Network Lengths by Comparison
  45. 45. Map of High Speed Railway
  46. 46. Map of High Speed Railway (Planned)
  47. 47. Will High Speed Railway Speeding Up Economic Growth? <ul><li>It will spread economic development farther west, by slashing travel time between Chinese cities it will spur trade and ease the flow of people and ideas, its proponents and tourism industries are all tipped as big winners. </li></ul>
  48. 48. Capital Growth
  49. 49. Foreign Direct Investment into China
  50. 50. Foreign Investment Spending <ul><li>Factories </li></ul><ul><li>Manufactoring facilities </li></ul>
  51. 51. China’s FDI inflow VS domestic investment Source: China National Bureau of Statistics $bn $3596bn $68bn $379bn $20bn
  52. 52. Government Debt is Scrambling
  53. 53. China’s Public Debt is More Than 80% of GDP
  54. 54. CDB’s Foreign and Domestic Lending, 2005-2009
  55. 55. Investment Contribution to GDP Growth
  56. 56. Is China One of the Asia’s Flying Geese? <ul><li>China’s low returns are getting lower. </li></ul><ul><li>China achieves about $2.20 in economic output per dollar invested, down from $3.40 in 1980. The United States gets almost $6.50. </li></ul><ul><li>(Indonesian efficiency surges after I.M.F.- led overhauls in the late 1990s. Every dollar invested produced $5 in output. Now $3) </li></ul><ul><li>China favored sectors like heavy industry and property, producing overcapacity and asset price bubbles. It means China needs more investment in its agricultural sector. </li></ul>
  57. 57. Investors’ Complaints to China <ul><li>Intellectual property rights protection </li></ul><ul><li>Directed lending by state banks to Chinese competitors </li></ul><ul><li>Indigenous innovation policy </li></ul><ul><li>Currency undervaluation capital control </li></ul><ul><li>Non-tariff barriers </li></ul><ul><li>Restrictions capital movement </li></ul>
  58. 58. Intellectual property rights protection
  59. 59. TRADE
  60. 60. China’s Exports and Imports(2000-2010) China joins WTO in 2001
  61. 61. Garment trade with EU http://online.wsj.com/article/SB10001424052748704062604576105691622922576.html
  62. 62. Garment trade with US
  63. 63. China in the Global Economy, 2009 % share of the global total Sources: UNDP, NBS, UN Comtrade, SAFE, UNCTAD, IMF, World Bank, RHG; *China‘s share in global total as available from the IMF in November 2010, 101 countries
  64. 64. China’s Production Surplus Production surplus
  65. 65. World Trade 2010- Top 10 exporters Source: WTO data http://www.wto.org/english/news_e/pres11_e/pr628_e.htm
  66. 66. China and Developing states Projected to keep a favorable trade balance
  67. 67. China’s Rising Share of Global Trade $3,517 bn $15,518 bn $138 bn Surplus: $40 bn Surplus: $571 bn China: $3,122 bn
  68. 68. U.S.’s Share of Global Trade 1990 vs. 2010 20% 26% $3,517 bn $15,518 bn Deficit: $ -82 bn Deficit: $ -529 bn
  69. 69. China’s Global Trade by region 2000 VS 2010 $2,723.5 510.8 479.9 385.6 292.6 230.0 174.7 133.3 109.8 103.8 85.1 80.5 48.4 37.0 31.4 20.5 2010 —— 2000 —— China’s surplus 2243 16 4 11 13 6 7 10 15 9 3 6 4 6 3 5 times times times times times times times times times times times times times times times times $373.6 ($125.2) $143.0 $181.7 ($16.1) $210.7 ($22.7) ($25.3) ($6.3) ($25.3) $4.2 $34.6 $26.1 $7.4 $4.0 ($17.3)
  70. 70. China ‘s Global Trade by Region 2010 In Billion
  71. 71. China ‘s Global Trade 2000 VS 2010   2000   2010   Trade Exports Imports China's surplus/deficit   Trade Exports Imports China’s surplus/ deficit EU $71.9 $41.1 $30.8 $10.2   $479.9 $311.5 $168.4 $143.0 Russia and rest of Europe $12.3 $3.9 $8.5 ($4.6)   $85.1 $44.6 $40.4 $4.2 US $74.5 $52.2 $22.4 $29.8   $385.6 $283.7 $102.0 $181.7 Canada $6.9 $3.2 $3.8 $0.6   $37.0 $22.2 $14.8 $7.4 Africa $9.6 $4.2 $5.4 ($1.3)   $109.8 $51.7 $58.1 ($6.3) MENA $17.7 $7.1 $10.6 ($3.5)   $174.7 $76.0 $98.7 ($22.7) Northeast Asia $118.5 $53.5 $65.0 ($11.5)   $510.8 $192.8 $318.0 ($125.2) China HK, Macao $54.8 $45.2 $9.5 $35.7   $230.0 $220.3 $9.6 $210.7 ASEAN $39.5 $17.3 $22.2 ($4.8)   $292.6 $138.2 $154.3 ($16.1) Oceana $12.6 $6.6 $6.0 $0.7   $103.8 $39.3 $64.6 ($25.3) South Asia $5.7 $3.8 $1.9 $1.9   $80.5 $57.6 $23.0 $34.6 Central Asia/ Caucuses $1.8 $0.8 $1.1 ($0.3)   $31.4 $17.7 $13.7 $4.0 Central America/ Caribbean $4.1 $3.5 $0.6 $2.9   $48.4 $37.3 $11.2 $26.1 South America $8.4 $3.6 $4.8 ($1.2)   $133.3 $54.0 $79.3 ($25.3) Other countries and area $0.0 $0.0 $0.0 $0.0   $20.5 $1.6 $18.9 ($17.3)   Total $438.3 $245.8 $192.4 $53.4   $2,723.5 $1,548.6 $1,175.0 $373.6
  72. 72. China’s Share of World Trade (Shadow Chart) 1990-2010
  73. 73. China’s Share of World Total Exports
  74. 74. China’s Share of World Total Exports Clear
  75. 75. China’s Share of World Imports
  76. 76. Exports: Comparison among US, Germany, Japan and China
  77. 77. China's Top 10 Trade Partners in 2010 In billion USD
  78. 78. Top 10 China's Imports in 2010 In billion USD
  79. 79. Top 10 China's Exports 2010 In billion USD
  80. 80. China is the NO.1 trading partner of six G-20 nations
  81. 81. China is the NO. 2 trading partner of Canada, U.S, Indonesia, Mexico and Brazil
  82. 82. As new powers grow…China is becoming ever more important to their trade.
  83. 83. China’s Current Account and percentage of GDP
  84. 84. China’s current account surplus
  85. 85. Trade Remedy Measures on China’s Exports Value ($ billion)
  86. 86. The Disappearing Cost Advantage
  87. 87. Comparison of population in China, Indonesia and Brazil China is now Indonesia's biggest export market, having almost doubled its share in the past decade to about 12.5%.
  88. 88. Population Matters <ul><li>A Chinese slowdown is a risk. </li></ul><ul><li>Both brazil and Indonesia also have vibrant domestic sectors. Household consumption equated to 65% of Indonesia's gross domestic product last year, similar to brazil and well above china’s level of about 40%. </li></ul><ul><li>In brazil, mortgages outstanding equate to a mere 3% of GDP, compared with 72% in the U.S., and 18% in China. </li></ul><ul><li>Indonesia is set to reap a demographic dividend as its working-age population grows 21 million people by 2020. While china’s working population peaks this decade, creating a headwind thereafter. Brazil’s will peak in 2030. </li></ul>
  89. 89. Aging Society
  90. 90. RMB EXCHANGE RATE
  91. 91. China’s currency has risen against the dollar recently, but against a broad basket of currencies it is basically flat.
  92. 92. RMB against USD 2000-2010
  93. 93. REER USD CNY
  94. 94. CNY/ EUR/ JPY
  95. 95. CNY/USD/JPY/EUR
  96. 96. Big Mac index, CNY is the most under valued currency Source: McDonald’s; The Economist. At market exchange rate (2010 Oct 13th)
  97. 97. The Yuan has strengthened against the dollar and euro over the past several years, leading some economists to say it is approaching fair value
  98. 98. Does China Really Appreciate Their Currency
  99. 99. U.S. imports from China may shrink, they may be replaced by imports from other emerging markets
  100. 100. Yuan Internationalization
  101. 101. L imiting the international use of the Yuan <ul><li>China keeps a rein on capital moving into and out of the country. </li></ul><ul><li>The government sets the maximum rate banks can pay to depositors and the minimum they can charge for loans- a boon to the large state-owned banks because the rules give them a cheap source of savings and limit competition from private financial firms. </li></ul><ul><li>The managed exchange rate is frustrating Beijing’s commercial and political aspirations. </li></ul><ul><li>Surplus of foreign reserves is locked away in low-yield U.S. treasury securities instead of helping develop the country </li></ul><ul><li>The exchange rate has become a sort of burden on china. We are creating a lot of distortions in the economy to maintain it. </li></ul>
  102. 102. Currency Change s will be Difficult <ul><li>China now accelerating the appreciation of Yuan, now 6.49 = $1 – the lowest since 1990s </li></ul><ul><li>Letting the Yuan rise and fall freely on world markets could cause pain </li></ul><ul><li>Decrease in exports, job loss; Increase in imports </li></ul><ul><li>Remove restrictions on loan and deposit rates, as deposit rates below inflation transfers wealth from savers to borrowers </li></ul><ul><li>Major impact on entire financial system </li></ul>
  103. 103. Currency Pros and Cons <ul><li>Undervalued currency boosts trade surplus </li></ul><ul><li>Has led to huge increase in foreign reserves </li></ul><ul><li>Yuan prices of imported fuel and food increase </li></ul><ul><li>Domestic inflation rises – now 5.4% </li></ul><ul><li>Other countries upset at China’s “unfair” competition </li></ul>
  104. 104. Volume of dollar-Yuan swaps traded increases
  105. 105. Top 10 underwriters for offshore Yuan-denominated bonds
  106. 106. FOREIGN RESERVES
  107. 107. China’s foreign reserve holdings topped $3 trillion in March, nearly three times the holdings of Japan $1.15 trillion is U.S. treasury
  108. 108. Foreign-exchange reserves keep rising
  109. 109. The Consequence of High Foreign Reserves <ul><li>China is the world’s largest foreign exchange holder, with reserves exceeding $3 trillion; three times that of Japan. </li></ul><ul><li>But these reserves do not give the government a good return, since they are largely invested in low-yield products. </li></ul><ul><li>Some analysts estimate yield could be 3 percent at best, while others argue that the real value of china’s reserves has eroded when exchange rates and inflation are taken into account. </li></ul><ul><li>Snowballing reserves add to inflation and are disadvantageous to China in international talks on its foreign exchange policies. </li></ul><ul><li>Should allow individuals and businesses to hold and manage more foreign reserves </li></ul>
  110. 110. Internationalization of the Yuan
  111. 111. Using Yuan in Trade Settlement?
  112. 112. Criteria for being a dominant international reserve currency
  113. 113. The expectation of Yuan’s rise may lead to change of business strategy
  114. 114. INFLATION
  115. 115. Inflation may lead China to start revaluing its currency
  116. 116. China’s Consumer Prices
  117. 117. Inflation facts <ul><li>China’s annual inflation hit 5.3% </li></ul><ul><li>The increase in the amount and prices of imported bulk commodities played a major role in increasing China's imports and thus the quarterly trade deficit. </li></ul><ul><li>China's iron ore imports grew by 14.4 percent to 180 million tons in the first quarter. The average price rose by 59.5 percent year-on-year to $156.5 a ton. </li></ul><ul><li>The rising price of iron ore has stimulated domestic production. The quality of metallic minerals mined in China, in general, is lower than the imported ones. </li></ul><ul><li>Soybean imports dropped by 0.7 percent to 10.96 million tons, but its average price increased by 25.7 percent to $573.9 a ton. </li></ul><ul><li>China lifts banks’ reserve ratio to 21%, among the highest in the world. </li></ul>
  118. 118. COMMODITIES A copper-products plant in Nantong, China: The metal bounced back from recent lows
  119. 119. Commodity Prices may increase and Hamper Growth
  120. 120. Metal prices go up
  121. 121. China’s refined copper imports drop
  122. 122. Copper reserves for selected countries
  123. 123. Steel Market
  124. 124. CHINA‘S DEMAND FOR ENERGY
  125. 125. China’s power picture
  126. 126. Typical urban household in China already has at least one air conditioners
  127. 127. Electricity consumption has soared in China
  128. 128. China is now the world Largest energy consumer
  129. 129. Power Output Source: China Electricity Council Unit: billion KWh
  130. 130. China and the US source their oil from different areas
  131. 131. Shanghai trucker strike as the price of oil surges.
  132. 132. In China, coal consumption has surged along with electricity consumption                                                               
  133. 133. World Gold Reserves in 2010
  134. 134. Gold Rush <ul><li>The amount individual buyers purchase as an investment is expected to surge two-fold annually. </li></ul><ul><li>And the government's gold reserves are &quot;far from enough&quot;, and should be increased to fend off global financial risks. </li></ul><ul><li>Since China deregulated its gold market in 2008 gold sales as a means of investment have surged, with an annual growth of 100 percent from 2007 to 2010, compared with 30 percent for the global investment market during that period. </li></ul><ul><li>Inflation and the weakening purchasing power of the yuan have driven up private demand for gold and this will continue. </li></ul><ul><li>China had more than $2.84 trillion in foreign exchange reserves by 2010, but only 1.7 percent were invested in gold. </li></ul><ul><li>The government needs to expand its share of gold in the foreign exchange reserves to reduce vulnerability to dollar depreciation. The reserve should be at least 5,000 tons. </li></ul><ul><li>In the first quarter, China overtook India to become the largest market for private gold sales. </li></ul>
  135. 135. China has gone from the world’s largest coal exporter to the largest importer
  136. 136. China’s nuclear
  137. 137. LABOR FORCE ISSUES
  138. 138. Guangdong Migrant Workers
  139. 139. EDUCATION
  140. 140. Graduate Employment Many college graduates are more willing to work in places where the cost of living is lower as a result slightly smaller cities in China begun to grow at a faster rate. Source: Chinese college graduates employment annual report
  141. 141. World Class-Average math and science scores for 15-year-olds in 2009
  142. 142. Chinese Travel
  143. 143. More Chinese Travelling Abroad <ul><li>The number of outbound travelers totaled more than 57 million in 2010,a rise of 20.4 percent year-on-year, </li></ul><ul><li>More than 57 million Chinese are expected to travel abroad this year, and will spend a staggering $55 billion, (China Tourism Academy).  </li></ul>
  144. 144. Visitors from China spend more Parting with cash Visitors from China ranked among the top 11 in head count and they were No.7 in spending last year. International arrivals to the U.S. International visitor spending in the U.S. Rank In millions Rank In billions 20.0 13.4 3.9 3.4 1.7 1.3 1.2 1.1 0.9 0.8 $20.8 14.6 11.6 8.7 5.9 5.8 5.0 4.1 4.0 4.0 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
  145. 145. CHINA’S INVESTMENT OVERSEAS
  146. 146. China’s overseas investment is surging
  147. 147. China’s ODI is stepping up
  148. 148. Outward Direct Investment: Flows and Stocks, 1981-2010 USD bn, BOP flow data <ul><li>Source: PBoC, SAFE, RHG </li></ul>Stock: $245.75 billion
  149. 149. China ODI flow 2003-2009, total $177.2 billion USD

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