This document provides an overview of China's future economic growth by Paul Young CPA, CGA. It summarizes several expert opinions and studies on key metrics that will influence China's GDP growth rate over the next 10-15 years, such as increasing private consumption, reducing debt-to-GDP ratio, and boosting private investment. There is disagreement among experts like Morgan Stanley and Michael Pettis on what China's sustainable growth rate will be. The document also discusses China's trade relationships with Canada and potential challenges of increasing trade liberalization.

1. STUDY – CHINA’S
FUTURE – JULY
2017
Paul Young CPA, CGA
July 5, 2017

2. PAUL YOUNG - BIO
• CPA, CGA
• Financial Solutions
• SME – Business Process Changes
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Financial Solutions
• SME – Supply Chain Management
• Academia – Advance Accounting, Public
Finance and Advanced Management Systems
Contact information:
Paul_Young_CGA@Hotmail.com

3. CHINA AND GDP GROWTH
Scotiabank –
http://www.gbm.scotiabank.com/English/bns_econ/
forecast.pdf

4. CHINA GROWTH WILL ACCELERATE AS IT
GETS LEADERS WHO AREN'T SCARED:
FORMER PBOC ADVISOR
Source - http://www.cnbc.com/2017/06/27/china-growth-will-accelerate-as-it-
gets-leaders-who-arent-scared-former-pboc-adviser.html
CNBC – June 27, 2017

5. CHINA AND EMERGING MARKETS
Source - http://marketrealist.com/2017/04/will-dragon-cause-worry-
global-markets/
China, of course, is a key source of concern in the EM space. A continued
slowdown in China will have a cascading effect on trade, commodity
prices, and investor confidence.
Meanwhile, rising interest rates in the US could make it harder for EM
economies to attract investments and could also lead to the local currency
(HEFA) depreciation.
At the same time, more geopolitical tensions could give rise to a sudden
spurt of risk aversion, which could cause a contagion in the EM space,
driving investors to flock toward safe-havens.
Marketrealist – April 18, 2017

6. CHINA – DEBT TO GDP, PRIVATE CONSUMPTION
Next big future – April 30, 2017

7. CHINA GDP AND INCOME GROWTH
▪ Morgan Stanley and Michael Pettis differ on what China’s sustainable economic growth rate is over the
next ten to fifteen years China. Morgan Stanley, however, proposes that China can manage to grow at
an average annual rate above 5 percent for the next ten years, which suggests that they think this
sustainable growth rate today is around 6 percent or a little less. Pettis thinks China is unlikely to
manage growth rates above 3 percent on average, and probably much lower.
▪ Key Metrics for China’s future economic growth
▪ A* China’s Debt to GDP is about 260% now – China can keep pushing GDP growth until debt to GDP
is about 350% of GDP. Then it will be whatever the natural sustainable GDP growth rate level is
▪ * The Sustainable growth rate for the next 10-15 years seems to be between 3 to 5%
▪ * If China can get private consumption up from about $5 trillion now to $12-15 trillion in 2025 then
China will be able to sustain a higher GDP growth rate level
▪ Morgan Stanley thinks that by 2030, household disposable income will reach $8,700; the median
age will rise to 43, and internet penetration will increase to 75%; compared to $5,000, 37 years old,
and 52%, respectively, in 2016.
Next Big Future – April 30, 2017

8. CHINA DEBT
▪ March’s 2.1 trillion renminbi increase in debt was part of a 7.0 trillion renminbi
increase in debt in the first quarter of 2017, an amount equal to an astonishing 39
percent of the country’s first quarter GDP. Part of this increased lending was used
simply to roll over bad debt that is not being recognized. But most of it went to fund
a 13.6 percent increase in public sector investment.
▪ Pettis thinks the increase in debt was needed to add the 3–4 percentage points. He
assumes this is the minimum gap between China’s sustainable growth rate and its
actual growth rate. Morgan Stanley—and anyone else who believes that China can
manage a decade or more of 5 percent growth is saying the large debt boosts
growth by only one percentage point above the rate China can achieve anyway
without relying on debt.
Next Big Future – April 30, 2017

9. CHINA – PRIVATE INVESTMENT
Next big future – April 30, 2017

10. CHINA AND PRIVATE INVESTMENT
▪ More reforms in the energy sector as part of re-focus on energy
▪ More P3 when it comes infrastructure spending
▪ More reforms in other areas as part of accessing more Foreign Direct
Invest (FDI)

11. GLOBAL PROTECTIONISM
▪ http://www.insurancebusinessmag.com/ca/news/breaking-news/rise-in-global-
protectionism-could-adversely-affect-the-global-economy--report-66056.aspx
Zurich Insurance also warned businesses that benefit from global trade that
they may be pushed into restructuring their supply chains in order to address
potential disruptions to their manufacturing and retail operations.
“We are in a period of geopolitical uncertainty, which can create a volatile
business environment for companies connected to global markets, whether it is
as a multinational corporation with overseas manufacturing and retail facilities
or a regional operation with global suppliers,” said Bryan Salvatore, head of
specialty products for Zurich North America.

12. CHINA AND CANADA
Source - http://dawsonstrat.com/2017/06/12/the-canada-china-trade-relationship/
Currently, China is Canada’s third largest trading partner, with two-way bilateral trade between
the countries totaling $85.9 billion in 2015. Prime Minister Justin Trudeau has indicated a desire
to double trade between Canada and China before 2025, and steps have been taken to that end.
In February 2017, an inaugural round of talks on a potential free trade agreement between
Canada and China took place.
The Canada-China FIPA lays the groundwork for an eventual Free Trade Agreement (FTA) between the two
nations. It is suggested that such an FTA would increase Canadian exports to China by almost $7.7 billion, as
well as Canadian GDP by approximately $7.8 billion (or 0.14 percent) by 2030. This would translate to the
creation of 25,000 Canadian jobs across all skill levels.
lthough engagement in exploratory talks does not guarantee a Canada-China FTA, it is evident that both
countries are working to strengthen the relationship and recognize the potential advantages of stronger ties
with each other.

13. CANADA AND CHINA TRADE
Source - https://www.thespec.com/news-story/7917493-report-shows-
skepticism-on-trade-with-china/?utm_source=dlvr.it&utm_campaign=tm
A sweeping federal report shows that Canadian businesses aren't sure a free trade pact will solve all the
concerns they have about dealing with China.
The newly released report summarizes the issues that more than 600 businesses, academics and civil
society groups believed must be resolved before Canada signs a free trade deal with China.
Among those concerns was that further liberalizing trade could kill Canadian businesses and jobs as
companies can't compete because of lax labour standards, lower environmental requirements, and state
subsidies in China, the report says.
These Canadian groups were adamant that failing to address these issues would only further the hollowing
out of the Canadian manufacturing sector.
There was skepticism that a free trade deal could "meaningfully address the full spectrum of challenges faced
by Canadian businesses trading with China," the report said.

14. BLOG – CHINA AND CANADA
▪ Harper when he was PM recognized the need to expand trade with China. Harper's government completed FIPA with China -
http://www.canadianbusiness.com/investing/canadas-fipa-treaty-with-china-and-what-it-means/ . Andrew Scheer has also been
clear that he is not against trade with China. Andrew Scheer wants to be careful on the kind of deals Canada makes with China.
▪ Harper was also very concern with both human rights as well as how Chinese companies would operate in Canada. Harper discussed
FTA with China, but said it would have to be a fair deal -https://www.theglobeandmail.com/report-on-business/rob-
commentary/building-on-a-breakthrough-year-in-canada-china-relations/article22406693/
▪ Trudeau is moving forward with FTA with China. Trudeau seems to have ignored China’s human rights as well all know that Trudeau
admired China - https://www.youtube.com/watch?v=l8wQrM5jTWc. Trudeau seems to be oblivious when it comes to either human
rights or handing over ownership to state-owned companies - https://www.theglobeandmail.com/news/politics/us-rebukes-canada-
over-chinese-takeover-of-norsat/article35294914/.
▪ People also need to remember Trudeau and his paid for access events - http://www.cbc.ca/news/politics/chinese-fundraiser-
trudeau-statue-1.3863266
▪ Other Sources:
▪ FIPA - https://www.slideshare.net/paulyoungcga/role-of-fipa-with-fdi-canada-june-2017
▪ China - https://www.slideshare.net/paulyoungcga/study-chinas-future-july-2017

15. BLOG #2 – CHINA AND CANADA
▪ Trudeau has said he admires China, right? http://www.cbc.ca/news/canada/toronto/justin-trudeau-s-
foolish-china-remarks-spark-anger-1.2421351
▪ Standards and Poor’s have downgraded China's Debt due to years of running up the credit card to
stimulate the economy.
▪ http://ww2.cfo.com/credit/2017/09/sp-downgrades-china-de-risking-
doubts/?utm_campaign=CFODailyAlert&utm_nooverride=1&utm_source=CFO-
email&utm_medium=email&utm_content=CFODailyAlert_Friday_2017-9-22&utm_term=credit
▪ I bet S&P start to look at Canada's Debt, especially seeing that debt financing imposed by Trudeau has
done nothing for the economy. Trudeau's thinks the economy is booming, right?
http://fortune.com/2017/07/31/justin-trudeau-canada-economy-booming/
▪ Yet when I crunch the Stats Canada numbers including looking at the details then I see an economy
led by housing and oil. The fundamentals are also not strong as business investment is waning and
taxes are going up, i.e. CPP hikes, elimination of tax credits, carbon taxation, small business tax grab.
https://www.slideshare.net/paulyoungcga/2015-election-promise-gdp-growth-canada-september-
2017

16. CHINA AND USA
▪ https://www.uschina.org/reports/us-exports/national