China aims to transition to a more sustainable growth model focused on domestic consumption and services. Strong investment and exports previously drove rapid GDP growth but this model is no longer viable due to overcapacity and weak global demand. Recent reforms accelerated under new leadership in 2013 aim to open markets, increase private sector involvement and liberalize financial markets. Growth is expected to slow gradually as reforms are implemented but will remain above 7% in 2014-2015 due to government stimulus measures. Lower growth, rising debt, pollution and corruption present medium-term challenges alongside risks from a potential slowdown in the property sector.
Cover Story China Running out of Breath
Outlook Crude Oil
Stats India Trade Deficit FY-2014
Emerging Country Russia
In Focus Land Acquisition Bill- A Snapshot
Key Growth Drivers and Fiscal Challenges in Economy: India and ChinaDibyajyoti Saikia
This presentation provides a comparison of Indian and Chinese economy in context to Key Growth Drivers and Fiscal Challenges.
Happy reading and Thanks!
CHINA STOCK MARKET CRASH 2015,
CHINA
INTRODUCTION
The Chinese stock market crash began with the popping of the stock market bubble on 12 June 2015.A third of the value of A-shares on the Shanghai Stock Exchange was lost within one month of the event. Major aftershocks occurred around 27 July and 24 August's "Black Monday."
CAUSES
Enthusiastic individual investors inflated the stock market bubble through mass amounts of investments in stocks often using borrowed money, exceeding the rate of economic growth and profits of the companies they were investing in.
Investors faced margin calls on their stocks and many were forced to sell off shares in droves, precipitating the crash.
By 8–9 July 2015, the Shanghai stock market had fallen 30 percent over three weeks as 1,400 companies, or more than half listed, filed for a trading halt in an attempt to prevent further losses.
Values of Chinese stock markets continued to drop despite efforts by the government to reduce the fall.
After three stable weeks the Shanghai index fell again on 27 July by 8.5 percent, marking the largest fall since 2007.
Federal Budget FY21: A Barrier Eclipsing ReliefSCPL Capital
FY21 : Key Budgetary Targets
GDP is expected to grow 2.2% vs. -0.4% in FY20e
Inflation to clock in at 6.5% as compared to 10.9% in FY20e
PSDP allocation of 1.3trn (up 13% YoY)
Tax revenue targeted at PKR4.7trn (up ~1trn YoY)
Fiscal Deficit to stand at 7% vs. 9.1% in FY21
Foreign Aid and Fiscal Behaviour in Nigeria: An Impact Assessment of Deregula...iosrjce
The study examined the influence of deregulation on the relationship between foreign aid and fiscal
behaviour in Nigeria. The equation which described foreign aid as function of important fiscal variables and
other macroeconomic variables is derived from the famous two-gap model. Chow test is used to examine if there
is any structural changes since the adoption of deregulation that has significantly affected the relationship
between foreign aid and fiscal behaviour. The result shows that deregulation has positively and significantly
affected the impact of fiscal behaviour in Nigeria on foreign aid accessibility. But the effect has been short-lived
recently owing to the recent drastic fall in foreign aid available to Nigeria despite the sustained increase in both
government revenue and expenditure. It is recommended that assessment of other shocks that can affect the
fiscal behaviour in Nigeria should be conducted with a view to getting the reason why deregulation fails to
maintain positive relationship that exists between fiscal behaviour and foreign aid in Nigeria.
Cover Story China Running out of Breath
Outlook Crude Oil
Stats India Trade Deficit FY-2014
Emerging Country Russia
In Focus Land Acquisition Bill- A Snapshot
Key Growth Drivers and Fiscal Challenges in Economy: India and ChinaDibyajyoti Saikia
This presentation provides a comparison of Indian and Chinese economy in context to Key Growth Drivers and Fiscal Challenges.
Happy reading and Thanks!
CHINA STOCK MARKET CRASH 2015,
CHINA
INTRODUCTION
The Chinese stock market crash began with the popping of the stock market bubble on 12 June 2015.A third of the value of A-shares on the Shanghai Stock Exchange was lost within one month of the event. Major aftershocks occurred around 27 July and 24 August's "Black Monday."
CAUSES
Enthusiastic individual investors inflated the stock market bubble through mass amounts of investments in stocks often using borrowed money, exceeding the rate of economic growth and profits of the companies they were investing in.
Investors faced margin calls on their stocks and many were forced to sell off shares in droves, precipitating the crash.
By 8–9 July 2015, the Shanghai stock market had fallen 30 percent over three weeks as 1,400 companies, or more than half listed, filed for a trading halt in an attempt to prevent further losses.
Values of Chinese stock markets continued to drop despite efforts by the government to reduce the fall.
After three stable weeks the Shanghai index fell again on 27 July by 8.5 percent, marking the largest fall since 2007.
Federal Budget FY21: A Barrier Eclipsing ReliefSCPL Capital
FY21 : Key Budgetary Targets
GDP is expected to grow 2.2% vs. -0.4% in FY20e
Inflation to clock in at 6.5% as compared to 10.9% in FY20e
PSDP allocation of 1.3trn (up 13% YoY)
Tax revenue targeted at PKR4.7trn (up ~1trn YoY)
Fiscal Deficit to stand at 7% vs. 9.1% in FY21
Foreign Aid and Fiscal Behaviour in Nigeria: An Impact Assessment of Deregula...iosrjce
The study examined the influence of deregulation on the relationship between foreign aid and fiscal
behaviour in Nigeria. The equation which described foreign aid as function of important fiscal variables and
other macroeconomic variables is derived from the famous two-gap model. Chow test is used to examine if there
is any structural changes since the adoption of deregulation that has significantly affected the relationship
between foreign aid and fiscal behaviour. The result shows that deregulation has positively and significantly
affected the impact of fiscal behaviour in Nigeria on foreign aid accessibility. But the effect has been short-lived
recently owing to the recent drastic fall in foreign aid available to Nigeria despite the sustained increase in both
government revenue and expenditure. It is recommended that assessment of other shocks that can affect the
fiscal behaviour in Nigeria should be conducted with a view to getting the reason why deregulation fails to
maintain positive relationship that exists between fiscal behaviour and foreign aid in Nigeria.
http://pwc.to/1lN91cC
Comme tous les mois, l’équipe d’économistes de PwC publie une note sur la situation macro-économique mondiale. Ce mois-ci, focus sur l’accroissement des inégalités dans les pays matures ; les incertitudes concernant la croissance chinoise ; et les prévisions de croissance pour la Grande-Bretagne.
World bank report on China Economic Update 2013Shiv ognito
The World Bank economic update provides an update on recent economic and social developments and policies in China, and presents findings from ongoing World Bank work on China. The update was produced by a World Bank team consisting of Karlis Smits (Senior Economist), Bingjie Hu (Economist), Binglie Luo (Research Assistant), Tony Ollero (Economist), and Ekaterine Vashakmadze (Senior Economist) with support from the China country team, and under the overall guidance of Klaus Rohland (Country Director), Sudhir Shetty (Sector Director), Bert Hoftman (Regional Chief Economist), and Chorching Goh (Lead Economist).
CII’s flagship monthly publication Economy Watch has been now revamped and rechristened as ‘Economy Matters’. Apart from encompassing all the key features of the old version, the new issue also carries a new section on Corporate Profitability to keep readers abreast about the latest trends in corporate performance. The ‘Economy Matters’ brought out by CII Research seeks to provide an in-depth update on current trends in the domestic and international economy and helps in tracking policy developments and understanding industry dynamics.
It gives me a pleasure to present the summary of India Budget Synthesis 2014.
While you may already have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2014 on You, Your Company and Your Sector.
Hope you find this analysis useful in taking clearer business decisions and align your company's strategy with the overall economic climate in the balance part of financial year 2014-15.
Would love to hear your feedback on the usefulness of the same.
Dear Friends,
It gives us a pleasure to present the summary of India Budget Synthesis 2014.
While you may already have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2014 on You, Your Company and Your Sector.
Hope you find this analysis useful in taking clearer business decisions and align your company's strategy with the overall economic climate in the balance part of financial year 2014-15.
Would love to hear your feedback on the usefulness of the same."
Regards,
Vishal Thakkar | Group Head - Corporate Relations | Synthesis Group
Hand Phone: 91 9320007891 | Boardline: 91 22 24093737 | Fax: 91 22 24093737
Ultimo informe elaborado por Atradius Crédito y Caución, sobre las economías de Asia-Pacífico, donde se analizan los plazos de pago y las previsiones de insolvencias para 2017
Current State of the Indian EconomyCautious optimism for the.docxfaithxdunce63732
Current State of the Indian Economy
Cautious optimism for the future
February 2013
www.deloitte.com/in
2
The Big Picture
The Indian Economy has experienced
its worst slowdown in nearly a decade
on the back of global contractionary
headwinds, domestic macro-economic
imbalances and policy reversals on the
fiscal front, 2012 has been a challenging
year for the economy. The year started
with news that the previous fiscal’s
fourth quarter GDP had dropped to
5.5%. That coupled with low growth,
macro-economic issues such as high
fiscal deficit, expansionary subsidies and
worsening current account balance has
added to the slowdown.
The 2011-12 Budget had proposed
to amend the 1961 income tax
law by introducing retrospective
tax adjustments and General Anti-
Avoidance Rules (GAAR). These steps
were viewed negatively by foreign
investors. Subsequent downgrading
of the Indian economic outlook from
‘stable’ to ‘negative’ by a major rating
agency, led to continued downward
pressure on the investment climate.
Additionally, as fiscal conditions
worsened over the year, export
numbers were revised in light of data
discrepancies leading to a widening of
the current account deficit.
In the second half of the fiscal, the
Government proactively intervened
with phased reforms to stabilize the
economy. Measures were taken to
reduce subsidies (oil, fertilizers) which
would in turn lower the fiscal deficit.
The Government also took concrete
actions to attract foreign direct
investment (FDI) and strengthen the
rupee. However, the impact of these
policy reforms remains uncertain in
the short term. Concerns continue
to exist over the current account
deficit scenario, prevailing supply side
constraints, inadequate infrastructure
investments and long term policy
directions.
In face of a perceivably weak macro-
economic climate, a well-planned
economic revival policy is required to
steer the Indian Economy back on the
growth path. Even though the long
term prospects of the economy look
promising, cautious optimism is the
tone in the short to medium term.
Global Linkages
Performances of advanced economies
continue to weigh on India’s growth
story.
The World Economic Forum’s annual
meeting for 2013 was held in Davos,
Switzerland in January 2013, bringing
together more than 2,000 top business
leaders, international political leaders,
Current State of the Indian Economy Cautious optimism for the future 3
Economic opportunity is dwindling. While reforms have
been initiated, further action to create infrastructure, boost
savings and generate growth will be welcome
selected intellectuals and journalists to
discuss the most pressing issues facing
the world. The IMF, in its update of
World Economic Outlook, lowered the
world GDP growth projections by 0.1%
each for 2013 & 2014 as compared to
the October 2012 projections. This is on
account of downside risks that continue
in light of renewed s.
In August-September, 2014 issue of Economy Matters, we analyse the recently held G20 Summit; movement in oil prices and Ukraine situation in the section on Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation and Trade. In the section on Taxation, the urgency of implementing GST in India is discussed. The Sectoral spotlight for this issue is on the Food Processing Industry. In Focus of the Month, the spotlight is on improving investment in Infrastructure.
The Union Finance Minister Shri Arun Jaitley tabled the Economic Survey 2016-17 today, the first day of the Budget Session of the Parliament. The Economic Survey says that the adverse impact of demonetisation on GDP growth will be transitional and the economy will recover with remonetisation. The Survey states that once the cash supply is replenished, which is likely to be achieved by end of March 2017, the economy would revert to normal. The GDP growth in 2017-18, as per the survey, is projected to be in the range of 6¾-7½ percent.
The Survey suggests a few measures to maximise long-term benefits and minimise short-term costs. One, fast remonetisation and early elimination of withdrawal limits. This would reduce GDP growth deceleration and cash hoarding. Two, continued impetus to digitalisation while ensuring that this transition is gradual and inclusive, and appropriately balances the costs and benefits of cash versus digitalisation. Three, following up demonetisation by bringing land and real estate into the GST. Four, reducing tax rates and stamp duties.
This is an analysis and brief overview document on the Survey
India Economic Survey 2017 by Edelman IndiaAklanta Kalita
The Union Finance Minister Shri Arun Jaitley tabled the Economic Survey 2016-17 today, the first day of the Budget Session of the Parliament. The Economic Survey says that the adverse impact of demonetisation on GDP growth will be transitional and the economy will recover with remonetisation. The Survey states that once the cash supply is replenished, which is likely to be achieved by end of March 2017, the economy would revert to normal. The GDP growth in 2017-18, as per the survey, is projected to be in the range of 6¾-7½ percent.
The Survey suggests a few measures to maximise long-term benefits and minimise short-term costs. One, fast remonetisation and early elimination of withdrawal limits. This would reduce GDP growth deceleration and cash hoarding. Two, continued impetus to digitalisation while ensuring that this transition is gradual and inclusive, and appropriately balances the costs and benefits of cash versus digitalisation. Three, following up demonetisation by bringing land and real estate into the GST. Four, reducing tax rates and stamp duties.
Similar to QNB Group China Economic Insight 2014 (20)
Mitigating the Deadly Embrace in Financial Cycles: Countercyclical Buffers an...Joannes Mongardini
IMF Working Paper WP/16/87 providing macroprudential simulations of the effectiveness of countercyclical buffers and loan-to-value limits to mitigate housing bubbles and bursts
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
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Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
Attending a job Interview for B1 and B2 Englsih learnersErika906060
It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
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Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
Know more: https://www.synapseindia.com/technology/mean-stack-development-company.html
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
2. Contents Executive Summary
Background
Recent Developments
Macroeconomic Outlook
Sustainable Growth
Banks and their Shadows
Financial Liberalization
Macroeconomic Indicators
QNB Group Publications
QNB Group International Network
Strong investment and exports have driven rapid GDP
growth over the last 30 years, but this model is no longer
sustainable due to overcapacity and weak global demand
The authorities aim to guide growth onto a more
sustainable path by encouraging domestic consumption
and services in order to raise China from a middle to high
income economy; this will inevitably mean lower GDP
growth over the medium term
Reforms have been accelerated after the new leadership
came to power in early 2013 (see the Sustainable Growth
chapter) and primarily aims to: open markets and increase
private sector involvement; liberalize exchange rates,
interest rates and the capital account (see the Financial
Liberalization chapter); increase urbanization; and tackle
the buildup of leverage in government finances and shadow
banks
The investment slowdown is dragging down overall GDP
growth, but government stimulus measures are expected to
keep growth above 7% in 2014-
The current account surplus should continue to narrow as
higher consumption strengthens domestic demand
The budget deficit has narrowed owing to higher tax
revenue, but is expected to widen slightly in 2014- as the
authorities add fiscal stimulus to meet the growth target
Inflation is expected to remain below target in 2014-
leaving room for monetary stimulus
Exchange rate controls have been eased and a gradual
strengthening of the currency is expected as the capital
account is liberalized, leading to larger portfolio inflows
Growth in the banking sector is likely to remain robust as
Chinese consumers are expected to take out more loans to
finance the purchase of homes, durable goods and higher
consumption
The shadow banking sector is mushrooming as a means to
circumvent the restrictions in traditional banking, leading
to rising liquidity and default risks
The main systemic risks relate to a slowdown in the real
estate sector, which is connected to excessive leverage in
shadow banking and high local government debt
Reforms will also need to address other medium term
challenges and risks, such as high debt, rising pollution and
corruption
Economics Team
economics@qnb.com.qa
Joannes Mongardini
Head of Economics
joannes.mongardini@qnb.com.qa
Rory Fyfe
Senior Economist
rory.fyfe@qnb.com.qa
Ehsan Khoman
Economist
ehsan.khoman@qnb.com.qa
Ziad Daoud
Economist
ziad.daoud@qnb.com.qa
Hamda Al–Thani
Economist
hamda.althani@qnb.com.qa
Editorial closing: June ,
3. Background
China is set to become the world’s largest economy by
China has transformed over the last years from a
predominantly agrarian economy to the world’s factory,
lifting 500m people out of poverty in the process. It is now
the most populous nation (1.36bn people), the largest
contributor to global growth, the largest exporting nation,
and is expected to become the world’s largest economy in
. Nonetheless, China remains a middle income
country, with the challenge of raising itself to a high–
income economy—GDP per capita was just under USD k
in China in 2013, compared with USD k in the US. To
achieve this, China plans to enact a new transformation
from an investment–led to a consumer-based economy.
China currently has the world’s highest private savings at
around USD5tn. Encouraging people to spend more of
these savings to drive the economy forward is the main
challenge for the future.
GDP of the World’s Largest Economies
(tn USD adjusted for purchasing power parity, 2016 value shown)
Sources: International Monetary Fund (IMF)
Strong investment drove growth over the last 30 years,
but this model is no longer sustainable
Investment in infrastructure and manufacturing and a
focus on exports have driven rapid GDP growth. In the
s, privatization, low labor costs and opening up to
foreign investment drove economic expansion. In 2008, a
USD600bn stimulus (mainly infrastructure projects)
further boosted investment growth as exports slowed due
to the global recession. This growth model is now
unsustainable: over-investment, combined with weak
global demand, have led to excess capacity in
manufacturing and infrastructure and high credit levels
( % of GDP) from traditional and shadow banks. As a
result, the authorities aim to guide the economy onto a
more sustainable growth path by encouraging domestic
consumption and a service-oriented economy (see
Sustainable Growth chapter).
Consumption, Investment and Exports
(Share of GDP)
Sources: National Bureau of Statistics (NBS)
Lower growth is just one of China’s medium term
challenges
Chinese growth fell below its historical average in 2011-
and is expected to slow further. China grew by an
average annual rate of % since 2000. However, growth
has slowed progressively in recent years, from 10.4% in
2010 to 7.7% in 2013, and is expected to continue slowing
to around 7.2% by China’s new leadership (in power
since March 2013) has taken action to enhance growth
(financial liberalization; tax breaks for small companies;
and more financing for social housing). Further reforms
are expected to increase openness and encourage the
development of the private sector (see Sustainable Growth
chapter). However, reforms will also need to address other
medium term challenges and risks, such as high debt,
rising pollution, a mushrooming and unregulated shadow
banking system (see Banks and their Shadows chapter)
and corruption.
Real GDP Growth
(%)
Sources: NBS
US, 18.4
European
Union, 19.3
China, 21.0
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014f 2016f
Thousands
Investment
Exports
0
10
20
30
40
50
60
2000 2002 2004 2006 2008 2010 2012
Private
Consumption
2013
Average to
2013
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010 2012 2014f 2016f
4. Recent Developments - )
The investment contribution to GDP rose in 2013, after
falling for the previous four years
A hefty government stimulus program boosted the
contribution of investment to real GDP growth in 2013,
partly offsetting lower contributions from consumption
and net exports. The contribution of investment picked up
as the government increased railway investment and
loosened monetary policy in order to achieve its targeted
growth rate. This helped stabilize overall growth at .
The contribution of private and public consumption
slowed, partly reflecting a tightening of fiscal policy and a
cooling of the property market. The weak global recovery
weakened demand for Chinese goods, pushing down the
contribution of net exports.
Contributions to Real GDP Growth
(% of GDP)
Sources: NBS
Growth slowed below target in Q1 2014, but a further
government stimulus will sustain the growth momentum
Real GDP growth in Q1 2014 slowed to 7.4%, falling below
the official target of 7.5%, but the government has
already announced stimulus measures to boost growth.
Growth slowed across the major sectors, although some of
the slowdown may have been related to the Lunar New
Year holiday, when many firms close down for two weeks.
In Q2, the government announced fiscal and monetary
stimulus measures, such as tax breaks, increased
spending and cuts to bank reserve requirements (see
below), which should be supportive of growth. Services
was the fastest growing major sector in 2013-14,
supporting the transition to a more consumer-oriented
economy (see Sustainable Growth chapter).
Real GDP Growth
(%, year on year)
Sources: NBS
The current account surplus has narrowed, indicating
that external economic rebalancing is underway
The current account surplus has narrowed gradually as
export growth has slowed due to weak global demand. A
high percentage of Chinese imports are inputs for export
manufacturing. Therefore, import growth slowed in line
with export growth. Nonetheless, import growth has been
somewhat higher than export growth as a growing share
of imports are for domestic consumption and rapid growth
in Chinese tourism has boosted imports of services for
transportation and travel. Historical current account
surpluses and high inflows of foreign investment have led
to the rapid accumulation of international reserves.
Controls on the capital account limit foreign portfolio
inflows.
Current Account
(% of GDP)
Sources: NBS and IMF
-3.4
0.4 -0.4 -0.2 -0.3
8.1
5.5
4.5 3.6 4.2
3.5
3.0
4.0
3.0 2.8
1.1
1.5
1.3
1.2 1.1
9.2
10.4
9.3
7.7 7.7
2009 2010 2011 2012 2013
Overall
Growth
Public
Consumption
Private
Consumption
Investment
Net Exports
7.7 7.6 7.7 7.7 7.4
0
1
2
3
4
5
6
7
8
9
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14
Agriculture & Mining Industry & Construction
Services Total
Growth
Target
7.5
29.6
26.425.6 23.8
0.1
-0.5
4.0
2.1
2010 2013
Exports Imports Other Balance
5. Exchange rate controls have been eased as China moves
towards full capital account liberalization
The exchange rate is allowed to float within a 2% band
above or below a level set daily by the PBC, up from 1%
since March 2014. The authorities have stated the
objective to gradually move toward a fully floating
exchange rate as part of reforms to liberalize the capital
account (see Financial Liberalization chapter). Having
allowed the exchange rate to appreciate during 2013, the
PBC has reversed course since early 2014 and the
currency has weakened. This may be to increase export
competitiveness as growth slows or to ward off
speculators betting on further appreciation before
increasing the exchange rate band. The sale of Chinese
Yuan to weaken the currency has led to an accumulation
of foreign exchange reserves, which have risen from
around 18.1 months of import cover at end-2012 to around
20 months at end-March 2014, or USD3.9tn.
Exchange Rate
(USD:CNY)
Sources: Bloomberg
The budget deficit narrowed, leaving room for fiscal
stimulus even when off-budget activities are factored in
Rising tax revenue helped narrow the fiscal deficit.
However, the official fiscal deficit excludes a number of
off-budget activities. In recent years, local governments
have increasingly financed infrastructure projects
through the shadow banking system (see Banks and their
Shadows chapter) or through land sales. If this is
considered as extra financing, it would add to the fiscal
deficit The IMF estimates that this “augmented fiscal
deficit” was around of GDP in There are
additional government liabilities related to financial
sector, state owned enterprise (SOE) debt and shortfalls in
the pensions system. However, offsetting all of this, the
government holds significant assets in sovereign wealth
funds, pension funds and equity stakes in SOEs.
Therefore, the government has sufficient resources to
provide additional fiscal stimulus, if needed, to help meet
its growth target.
General Government Budget
(% of GDP)
Sources: IMF
Fiscal policy has been used to stimulate growth and
support key sectors, such as education
The government has implemented a series of fiscal
stimulus packages and boosted spending on education.
There was a significant increase in education expenditure
in 2010-12 as part of efforts to rebalance the economy
towards services. This should help boost human capital
over the longer term, supporting the development of a
service-oriented economy. Fiscal stimulus measures in
2013-14 have mainly included tax breaks for small
companies to support the private sector; increased
financing for social housing; and spending on new high-
speed railways. This has led to higher community affairs,
general services, social support and transportation.
Expenditure Breakdown
(% of GDP)
Sources: NBS
Official
Daily Fixing
Interbank
Rate
6.0
6.1
6.2
6.3
6.4
1-1-13 1-4-13 1-7-13 1-10-13 1-1-14 1-4-14
Trading band increased
from 1% to 2% (Mar-14)
1.2%
Lower Limit
Upper Limit
24.8 24.822.6 22.9
-2.2 -1.9
-9.7
-7.2
2012 2013
Expenditure Revenue
Balance "Augmented Deficit"
3.1 4.1
2.3
2.5
2.3
2.4
2.0
2.31.5
1.71.4
1.610.2
10.4
2010 2011
Other
Transportation
Community Affairs
Agriculture
Social Support
General Services
Education
2012
22.8
24.8 Total
6. Inflation is below target, leaving room for monetary
stimulus
Inflation was 1.8% in the year to April and has been
consistently below the target of 3.5%, which gives the
PBC room for further monetary stimulus. Meanwhile,
broad money growth was just above the 13% target, but
this target is of secondary importance to the authorities.
Producer prices fell 1.4% in the year to May and have
fallen each of the last 27 months. This should leave the
authorities with room to ease monetary policy further
without deviating too far from their targets. The central
bank cut the reserve requirement ratio (RRR) from 21.5%
in 2011 to 20% in 2012. It cut the RRR at rural banks by
between and 2.0% in April , just after Q1 GDP
growth came in below target. Another 0.5% cut to the
RRR was made in June for banks that lend to the
agricultural sector and SMEs in order to add liquidity and
further stimulate private consumption.
Inflation and Broad Money Growth
(%)
Sources: People’s Bank of China PBC) and NBS
Growth of the banking sector is slowing
Growth in the banking sector has been slowing in 2013-
, reflecting the authorities’ intent to control excessive
credit growth. The PBC is concerned about high lending to
certain sectors (property and mining) and the growing
shadow banking sector. Almost half of all new credit in
China last year was issued through the shadow banking
system, which is mainly banks creating off-balance sheet
vehicles to boost lending and attract investment (see
Banks and their Shadows chapter). The average return on
equity is falling (19.2% at end-2013) owing to slowing
growth and higher provisioning. Recognized NPLs were
only 1.0% at end–2013, but unrecognized NPLs are
thought to be significant, but estimates are unavailable.
However, capital buffers are adequate at most banks, with
the capital adequacy ratio at 12.2% at end-
Banking Sector Growth
(% change, year on year)
Sources: PBC
Links between real estate, shadow banking and local
government debt are the main systemic risk
The authorities are concerned about a slowdown in the
real estate sector. The number of new projects and
investment in real estate has slowed, leading to slower
price increases. Annual growth in an official index of
house prices in 70 major cities slowed from 9.2% in
December 2013 to 6.4% in April . A private index
covering 100 cities showed a decrease in prices of 0.3% in
April . There is a risk that a downturn in real estate
could impact the real economy by eroding household
wealth and negatively impacting production in connected
sectors, such as steel, cement and household appliances,
which are already suffering from excess capacity. Lending
to local governments, property developers and mining
companies through the shadow banking system (see
Banks and their Shadows chapter) may have led to the
buildup of excessive debt. A correction in property prices
could put pressure on leveraged borrowers, potentially
leading to defaults and liquidity issues in the shadow
banking system.
Real Estate Prices (in 70 major cities)
(% change, year on year)
Sources: NBS
1.8
13.2
0.0
4.0
8.0
12.0
16.0
20.0
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Broad Money
Target (13%)
Broad Money
Growth
Inflation
Inflation
Target (3.5%)
Assets
Loans
Deposits
10
11
12
13
14
15
16
17
18
19
20
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14
0.6
9.2
6.4
0
1
2
3
4
5
6
7
8
9
10
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14
7. Macroeconomic Outlook (2014- )
A continued investment slowdown is expected to lead to
lower real GDP growth over the medium term
Real GDP growth is expected to slow gradually from 7.7%
in 2013 to 7.2% by 2016 owing to the slowdown in
investment. Private consumption should pick up,
encouraged by government policies to open markets and
boost spending. We expect the contribution of private
consumption to real GDP growth to rise to 3.3 percentage
points (pps) by 2016, compared with 3.1pps from
investment, as the economy becomes more consumer
driven (see Sustainable Growth chapter). The contribution
of public consumption should remain flat at 1 pps as the
government expands its education and health services. A
recovery in external demand should support export
growth in and 2015, making the contribution of net
exports positive.
Contributions to Real GDP Growth
(pps)
Sources: NBS and QNB Group forecasts
The current account surplus is projected to narrow
slightly as import growth outpaces exports
Imports are expected to rise on higher private
consumption as the economy becomes more consumer
based and services oriented. Accelerating private
consumption growth and the stronger exchange rate
should increase demand for imports, tourism and travel.
Meanwhile, the environment for Chinese exports is
expected to remain challenging. Rising wages and a
stronger exchange rate (see below) will undermine the
competitiveness of Chinese exports while competition
from other Asian emerging markets increases.
Conversely, the global recovery should support demand
for Chinese exports. As a result, exports are expected to
remain broadly constant as a share of GDP. Overall, we
expect the current account surplus to narrow slightly as
imports grow faster than exports.
Current Account
(% of GDP)
Sources: NBS, IMF and QNB Group forecasts
A managed appreciation of the exchange rate is expected
and international reserves may start falling
We expect the exchange rate to appreciate steadily in
2014-16 as capital inflows are gradually liberalized,
leading to higher portfolio inflows (see Financial
Liberalization chapter). The authorities are likely to
continue their policy of allowing the currency to
strengthen gradually in order to encourage domestic
consumption (by making foreign goods cheaper) and to
reduce external imbalances by helping to lower the
current account surplus. As a result of the narrowing
current account surplus and growing imports,
international reserves are likely to fall to around
months of import cover by 2016. However, in absolute
terms they should continue to accumulate to around or
USD5.4tn.
Exchange Rate
Sources: Global Insight and QNB Group forecasts
-0.3 0.1 0.1 -0.2
2.8 2.7 3.0 3.3
4.2 3.6 3.3 3.1
1.1
1.0 1.0 1.0
7.7
7.5 7.4 7.2
2013 2014f 2015f 2016f
Overall
Growth
Public
Consumption
Investment
Private
Consumption
Net Exports
26.4
25.8
25.8
26.2
23.8
23.4
23.6
24.1
-0.5 -0.6 -0.6 -0.6
2.1 1.8 1.7 1.5
2013 2014f 2015f 2016f
Exports Imports Other Balance
6.2
6.1
6.0
5.9
19.3
19.6
19.4
19.1
18.6
18.8
19.0
19.2
19.4
19.6
19.8
5.7
5.8
5.9
6.0
6.1
6.2
6.3
2013 2014f 2015f 2016f
USD:CNY International Reserves (months import cover)
8. The government budget deficit is expected to widen
slightly on continued stimulus to meet the growth target
The fiscal deficit should continue to expand as the
government adds further stimulus to help rebalance the
economy and meet growth targets. Further government
stimulus packages are likely, as per the increased railway
spending and tax breaks for small companies announced
recently. The tax breaks are likely to lower revenue in
2014, while rising expenditure on education and health is
likely to gradually push up expenditure. Therefore, the
fiscal deficit is likely to widen marginally in 2014-
Meanwhile, the augmented fiscal deficit is expected to
narrow to 5.8% of GDP by 2016 as local governments
reduce their recourse to land sales and financing through
the shadow banking system.
Government Budget
(% of GDP)
Sources: IMF and QNB Group forecasts
CPI inflation is expected to pick up gradually on rising
domestic demand and government stimulus
Rising wages and the push to move the economy towards
higher private consumption should increase inflationary
pressures on the demand side. Therefore, we expect
inflation to rise towards the 3.5% target in 2014-
Inflationary pressures will be partly offset by the
expected appreciation of the exchange rate (see below),
which will reduce imported inflation, and overcapacity,
which could ease some cost-push inflation. Moreover,
rising interest rates (after the expected lifting of a cap on
deposit rates) and the curbing of growth in shadow
banking should put further downward pressure on
inflation.
CPI Inflation
(annual average % change)
Sources: PBC, NBS and QNB Group forecasts
Banking sector growth is expected to remain robust on
strong demand for consumer loans and mortgages
We expect deposit growth to slow to an average % in
- , compared with % in the previous three years
as households are encouraged to save less and spend
more. Loan growth is projected to remain robust on strong
demand for consumer loans and mortgages. This should
lead to a steady but small rise in the loan to deposit ratio
(LDR). Profitability is likely to fall owing to a number of
factors: slower GDP growth; narrower net interest
margins (NIMs) owing to the liberalization of deposit
rates and the opening of the banking sector to
competition; and higher provisioning, defaults or write-
offs. Furthermore, as the authorities aim to gain tighter
control of the shadow banking system (see Banks and
their Shadows chapter), it is likely that banks will need to
bring some low-quality shadow banking assets onto their
balance sheets, which could add to provisioning and
further depress profitability.
Banking Sector
(% of GDP)
Sources: PBC and QNB Group forecasts
24.8
24.7
25.3
25.5
22.9
22.6
22.6
22.5
-1.9 -2.0 -2.1 -2.1
2013 2014f 2015f 2016f
Expenditure Revenue Balance
2.6
2.0
2.5
3.0
Inflation
Target (3.5)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2013 2014f 2015f 2016f
163 170 177 184189 196
203
210
86.3 86.7 87.0 87.3
2013 2014f 2015f 2016f
Loans Deposits LTD Ratio
9. Sustainable Growth
Excess capacity requires a continued slowdown in
investment growth to rebalance the economy
Growth has mainly been driven by investment since 2000,
leading to excess capacity. This was accentuated by the
government investment stimulus after the financial
crisis and subsequent weak global demand. For example,
steel capacity was 970m tons per year (t/y) at the end of
2012, but production was only 710m t/y (75% capacity
utilization). Similarly, cement capacity was 3.1bn t/y, but
only bn tons were produced China’s capacity
utilization is dependent on the world economy (China
accounted for 46% of global steel production and 57% of
global cement production in 2012). Furthermore, export
competitiveness declined as wages and other production
costs rose and as competition from other emerging
markets stiffened. Therefore, a gradual slowdown in
investment and new sustainable sources of growth are
needed to help rebalance the economy.
Capacity Utilization in the Economy
(Production as % of total capacity)
Sources: IMF and NBS
Various reforms are underway to facilitate the transition
to a more sustainable advanced economy growth model
China is implementing a package of reforms to boost
consumption, reduce the savings rate and thereby raise
GDP per capita towards advanced economy levels. Future
growth could be generated from higher consumer
spending through a lower savings rate. With about
USD5tn in savings, China has the highest savings in the
world. Unleashing these savings should generate growth
in consumption, helping to raise GDP per capita towards
advanced economy levels, with estimates that China will
catch up with the US per capita income by China’s
past growth model depended on absorbing surplus labor
from the countryside into factories. With excess
manufacturing capacity, new jobs will need to be found
for future migrants in services sectors. The new
leadership is already implementing reforms to guide the
economy towards consumption and services.
Savings Rates and GDP per Capita ( )
Sources: IMF and QNB Group Analysis
Reforms aim to open up markets…
China’s new leadership outlined a blueprint for reform at
its Third Plenum in November last year. The leadership
aims to raise the share of services in GDP to levels in
advanced economies, such as the US. The gap has already
narrowed by almost 10% of GDP since 1980. To further
close this gap, the government is implementing reforms,
including a greater role for the market through: financial
reform (permitting small private banks and further
liberalization (see Financial Liberalization chapter);
market–based pricing of resources and utilities; and
reforms to allow greater private ownership in SOEs. In
May , private companies were invited to participate
in 80 major national projects in infrastructure, energy and
communication sectors. A greater role for the private
sector and stronger financial services should encourage
innovation and growth of services.
Services and other Sectors
(% of GDP)
Sources: NBS
82.0
81.0
80.0
75.0
70.0
65.0
65.0
71.0
69.0
64.0
60.0 60.0
2009 2010 2011 2012
Steel Cement Total
Full (100%) Capacity
China
Emerging
AsiaEmerging
Markets
Advanced
Economies
EU
US
0
10
20
30
40
50
60
0 10 20 30 40 50 60
GDPperCapita(kUSD,PPP)
Gross National Savings (% of GDP)
21.6
Services
Agriculture
Industry
66.1
US Services
0
10
20
30
40
50
60
70
80
90
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
44.5
45.4
79.6
44.8
9.7
34.8
10. …and free up resources for consumption
Reforms aim to increase urbanization and unlock
resources for consumption. The government plans to
encourage urbanization by reforming resident permits,
relaxing controls on rural residents moving to urban
areas. Urbanization typically boosts growth of services
and consumption. Land reforms will give farmers greater
rights and allow the transfer, mortgage or rent of land
leases. This should unlock resources, boosting retail sales,
which are stronger than stated as online sales are omitted
from official statistics but are up about 50% in the last
year. An increase in SOE dividends is being directed
towards social spending, also supporting consumption. In
the longer term, relaxation of the one-child policy
(couples can now have two children if one parent is an
only child, instead of both parents previously) should
alleviate the drag on growth from an aging population.
Retail Sales and Industrial Production
(% change yoy)
Sources: Bloomberg
Reforms will also tackle unsustainable costs of growth,
such as rising debt levels, pollution and inequality
Mounting debt, higher pollution and rising inequality all
undermine the sustainability of China’s current growth
model. The investment boom was partly debt-financed.
Total debt rose by pps over the last two years to 196%
of GDP at end- . Overcapacity means some
investments yield insufficient returns to service debt, so
reform of government finances and broader financial
oversight are planned. The speed of economic growth has
created acute environmental issues, such as poor air
quality and desertification. It has also led to resource
shortages, notably water, which is a significant constraint
on growth as it is non-tradable. The authorities plan to
address environmental issues through regulation and
investment in cleaner technology. Finally, rapid growth
has sharpened inequalities, which is being addressed by
reform of rural-urban resident permits, an anti-corruption
drive and social welfare reforms.
Costs of Growth:
Debt, Pollution and Inequality
Sources: PBC, Financial Stability Board, Beijing Environmental
Protection Monitoring Center, World Health Organization (WHO),
World Bank and CIA
Industrial
Production
Retail Sales
0
5
10
15
20
25
Jan-09 Nov-09 Sep-10 Jul-11 May-12 Mar-13 Jan-14
2009 2013
Rising
Inequality
47.3
42.1
Gini Coefficient
2011 2013
165%ofGDP
196%ofGDP
Debt
2013
WHO Guideline (10)
Annual fine
particle
concentration
90.1
Beijing Air Pollution
11. Banks and their Shadows
Asset growth has slowed in line with the slowing
economy
Asset growth has been rapid up to 2013 owing to the
strong economy, but expansion is slowing in line with
lower GDP growth and high asset penetration. In 2009-13,
asset growth was 20.5%, but it is expected to slow to
around 14.0% in 2013-16 owing to slower economic
growth. This is still a relatively high rate of growth as
government policies to boost consumption as well as
monetary stimulus, such as RRR cuts, should be
supportive of credit growth.
Bank Assets
(tn USD)
Sources: PBC
Asset penetration is high by Asian standards
China’s asset penetration is high compared to Asian
peers. Asset growth is slowing, but remains higher than
nominal GDP growth, so penetration is expected to
continue rising. Steady deposit growth provides a stable
source of funding and a low loan to deposit ratio )
leaves room for further growth in assets (see
Macroeconomic Outlook above). However, even though
asset penetration is already high, there is room for
continued steady growth through financial deepening as
China moves towards becoming an advanced economy,
such as Japan.
Asset Penetration
(Assets as a % of GDP)
Sources: PBC; * March 2013 data (latest available)
Households are accounting for an increasing share of
bank lending, which should help boost consumption
In 2009-13, loan growth was rapid (20.4%) on the back of
strong economic growth.1
The bulk of outstanding loans
are in the corporate sector. However, households are
taking an increasing share of lending in line with
government policies to stimulate consumption. In
particular, there has been strong growth in mortgages in
recent years as a more affluent middle-class has started
buying properties in urban areas. The household segment
of bank lending is likely to grow faster than corporate
over the medium term as the economy becomes more
consumer-oriented.
Bank Lending
(tn USD and % share of total loans)
Sources: PBC
1
This is the compounded annual growth rate (CAGR), which is a geometric mean. In general, unless otherwise specified, all multi-year growth rates mentioned
in this report will be CAGRs rather than arithmetic averages.
11.9
14.5
18.1
21.3
25.0
28.4
32.5
37.1
2009 2010 2011 2012 2013 2014f 2015f 2016f
+20.5%
CAGR
+14.0%
CAGR
China, 268
50
100
118
71
200
320
238
2009 2013
Indonesia, 47
Philipines, 75
India*, 94
Thailand, 127
Malaysia, 200
Japan, 334
71.6%
64.4%
17.1%
21.1%
3.5%
7.8%
7.8%
6.7%
2009 2013
Government
Financial
(non-banks)
Household
Corporate
7.8
15.3CAGR
20.4%
12. Strong growth in time and savings deposits provides a
strong funding base for banks
Deposits grew at a CAGR of 19.9% in USD terms in 2009-
China’s high savings rate means time and savings
account for the largest share of deposits, which grew
24.1% from 2009-13. This ensures that banks have a large
and stable deposit base that is growing rapidly, providing
a strong source of funding. The large size of time and
savings deposits is partly explained by the lack of
alternative investment and pension schemes to save for
retirement.
Bank Deposits
(tn USD and % share of total deposits)
Sources: PBC
State banks dominate and a rapidly expanding shadow
banking system is emerging to circumvent restrictions
China’s official banking system is tightly controlled,
highly protected and dominated by a handful of very large
state-owned banks. There are around 170 operational
banks with a high level of government ownership and low
levels of foreign participation. The top five banks are all
state owned and account for 54.9% of total assets.
Industrial and Commercial Bank of China (ICBC) is the
largest bank in the world by assets. High government
ownership affords some banks with preferential access to
state business, particularly the top public banks. Growth
and profitability are slowing as the economy cools. In
addition to traditional banking, a rapidly expanding
shadow banking system has emerged, circumventing
lending restrictions and caps on saving rates.
Top Five Banks’ Market Share by Assets
(tn USD and % share of total assets)
Sources: Bankscope
Shadow banking is mushrooming as a means to
circumvent restrictions in traditional banking
Regulations have pushed banks off balance sheet to
generate growth, leading to rapid expansion of shadow
banking to about 33.5% of GDP, according to the Financial
Stability Board. Other estimates are considerably higher
(47.9% of GDP from CASS, or 81.7% from JP Morgan). The
stimulus during the global recession encouraged local
governments and banks to establish special trusts to
avoid lending restrictions and finance investment. These
loans have been converted to Wealth Management
Products (WMPs) and sold on to investors seeking higher
yields than available in traditional banking where deposit
rates are capped (WMPs yield on average about 6%
compared with a bank deposit rate cap of 3.3%). Local
governments met 51% of their financing needs through
bank loans as at June 2013, compared with 75% at the end
of 2010. Shadow banking lacks regulatory oversight and
investors have come to assume many government related
products are backed by an implicit guarantee.
Shadow and Traditional Banking
(% of GDP)
Sources: Financial Stability Board and PBC
64.4%
67.8%
31.6%
27.1%
4.1%
5.0%
2009 2013
Other
Demand
Time and
Savings
9.2
16.9
CAGR
19.9%
145.4 155.1 163.0
20.0
25.8
33.5
2011 2012 2013
Shadow
Banking
Domestic
Credit
3.1
2.5
2.4
2.3
1.2
Industrial & Commercial Bank
of China
China Construction Bank
Agricultural Bank of China
Bank of China
China Development Bank
Industrial & Commercial Bank
of China
11.4%
10.9%
5.7%
13. Shadow banking accounted for almost 45% of all new
credit issuance in 2013, mainly through trust vehicles
In 2013, shadow banking grew by about 42% and
accounted for circa 45% of new credit issuance. The
issuance of new credit through the shadow banking
system has almost doubled since 2011. The bulk of new
shadow banking credit is through trust companies or
entrusted loans. However, shadow banking credit
issuance fell in H2 2013 after the authorities implemented
measures to slow growth. The PBC allowed interest rates
to rise. The CBRC limited WMPs to 4% of bank assets and
asked banks not to increase exposure to LGFVs, including
trusts and entrusted loans. The CBRC also prohibited
banks from providing guarantees to WMPs or LGFVs.
Regulations were further tightened in early 2014 to reduce
credit through trusts and WMPs and increase
transparency in off-balance sheet activities. Most of the
corporate bonds in the shadow banking system are issued
by LGFVs to finance infrastructure projects but issuance
is slowing.
New Issuance of Shadow Banking Products
(bn USD)
Sources: Bloomberg
Liquidity and default risks are high in shadow banks…
The short-term structure of shadow banking debt adds to
liquidity risks and defaults could be contagious. Local
governments have used short term financing to fund long
term infrastructure projects, creating a maturity
mismatch and liquidity risks. Approximately 25% of
shadow banking debt falls due within one year and
USD557bn of corporate bonds mature in 2014. The
situation is worst in the Trust sector where 89% of trusts
mature within two years. There is an increasing risk of
defaults as the economy slows and the government needs
to strike a delicate balance in dealing with them without
reinforcing perceptions of a strong implicit guarantee.
Two examples illustrate this point. First, a USD495m trust
product distributed by ICBC China’s largest bank)
received a de facto bailout in January 2014 from a
consortium consisting of the trust company, ICBC and
local government. The bailout avoided a damaging
default, but reinforced perceptions of an implicit
guarantee.
Trusts Maturity Profile
(% share of total trust products)
Sources: Use Trust and HSBC
…but risks are mitigated by strong government backing as
the bulk of trusts are used for public projects
The majority of the trusts (estimated at 84% by HSBC)
are backed by strong shareholders (government or state-
owned financial institutions) making possible defaults
manageable. Local governments have significant assets
at their disposal (land and stakes in SOEs), while central
government also has more than ample resources (USD4tn
in international reserves) to insulate the economy and
bail out the banks that have financed local governments.
The authorities recognize the risks in the shadow banking
system and have regulated to reduce these risks. Reforms
are being implemented to address the maturity mismatch,
such as permitting more local governments to issue bonds
directly rather than through the shadow banking system.
Trust Assets by Sector
(% share of total)
Sources: China Trustee Association
190 238
409
720
167
217
359
297
353 163
167
127
20
22
19
23
730
640
954
1,167
2010 2011 2012 2013
Total
Other
Bank
Acceptance
Corporate
Bonds
Trust &
Entrusted
Loans
+16.9%CAGR
34.0
55.0
11.0
2014 2015 After 2015
100%
(USD1.8tn)
28.1
25.3
12.0
10.4
10.0
14.2
2013
Others
Property
Stocks, bonds and funds
Financial Institutions
Infrastructure
Industrials
14. Financial Liberalization
The authorities have started a long and steady process of
financial liberalization
Partial liberalization of banking, exchange rates, interest
rates and the capital account have begun, but will be
finalized in small steps owing to the risks involved. The
authorities plan to open up banking to the private sector,
permitting small private banks. Lending rates have been
liberalized and, while caps on deposits remain, the central
bank governor expects them to be lifted in 1-2 years. As a
precursor, interest rates on foreign currency deposits in
the Shanghai Free Trade Zone (SFTZ) were liberalized
from March . More competition and rising interest
rates are likely to narrow NIMs in the banking sector.
Exchange rate restrictions have been eased (see Recent
Developments above) with full currency convertibility
expected in 2-3 years. Finally, gradual steps are expected
to liberalize financial account flows.
Interest Rate Liberalization
(%)
Sources: Bloomberg
The gradual liberalization of the financial account could
take up to ten years
Financial account liberalization has begun, but will take
time to complete. Portfolio inflows are permitted under a
qualified foreign institutional investor (QFII) program,
which was piloted in 2002 and allows foreign investment
in Chinese securities using foreign currencies within a
quota. The current quota is USD80bn with plans to raise it
to USD150bn. Transfers between the Shanghai and Hong
Kong stock markets were permitted in April, which may
encourage portfolio flows. SFTZ was recently launched
and will be used to test reforms. Further liberalization is
planned in a series of steps. In 2014- , controls on FDI by
enterprises will be relaxed. In 2016- controls on trade–
related credit will be eased and internationalization of the
Renminbi promoted. From 2018, full liberalization of
capital flows is expected, including personal transactions
and financial instruments.
Financial Account Flows
(USD bn)
Sources: NBS
Renminbi internationalization could create a new global
reserve currency
Reforms to ease the international use of the Renminbi are
already in motion. The trading band has been widened
(see Recent Developments above) and financial account
restrictions are being eased. The authorities are taking
additional steps to push CNY internationalization. First,
the authorities have successfully promoted CNY
settlement of cross border trade, which reached 18% of
global settlements in 2013 (up from 12% in 2012), thus
overtaking the Euro. Second, they have established
offshore settlement centers, such as those in Frankfurt
Hong Kong, London, Singapore and Taiwan. Finally, they
have been encouraging the use of CNY in cross border
investment. As a result, an increasing number of central
banks are diversifying reserves into CNY and ensuring
greater CNY liquidity. Offshore bond issuance in
Renminbi (Dim Sum Bonds) started in 2007 and has risen
to USD54.2bn in 2013; almost all issuance is corporate.
Rise of the Renminbi
(bn USD and world rank)
Sources: Bloomberg and Swift
2.3 Deposit
Cap, 3.0
1.7
Interbank,
3-month,
5.1
5.3
3.7
4.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1-1-09 1-1-10 1-1-11 1-1-12 1-1-13 1-1-14
Lending floor lifted (was
70% of benchmark)
Benchmark Lending
Rate, 6.0
-50
50
150
250
350
450
550
Inflow
Outflow
Inflow
Outflow
Inflow
Outflow
Inflow
Outflow
Inflow
Outflow
Direct Investment Other Portfolio
2009 2010 2011 2012 2013
202
405
426
279
538
25
184
210
300
215
20.4
106.5
85.7
0
10
20
30
40
50
60
70
80
90
100
110
Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14
CNY rank as world
payments currency
2nd
4th
CNY rank as world
trade finance currency
20th
13th
7th
CNY rank as world
payments currency
2nd
4th
CNY rank as world
trade finance currency
20th
13th
7th
CNY cross-border trade
settlement in (bn USD)
16. QNB Group Publications
Recent Economic Insight Reports
Qatar 2014 (April) Jordan 2014 Indonesia 2013 KSA 2013
Kuwait 2013 Qatar 2013 (April) Qatar 2013 (Sept) Oman 2013
Qatar reports
Qatar Monthly Monitor
Recent Economic Commentaries
ECB Monetary Stimulus May Avoid Eurozone Deflation
Could the Emerging Market Slowdown Jeopardize the Global Recovery?
Oman Is on Its Way to a New Growth Model
Eurozone’s Fragile Recovery Depends on Continued Adjustment
GCC Countries Continue To Be the Main Engine of Growth in MENA
India’s Economy Is On The Mend
The US Economy Is On a Tight Rope Between Recovery and Policy Tightening
The Rise of the Chinese Consumer
Calm in Emerging Markets but Underlying Vulnerabilities Remain
Qatar’s Economic Growth To Accelerate on Strong Investment Spending and Higher Population
IMF Programs Restore Investor Confidence in Several MENA Countries
The World Economy On a Bumpy Road to Recovery
Qatar’s Real GDP Growth Accelerated to in 13 on Strong Investment and Higher Population
The Eurozone Takes A Final Step Toward a Banking Union
Foreign Ownership of Debt is an Important Indicator of Vulnerability to the Emerging Market Crisis
Natural Gas To Outpace All Other Energy Sources Until 2035
Construction Projects, Lower Energy Costs and a Recovery in Tourism Should Boost Jordan’s Economic Growth
Deflation Likely to Keep Down Interest Rates
Age Matters for Economic Performance
Qatari Banks Lead Asset and Loan Growth in the GCC
Kingdom of Saudi Arabia’s Non-Oil Sector to Drive Growth
17. QNB International Branches and Representative Offices
China
Room 930, 9th Floor
Shanghai World Financial Center
100 Century Avenue
Pudong New Area
Shanghai
China
Tel: +86 21 6877 8980
Fax: +86 21 6877 8981
Lebanon
Ahmad Shawki Street
Capital Plaza Building
Mina El Hosn, Solidere – Beirut
Lebanon
Tel:
Fax: +961 1 377 177
QNBLebanon@qnb.com.qa
South Sudan
Juba
P.O. Box: 587
South Sudan
QNBSouthSudan@qnb.com.qa
France
Avenue d’lena
Paris
France
Tel: +33 1 53 23 0077
Fax: +33 1 53 23 0070
QNBParis@qnb.com.qa
Mauritania
Al-Khaima City Center
10, Rue Mamadou Konate
Mauritania
Tel: +222 45249651
Fax: +222 4524 9655
QNBMauritania@qnb.com.qa
Sudan
Africa Road - Amarat
Street No. 9, P.O. Box: 8134
Sudan
Tel: +249 183 48 0000
Fax: +249 183 48 6666
QNBSudan@qnb.com.qa
Iran
Representative Office
6th floor Navak Building
Unit 14 Africa Tehran
Iran
Tel: +98 21 88 889 814
Fax: +98 21 88 889 824
QNBIran@qnb.com.qa
Oman
QNB Building
MBD Area - Matarah
Opposite to Central Bank of Oman
P.O. Box: 4050
Postal Code: 112, Ruwi
Oman
Tel: +968 2478 3555
Fax: +968 2477 9233
QNBOman@qnb.com.qa
United Kingdom
51 Grosvenor Street
London W1K 3HH
United Kingdom
Tel: +44 207 647 2600
Fax: +44 207 647 2647
QNBLondon@qnb.com.qa
Kuwait
Al-Arabia Tower
Ahmad Al-Jaber Street
Sharq Area
P.O. Box: 583
Dasman 15456
Kuwait
Tel: +965 2226 7023
Fax: +965 2226 7031
QNBKuwait@qnb.com.qa
Singapore
Three Temasek Avenue
#27-01 Centennial Tower
Singapore 039190
Singapore
Tel: +65 6499 0866
Fax: +65 6884 9679
QNBSingapore@qnb.com.qa
Yemen
QNB Building
Al-Zubairi Street
P.O. Box: Sana’a
Yemen
Tel: +967 1 517517
Fax: +967 1 517666
QNBYemen@qnb.com.qa
18. QNB Subsidiaries and Associate Companies
Algeria
The Housing Bank for Trade
and Finance (HBTF)
Tel: +213 2191881/2
Fax:
Iraq
Mansour Bank
Associate Company
P.O. Box: 3162
Al Alawiya Post Office
Al Wihda District Baghdad
Iraq
Tel: +964 1 7175586
Fax: +964 1 7175514
Switzerland
QNB Banque Privée
Subsidiary
3 Rue des Alpes
P.O. Box: 1785
1211 Genève-1 Mont Blanc
Switzerland
Tel: +41 22907 7070
Fax: +41 22907 7071
Bahrain
The Housing Bank for Trade
and Finance (HBTF)
Tel: +973 17225227
Fax: +973 17227225
Jordan
The Housing Bank for Trade
and Finance (HBTF)
Associate Company
P.O. Box: 7693
Postal Code 11118 Amman
Jordan
Tel: +962 6 5200400
Fax: +962 6 5678121
Syria
QNB Syria
Subsidiary
Baghdad Street
P.O. Box: 33000 Damascus
Syria
Tel: +963 11-
Fax: +963 11-
Egypt
QNB ALAHLI
Dar Champollion
5 Champollion St, Downtown 2664
Cairo
Egypt
Tel: +202 2770 7000
Fax: +202 2770 7099
Info.QNBAA@QNBALAHLI.COM
Libya
Bank of Commerce and Development
BCD Tower, Gamal A Nasser Street
P.O. Box: 9045, Al Berka
Benghazi
Libya
Tel: +218 619 080 230
Fax: +218 619 097 115
www.bcd.ly
Tunisia
QNB Tunisia
Associate Company
Rue de la cité des sciences
P.O. Box: 320 – 1080 Tunis Cedex
Tunisia
Tel: +216 7171 3555
Fax: +216 7171 3111
www.tqb.com.tn
India
QNB India Private Limited
802 TCG Financial Centre
Bandra Kurla Complex
Bandra East
Mumbai 400 051
India
Tel: + 91 22 26525613
Palestine
The Housing Bank for Trade
and Finance (HBTF)
Tel: +970 2 2986270
Fax: +970 2 2986275
UAE
Commercial Bank International p.s.c
Associate Company
P.O. Box: 4449, Dubai,
Al Riqqa Street, Deira
UAE
Tel: +971 04 2275265
Fax: +971 04 2279038
Indonesia
QNB Kesawan Tower, 18 Parc
Jl. Jendral Sudirman Kav.
52-53 Jakarta 12190
Tel : +62 21 515 5155
Fax :
qnbkesawan.co.id
Qatar
Al Jazeera Finance Company
Associate Company
P.O. Box: 22310 Doha
Qatar
Tel: +974 4468 2812
Fax: +974 4468 2616