- Chinese economic growth has been one of the most remarkable in history, with China emerging as the world's largest economy. - Since implementing reforms in 1978, China has experienced over 30 years of rapid economic expansion and industrialization, lifting hundreds of millions out of poverty. - China's emergence as a major economic power has resulted in a shift in the global balance of economic activity and will continue to have widespread impacts on business, labor markets, commodity consumption, and geopolitics for decades to come.

1. Introduction: Chinese economic growth
The Emergence of China in the 21st Century — Session one
Luis Torras (@TorrasLuis)

2. – John Thornton
former Chairman of Goldman Sachs, professor at Tsinghua University
“The single most important to happen in our lifetime will be
the emergence of China.”
2

3. Intro by prof. Niall Ferguson (Harvard): “China:
Triumph and Turmoil”, BBC.
h"ps://www.youtube.com/watch?v=jKyY0u8AJL4&list=PLy1NmHonG-­‐A42trP17ZRKqkvW3hvY_mJH
3

4. Perspective is essential in order to address any
issue regarding China: we need to know the
details…
4

5. …but at the same time we have to keep always
in mind the global picture.
5

6. And also is important to evaluate things with an
historical perspective: not only the present…
6

7. … but to understand the starting point. Trend is
more relevant that absolute figures.
7

8. October 1, 1949: Mao Zedong proclaims the
People’s Republic of China
8

9. China has experienced one of the most
remarkable economic growth in economic history
Real%GDP%by%output%(in%RMB%billions)%
• Today,'China'has'more'
than'300m'Chinese'with'
a'per'capita'income'of'
over'€'20,000
• China'is'the'first'market'
in'the'world'as'an'issuer'
of'spending:'78,000'm'€'
in'2012'with'doubleEdigit'
annual'increases
• In'2014,'China'issued'the'
world'100'million'tourists'
(c.180,000'visited'Spain)
Today, China is the biggest potential market in the world
9
Real GDP (RMB billions)

10. China’s growth has lead to a major swift in the
global stage of historical proportions
The “great divergence” The “great convergence”
GDP$per$capita$evolu0on$ra0o$selected$countries,$150082008$ World$GDP$percentage$on$total$principal$economies$(198082018)$
Source: Maddison; IMF. PPP data. Adapted form Prof. Niall Ferguson.
10

11. Since the 1978, China has experienced three
decades of economic expansion
1978%
Reformist%
leader%Deng%
Xiaoping%
announces%
open%door%
policy%
1984%
China%opens%up%
14%ci=es%and%3%
regions%to%
foreign%
investment%
1989%
Tiananmen%
Square%
massacre%
1990%
Stocks%markets%
open%in%
Shanghai%and%
Shenzhen%
2005%
600%million%
liIed%out%of%
poverty%since%
1980%according%
to%the%World%
Bank%
2010%
China%
overtakes%
Japan%as%
second%largest%
economy%
11

12. China’s economic growth has no precedents in
history
12
Source: World Bank.
GDP in current US$ prices (1970 - 2014)
US$ billion

13. China has experienced the greatest economic
transformation in history; the shortest Industrial
Revolution
Number'of'years'required'to'double'the'real'GDP'per'capita'
RPC
(1990-1998)
Japan
(1885-1919)
US
(1839-1886)
RPC
(1981-1990)
Corea
(1966-1977)
United Kingdom
(1780-1835)
8'
9'
11'
34'
47'
55'
Source: IMF.
13

14. Chinese economic growth has had an
important impact in the rest of the world
14
Business'world' Labour'markets'
Macroeconomic' Geopoli7cs'
! Offshoring*
! Big$poten*al$market$
! Investment$opportuni*es$
! Cost$reduc*ons$
! Low$value9add$jobs$are$moving$to$China$
! Low$labour$cost$
! Rela*vely$high$produc*vity$
! Rela*vely$skilled$workers$
! Defla*onary$trends$in$the$manufacturing$products$
! Infla*onary$trends$in$raw$materials$and$components$
! Increase$of$interna*onal$trade$flows$
! Increase$of$the$interna*onal$reserves$of$China$
! China$emergen$can$not$be$compared$with$other$Asian$
*gers$
! China$would$like$to$increase$its$influence$in$the$
suprana*onal$ins*tu*ons$
! China‘s$emerge$is$more$similar$to$the$rise$of$the$US$in$
the$XIX$century$
Chinese'impact'in'the'
world'economy'

15. Today, China consumes 40-50% of the
world's commodities excluding oil
Recently we’ve seen prices fall due to slowdown of Chinese infrastructure spending
China consumes mind-boggling amount of raw materials
Source: visualcapitalist.com

16. China (Asia’s) re-emergence is (mainly) driven by
demographics
16

17. By 2040, 3/4 of world’s population will live in Asia-
Pacific region
Source: Population Prospects, United Nations.
17

18. Chinese economic emergence has has a major
impact in the world changing the global stage
Source: McKinsey Global Institute.
Developments+in+the+economic+center+of+gravity+(162025)+
• Never%before%has%the%
world%had%changed%
structurally%so%quickly%
• This%rapid%convergence%
is%compensated%marked%
three%centuries%of%
Western%superiority%
resul<ng%in%a%mul<polar%
scenario%
• This%gradual%shi=%
eastward%is%supported%
by%a%strong%
demographic%logic%
18
Developments in the economic center of gravity (1-2025)

19. Global growth is widely held; today concentrated
in emerging countries
Source: The Economist.
19
Economic growth estimated for 2015

20. Global growth relies on new engines, mainly
China, US and India
Source: The Economist.
20
World GDP contribution per major economies

21. Debt swells most since 2012 China Inc. resists Li
reform push as debt swells most since 2012
Source: Bloomberg.
21
Shanghai-listed non-bank corporate debt in 2015 rises at fastest pace in 3 years.
(¥ billion)
Total Chinese corporate debt

22. After +150% of revaluation in the 12 month before
June; SCI drop 40% in only two months
Shanghai Composite Index
20152014
Source: Bloomberg.

23. China has been like its foreign-exchange
reserves have been falling in the last two years
Source: The Economist.
China’s Trade and Investment balance ($bn)

24. China could overtake the US in terms of GDP
PPA in 2018 when both economies could have
similar approx. size of $20 Bn
Source: The Economist.
Steel consumption
Cell phone
Export
Investment
Industrial production
Energy consumption
Car sales
Retail sales
Imports
GDP PPA
GDP nominal
Market cap.
Private consumption
Defense expenditure
1999 232011
China&/&US&ra+o&
2119171513 250907050301
6,6
3,3
1,3
1,4
6,6
6,6
1,2
0,7
0,8
0,8
0,5
0,3
0,2
0,2
Year in which China overtook the US
Forecast overtake
24
The overtaking game

25. US/China per capita GDP ratio is expected to
continue its convergence in a similar path (more
likely scenario)
Source: Prof. Ferguson; Author.
US/ China per capita GDP ratio, 2012-2060!
Today&the&average&
American&is&c.&5&5mes&
richer&than&the&average&
Chinese&richest.&This&is&ra5o&
may&will&be&reduce&to&less&
than&2&in&the&following&
decades.
25
US / China per capita GDP ratio (2012-2060)

26. 26