US-China Commercial Relations - UChicago


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US-China Commercial Relations - UChicago

  1. 1. US-China Commercial Relations
  2. 2. Pop Quiz
  3. 12. US-China Business Council
  4. 15. Maps
  5. 21. Stats + Data
  6. 22. Cities with a population over 1 million 160 9
  7. 23. Labor force 780 million 155 million
  8. 24.   China is expected to build over the next 15 years some 1,000 gigawatts of new power generation capacity. WSJ
  9. 25. There are 270 regularly scheduled flights each week between Chinese and Taiwanese cities. The number of weekly flights is set to grow to more than 400 in a few weeks. WP
  10. 26. More than a million Taiwanese now live in China full time -- about half of them in the Shanghai area -- running factories, starting restaurants, attending universities, buying property. WP
  11. 27. Analysts estimate G.M. is worth $50 billion to $90 billion, with China accounting for about $15 billion of that total. NYT
  12. 28. General Motors Co. sold more cars and trucks in China last year than it did in the U.S., for the first time in the company's 102-year history. AP
  13. 29. “ China is one of the larger and faster-growing markets for us,”said Karen Gerwitz, the new executive director of the World Trade Center Denver. China purchased $440 million worth of Colorado goods last year, ranking third. Denver Post The trade numbers don't include service providers such as CH2M Hill that are helping China industrialize, build infrastructure and clean up environmental problems. "We are very bullish on China," said Thomas Searle, president of CH2M Hill International. Denver Post
  14. 30. Number of time zones 1 6
  15. 31. China has plenty more room to grow. Its potential lies in the fact that about one-fifth of the world lives there and virtually every major company looking to increase market share, from General Electric to Caterpillar, has a strategy to somehow reach those consumers. People’s Daily
  16. 32. 3M reported a growth of 53 percent in sales during the first half of 2010. A strong performance in China helped lift the company's global net profit to $1.12 billion in the second quarter, said George Buckley, president and chief executive officer, 3M. "China has been performing well for some time now, and for many years we had a growth of 20 to 25 percent," said Buckley. People’s Daily
  17. 33. McDonald's plans to double to number of stores to 2,000 by 2013. CNBC
  18. 34. In 2010, China was the fifth biggest box office market outside of the US, with $1.5 billion in revenue. LAT China government only allows about 20 non-Chinese films into theaters each year. LAT
  19. 35. Number of movie theatres 6,200 39,000
  20. 36. China’s economy is more oil intensive than either America or Europe, while half of its imported oil comes from the Middle East and north Africa, compared with one-quarter for the US. FT
  21. 37. Energy accounts for a third of the cost of grain production and oil prices are increasing demand for biofuels. Food prices are rising twice as fast as consumer prices overall. . FT
  22. 38. For multinationals, the shift from exports to domestic consumption will increase the importance of treating China as a core market. Businesswee k
  23. 39. GDP composition by sector 9.6% Agriculture 46.8% Industry 43.6% Services 1.2% Agriculture 22.2% Industry 76.7% Services
  24. 40. Companies will find it beneficial to align their China strategies with the government's policy agenda. Businessweek
  25. 41. Exports $1.51 trillion US 20% Hong Kong 12% Japan 8% S. Korea 5% Germany 4% $1.27 trillion Canada 19% Mexico 12% China 7% Japan 5% UK 4% Germany 4%
  26. 42. While market opportunities are likely to be abundant in most industries, we anticipate that some sectors, such as health care, financial services, and travel and tourism, are likely to grow at a much faster rate than the GDP. Businessweek
  27. 43. According to a World Bank report, China moved up from the world's 21st-largest source of FDI in 2006 to the 13th-largest in 2010. Given the country's abundance of capital and a determined policy push, we anticipate that China is likely to move into the ranks of the top five by 2015. Businessweek
  28. 44. GDP $5.745 trillion $14.62 trillion
  29. 45. Per capita GDP $7,400 $47,000
  30. 46. Trends
  31. 47. <ul><li>Demographics: </li></ul><ul><ul><li>Baby boomers (born after 1980) 50%+ of population by 2015, 45% of workforce by 2020 </li></ul></ul><ul><ul><li>Aging to quadruple total real wage </li></ul></ul>Source: Morgan Stanley Research (E) estimates.
  32. 48. <ul><li>Urbanization: </li></ul><ul><ul><li>47% to 65% in the long-term, adding 300 million urban residents </li></ul></ul>Source: Morgan Stanley Research (E) estimates.
  33. 49. Infrastructure: China to have the longest + fastest high speed rail grid in the world by 2015 Road capacity to outpace US by 2015 Source: Morgan Stanley Research (E) estimates. Zhengzhou Xining Shijiazhuang Taiyuan Hohhot Nanchang Nanning Zhanjiang Haikou Macau Kunming Guiyang Dalian Qingdao Lianyungang Hangzhou Fuzhou Xiamen Hong Kong Shantou Zhuhai Xian Yinchuan Lhasa Urumqi Yumen Beijing Tianjin Shanghai Shenyang Changchun Harbin Yantai Jinan Changsha Guangzhou Hefei Chengdu Chongqing Lanzhou Wuhan Shenzhen Nanjing Super Hubs Emerging HSR Hubs
  34. 50. <ul><li>Consumer financing: </li></ul><ul><ul><li>Credit consumption as % of total: </li></ul></ul><ul><ul><li>10% to 40% </li></ul></ul>Source: Morgan Stanley Research (E) estimates.
  35. 51. <ul><li>Education: </li></ul><ul><ul><li>College degree of workforce: </li></ul></ul><ul><ul><li>from 10% to 35% </li></ul></ul>Source: Morgan Stanley Research (E) estimates. China college education coverage ratio
  36. 52. Business Environment
  37. 53. USCBC 2010 Member Priority Survey Results US Companies’ China Outlook: China Operations Profitable and Growing; Protectionism Concerns Real and Rising
  38. 54. Five-Year Outlook for Business in China USCBC 2010 Survey
  39. 55. View of Current Business Climate Compared with Three Years Ago USCBC 2010 Survey
  40. 56. China's Prominence in Overall Company Strategy USCBC 2010 Survey
  41. 57. Company Resource Commitment to China over Next 12 Months USCBC 2010 Survey
  42. 58. Company Objectives in China USCBC 2010 Survey
  43. 59. Are China Operations Profitable? USCBC 2010 Survey
  44. 60. USCBC 2010 Survey Profitability of China Operations in 2009 vs. 2008 Profitability of China Operations vs. Company's Global Rate
  45. 61. Primary Restraint on Profitability USCBC 2010 Survey
  46. 62. USCBC 2010 Survey: Top 10 Challenges 1. Human resources: Talent recruitment and retention 1. Administrative licensing 1. Competition with PRC state-owned enterprises 4. IPR: Enforcement 5. Cost increases 6. Market access in services 7. Transparency 8. Protectionism risks in China 9. Government procurement 10. Standards and conformity assessment USCBC 2010 Survey
  47. 63. USCBC 2010 Survey: Top 10 Challenges 1. Human resources: Recruitment & retention 1. Administrative licensing 1. Competition with PRC state-owned enterprises 4. IPR: Enforcement 5. Cost increases USCBC 2010 Survey Operating Costs
  48. 64. Rising Costs of Most Concern USCBC 2010 Survey
  49. 65. Human Resources Increased costs….. Increased competition….. 2011 Minimum Wage Increases Beijing 20% Tianjin 16% Chongqing 32% Shandong 26% Jiangsu 17% Guangdong 18% Among ChinaHR’s 2010 survey of top 50 employers in China, only 4 were foreign companies, down from 21 in 2009. SOEs made up 66% of the list. ManPower’s 2010 Employee survey, 59% of job seekers prefer Chinese private companies because of better long-term career development opportunities.
  50. 66. Reasons Company Considers Moving operations from China to other Asian/East Asian country USCBC 2010 Survey Impact of Rising Costs on Long-term Planning
  51. 67. USCBC 2010 Survey: Top 10 Challenges 6. Market access in services 7. Transparency 8. Protectionism risks in China 9. Government procurement 10. Standards and conformity assessment USCBC 2010 Survey Policy and Regulatory Costs
  52. 68. Seeing Signs of Protectionism in….. USCBC 2010 Survey
  53. 69. Selected Industrial Issues and Advocacy Map Key Commercial Policies Spread Across Agencies, Not Always Well-Coordinated; Effective Advocacy Targets All Key Stakeholders … And Senior Leadership Zhang Dejiang Vice Premier Li Keqiang Vice Premier Wang Qishan Vice Premier Liu Yandong State Councilor Wen Jiabao Premier Agencies Selected Responsibilities NDRC, MOHURD, MOF, MLR, MOH, MEP, SAT MIIT, MHRSS, MOT, MOR, SASAC, SAWS MOFCOM, PBOC, SAIC, Customs, AQSIQ, SIPO, CSRC, CBRC, CIRC MOE, MOST, SARFT, Min of Culture, GAPP Economic planning Commodity prices Public finance/tax Healthcare reform Climate /energy policy Financial sector Trade & investment Quality inspection Business licensing Competition policy S&ED, JCCT Industrial reform Telecom, IT, transportation Labor, social security Production safety State-owned enterprises Science & technology Education Culture Sports HK & Macao Issues Govt procurement Tax/HNTE Standards Indig Innovation IPR M&A Industrial policy <ul><li>MOF, NDRC </li></ul><ul><li>MOFCOM </li></ul><ul><li>MOF, SAT </li></ul><ul><li>MOST </li></ul><ul><li>AQSIQ </li></ul><ul><li>MIIT </li></ul><ul><li>MOF, NDRC </li></ul><ul><li>MOST </li></ul><ul><li>SIPO, SAIC </li></ul><ul><li>GAPP </li></ul><ul><li>MIIT </li></ul><ul><li>NDRC </li></ul><ul><li>MIIT </li></ul><ul><li>NDRC </li></ul><ul><li>MOFCOM, SAIC </li></ul><ul><li>SASAC, MIIT </li></ul><ul><li>MOST </li></ul>AQSIQ = Quality & Inspection Admin CS/B/IRC = Securities, Bank, Insurance regulators GAPP = Gen Admin of Press & Pubs MEP = Min of Envir Protection MIIT = Min of Industry & Info Tech MLR = Min of Land & Resources MOE = Min of Education MOF = Min of Finance MOFCOM = Min of Commerce MOH = Min of Health MOHURD = Min of Housing, Urb/Rural Dev MHRSS = Min of Hum Resources & Soc Sec MOR = Min of Railways MOST = Min of Science & Technology MOT = Min of Transportation NDRC = Nat. Devel & Reform Comm PBOC = People’s Bank of China SAIC = State Admin of Ind & Commerce SARFT = Radio, Film, TV Administration SASAC = State Assets Commission SAT = State Tax Admin SAWS = State Admin of Workplace Safety SIPO = State Intellectual Property Office Energy Efficiency <ul><li>NDRC, MEP, MOF </li></ul><ul><li>SASAC, MIIT </li></ul><ul><li>AQSIQ </li></ul><ul><li>MOST </li></ul>
  54. 70. Advocacy Strategies Pursued USCBC 2010 Survey
  55. 71. What Keeps Central Planners Awake? What Keeps Average Citizens Awake? <ul><li>#1 - Social (in)stability </li></ul><ul><li>Next Issues: </li></ul><ul><li>Inflation, inflation, inflation </li></ul><ul><li>Resource allocation </li></ul><ul><li>Control over local governments </li></ul><ul><li>“ Imbalances” </li></ul><ul><li>Corruption </li></ul><ul><li>Social security </li></ul><ul><li>Justice </li></ul><ul><li>Anti-corruption </li></ul><ul><li>Personal income </li></ul><ul><li>Housing prices </li></ul><ul><li>Healthcare reform </li></ul><ul><li>Commodity price control </li></ul><ul><li>Environment pollution </li></ul><ul><li>Food safety </li></ul><ul><li>Education reform </li></ul>Policy Environment
  56. 72. 12 th FYP Key Goals Encourage domestic consumption Improve social safety net Industrial “upgrading” (Strategic Emerging Industries plan) Regional development – Central & Western China Energy efficiency and environmental sustainability Taxation and financial systems reform Urbanization
  57. 73. Marc Ross [email_address] +1 202 429 0340 +1 703 598 3242 @marcaross @USChinaBuisness