▪ The document provides an overview of China's future economic outlook prepared by Paul Young CPA, CGA in February 2018. It summarizes that China's GDP growth is slowing to around half of 1990s levels and debt levels are rising. Private consumption is increasing but environmental issues like climate change also pose challenges for China's future economic trajectory. The report also briefly discusses China's trade relationships with Canada and the US.

1. STUDY – CHINA’S
FUTURE –
FEBRURAY 2018
Paul Young CPA, CGA
February 14, 2018

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. SUMMARY
▪ China is important country due to its size
▪ Caution needs to be taken when dealing with China. China has specific
business controls as it relates to business
▪ China growth is ½ what it was in the 1990s. India is now growing faster
than China
▪ China is looking at investment outside of China into Africa.
▪ China is pushing forward with the one-belt road to move goods to
Europe
▪ China is moving more and more to electrical market for vehicles.

4. AGENDA
▪ GDP Growth
▪ Debt
▪ Consumption
▪ Climate Change
▪ Canada and China
▪ USA and China

5. CHINA AND GDP GROWTH
Scotiabank –
http://www.gbm.scotiabank.com/scpt/gbm/sc
otiaeconomics63/forecast_20180206.pdf
https://www.statista.com/statistics/263616/gross-domestic-
product-gdp-growth-rate-in-china/

6. 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

7. 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

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

9. 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

10. 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

11. CHINA / DEBT
Source - https://www.bloomberg.com/news/articles/2018-02-13/china-s-debt-laden-dealmakers-eyed-by-restructuring-specialists
Chinese deal makers that racked up debts for overseas deals and are now reversing course to pay down
borrowings have attracted the attention of restructuring specialists.
As President Xi Jinping steps up leverage curbs, borrowing costs in China have jumped.
The nation’s most high-profile deal makers including HNA Group Co. have come under mounting
regulatory scrutiny, and have been selling assets as they try to rein in borrowings. HNA missed
payments to several Chinese banks and its bond yields have in recent months traded at times at levels
that are often considered distressed.
“Chinese companies have been active in overseas acquisitions in recent years and some of their
investments have not panned out,” said Damien Whitehead, partner at law firm Ashurst, without naming
any specific companies. “Some of these companies are in a tight liquidity situation and their debt may
need to be restructured.”

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

13. 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)

14. 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.

15. 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.

16. BLOG – CHINA AND CANADA TRADE
▪ http://business.financialpost.com/opinion/terence-corcoran-trudeau-cant-land-a-trade-deal-because-hes-no-free-trader
▪ Hi Lauren
▪ Trade and FIPA agreements are federal government responsibility. There is a big picture in play with Trudeau and Wynne:
▪ https://www.facebook.com/ShannonLakeland/videos/1766348470050268/
▪ Hint: Rudi is funny as she does not live in reality!
▪ Here are things that Rudi did not get the memo when it comes to PM Selfie’s trip to China:
▪ Trudeau was told shut up about human rights which was all but ignored by MSM - https://youtu.be/03mogIdp-vA
▪ Trump went to China with a plan which resulted in $250B worth of business. Trudeau went with a plan to get social issues dealt with
by China. China told Trudeau that they were not interested in discussion of social policies -
https://www.bloomberg.com/news/articles/2017-11-08/trump-team-said-to-plan-250-billion-in-deals-from-china-visit
▪ McKenna try to force coal banning on China as such was told to bud out! Source - http://www.nsnews.com/cmlink/gmg-glacier-
media-group/2.2062/china-not-able-to-join-canada-u-k-coal-phase-out-alliance-mckenna-1.23113168
▪ You must walk a balance with China - https://www.slideshare.net/paulyoungcga/china-future-november-2017
▪ Liberals are consistent that is mislead people with information as way to muddy the water to what happen with either their policies or
their meetings with business leaders and/or other governments.

17. BLOG – CHINA AND CANADA TRADE
▪ Here is a bit more on Trade:
▪ I am for supporting trade as long those deals are fair and equitable to Canada. Here are things to consider when deal with China in terms of investment and Trade:
▪ Canada has a trade deficit of $16-17B with China - http://www.statcan.gc.ca/daily-quotidien/170504/dq170504c-eng.pdf
▪ Trudeau and Protectionism - https://www.spencerfernando.com/2017/12/06/deception-trudeau-purposefully-trying-deceive-canadians-china/
▪ No more admiration - https://globalnews.ca/news/3899392/trudeau-admires-most-not-china/
▪ China wants Canada natural resources - https://www.nrcan.gc.ca/19698/ China has abysmal environmental record - https://www.ft.com/content/e22dd988-3ed9-11e7-9d56-25f963e998b2
▪ Manufacturing sector is already under pressure as such trade agreements with countries like china that have poor labour and environmental regulations only handcuffs Canadian companies in
their ability to compete - http://www.newswire.ca/news-releases/canada-china-trade-deal-would-decimate-canadian-workers-industries-628447033.html
▪ China has no interest with Trudeau’s social agenda - https://www.spencerfernando.com/2017/12/04/fool-naive-trudeau-tricked-china-press-conference-cancelled-last-minute/
▪ McKenna tried to push anti-coal on China and China said no - http://www.ctvnews.ca/politics/china-not-able-to-join-canada-u-k-coal-phase-out-alliance-mckenna-1.3708186
▪ China is moving forward with their own plans in terms of accessing key raw materials like oil - https://www.slideshare.net/paulyoungcga/why-does-government-keep-gold-reserves
▪ China wants Canadian oil - http://www.cbc.ca/news/canada/calgary/china-investment-oilsands-jim-carr-1.4152520. The problem is getting oil to China - https://www.bnn.ca/kinder-morgan-
canada-down-4-after-more-potential-pipe-delays-1.935031 (Kinder Morgan is no further along then it was when approved in late 2016)
▪ Trump went to China as such completed deals - https://www.bloomberg.com/news/articles/2017-11-09/breaking-down-the-250-billion-china-deals-trump-got-for-america as compare to
Trudeau who got nothing done - https://globalnews.ca/news/3894897/justin-trudeau-canada-china-trade-talks/
▪ Australia and China Trade Agreement -“One of the main sticking points was a temporary worker memorandum of understanding in the agreement, which caused a backlash from parts of the
Australian population that feared an influx of cheap Chinese labour” http://news.xinhuanet.com/english/2017-11/15/c_136752488.htm or https://www.asiapacific.ca/canada-asia-
agenda/china-australia-free-trade-agreement-lessons-canada
▪ China is important market, but any further advancement into trade agreements needs to be done in careful manner. https://www.slideshare.net/paulyoungcga/china-future-november-2017

18. CHINA AND CARBON TAX
▪ http://www.industryweek.com/leadership/top-polluter-china-unveils-nationwide-carbon-market?NL=QMN-01&Issue=QMN-
01_20171220_QMN-
01_859&sfvc4enews=42&cl=article_3&utm_rid=CPG03000001519274&utm_campaign=23897&utm_medium=email&elq2=b159
e52f60444cb0b1d06ae130cd0ab6
▪
▪ There has been issue with business corruption in China. http://reneweconomy.com.au/qa-how-will-chinas-new-carbon-trading-
scheme-work-57769/ Carbon trade systems have been fraught with corruption in the past -
http://www.leviathanjournal.org/single-post/2018/01/21/Carbon-Trade-Fraud
▪ China has made changes to help reduce emissions through shutting down of plants, but emissions are still a big issue -
http://www.climatechangenews.com/2018/02/12/china-counts-emissions-growth-shaken-free-carbon/
▪ You cannot talk environment unless you look at the three main pieces: a) Land Management b) Water Management c) Air Quality
-
https://www.google.ca/search?rlz=1C1CHBF_enCA759CA759&biw=1536&bih=759&tbs=qdr%3Am&ei=ugaEWuvwGeupjwTz9Kf4
Cg&q=china+environmental+ranking&oq=china+environmental+ranking&gs_l=psy-
ab.3..0i22i30k1.1655.7520.0.7680.22.16.0.6.6.0.91.1096.16.16.0....0...1c.1.64.psy-
ab..0.22.1126...0j46j0i67k1j0i131k1j0i131i67k1j0i46k1j33i22i29i30k1j33i160k1j33i21k1.0.wx2gx0oi-PE - China is ranked 120th
▪

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