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-1-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-2-
In the same manner that a compass highlights the cardinal points of north, south, east, and west, The China Compass is intended to serve as a navigational instrument for determining China’s position and direction in the context of the world’s economic landscape. As such, by closely examining China’s relevance, importance and progressive integration with the world economy, The China Compass is a knowledge tool by THE BEIJING AXIS China Strategy Group for executives with a China agenda.
The growth of China’s economy is without precedent and its rise has been a unique and complex experience – requiring the adoption of a customised and dedicated planning approach. Although many MNCs are already active in China, access to reliable information and channels of strategic knowledge are not always easy to come by and are, more often than not, the product of a long-term investment in research, analysis and strategic thinking. It is against this background that this publication aims to make a modest contribution as a desk reference.
In this March 2010 edition, we provide the latest macroeconomic data available for a wide range of indicators, for China as well as for other major world economies, and include a new section, ‘What’s New: China From Rebound to Recovery’. China has recovered from the financial crisis-induced slowdown in better shape than ever, with solid prospects for 2010. With the stimulus of government investment, China’s economy left the financial crisis behind, attaining 8.7% GDP growth in 2009. Now poised to become the world’s second-biggest economy, China is readying itself for the challenges of 2010 and the next stage of its relentless rise.
We trust that this edition of The China Compass will be useful for those that are in the midst of planning, and that it will shed light on the past development and future prospects of a uniquely Chinese story of human development.
As always, we welcome all feedback.
Kobus van der WathFounder & Group Managing Director, THE BEIJING AXISChief Executive, Bateman Beijing [email protected]
-3-
A HIGH LEVEL OVERVIEW OF CHINA’S ECONOMIC FUNDAMENTALS AND CURRENT GLOBAL POSITION
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
World GDP2009
World GDP2009
DevelopingCountriesGDP 2009
China GDP 2009
China GDP 2009
China GDP 2009
China GDP 2009
China GDP2008
Note: World macroeconomic data for the world totals are IMF forecasts, while the data for China are actualised figures; the far right column is from 2008 for comparison purposes
Source: IMF World Economic Outlook - October 2009; China Statistical Yearbook; THE BEIJING AXIS Analysis
BrazilUK
SpainCanada
Others
FranceItaly
GermanyHenan
Zhejiang
HebeiLiaoning
HunanSichuanShanghai
Others
Developed Countries
China
Jiangsu
Western China
Tertiary Industry
Japan
US China
China
Shandong
Guangdong
Central China
EasternChina
Secondary Industry
PrimaryIndustry
USD 57.2 tn
USD 57.2 tn
USD 17.6tn
USD 4.9 tn
USD 4.9tn
USD 4.9 tn
USD 4.9 tn
Developing Asia
(excl. China)
Developing Countries
(excl. China)
China
Other Developing Countries
Northeast China
USD 4.4 tn
Government consumption/ expenditure
Net exports
Gross capital formation
Private consumption/ expenditure
-4-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-5-
0
3
6
9
12
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
China Quarterly GDP Growth Rate (%, 2006-Q4 2009)
2006 2008 20092007
Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
8% GDP growth target for 2009 established by Chinese
government
Government fiscal and monetary policy focused on slowing economic growth
Economic rebound
Global financial crisis unfolding
Fulleconomic recovery
CHINA’S ECONOMY HAS MOVED FROM REBOUND TO RECOVERY
In 2009, China’s economy grew 8.7% y-o-y; Q4 growth of 10.7% surpassed even optimistic expectations
-6-
CHINA IS SET TO CONTINUE TO OUTPERFORM OTHER DEVELOPING AND DEVELOPED ECONOMIES
China has outpaced the rest of the world in its recovery from the economic crisis
World GDP growth (% y-o-y, 1990-2010F)
-4
-2
0
2
4
6
8
10
12
14
16
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
World Advanced economies Emerging and developing economies China
Source: IMF World Economic Outlook 2010; THE BEIJING AXIS Analysis
Tiananmen square events
Asian financial crisis
Global financial crisis
-7-
Nominal GDP Japan and China (USD bn, 2000-2009)
CHINA IS NOW ON TRACK TO REPLACE JAPAN AS THE WORLD’S SECOND-LARGEST ECONOMY
While Japan is recovering from the worst recession since the end of the second world war, China is expanding rapidly
Quarterly and Annual GDP Growth: Japan and China (%, Q1-Q4 2009, 2009 year-end)
-10%
-5%
0%
5%
10%
15%
Q1 Q2 Q3 Q4
Japan China
0
1000
2000
3000
4000
5000
6000
89 91 93 95 97 99 '01 '03 '05 '07 '09
Japan China
20092009
year-end
In 2009, China’s economy grew by 8.7% y-o-y…
…while Japan’s shrunk -6.0% y-o-y
China’s nominal GDP reached USD 4,909 bn in 2009 while
Japan’s is within reach at USD 5,100 bn
Source: IMF; Japan SNA; World Bank; THE BEIJING AXIS Analysis Note: Japan’s GDP, officially reported in Yen, decreased throughout 2009 as shown in the chart on the right. However, conversion to nominal US Dollars shows an overall
increase for the time period due to the Yen’s appreciation relative to the US Dollar.
-8-
38%
25%
10%
9%4%
5%
9%
Public InfrastructurePost Quake ReconstructionSocial WelfareRural DevelopmentTechnological AdvancementSustainable DevelopmentEducational and Cultural Projects
Breakdown of China’s Stimulus Package
COMPOSITION OF RMB 4 TRILLION FISCAL STIMULUS PACKAGE
SECTOR
AMOUNT ALLOCATED
RMB bn
Public Infrastructure 1,500
Post Quake Reconstruction 1,000
Social Welfare 400
Rural Development 370
Technology Advancement 370
Sustainable Development 210
Educational and Cultural Projects 150
TOTAL 4,000
Source: National Development and Reform Commission (NDRC); THE BEIJING AXIS Analysis
ONE OF THE MAJOR FACTORS FOR THIS ACHIEVEMENT IS CHINA’S SUCCESSFUL RMB 4 TRILLION STIMULUS PACKAGE
Over 50% of the stimulus package was aimed at infrastructure projects which supported employment and final demand through the crisis
-9-
Monthly Totals of New RMB Loans (USD bn, 2007-2009)
(50)
0
50
100
150
200
250
300
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2007: USD 474.9 bn 2008: USD 597.2 bn
2008 20092007
2009: USD 1,401.8 bn
Source: Ministry of Finance of The People's Republic of China; THE BEIJING AXIS Analysis
LOOSE MONETARY AND FISCAL POLICIES BOLSTERED CHINA’S ECONOMIC STANCE IN 2009
During 2009, China’s new loans reached USD 1.4 trillion, a 135% increase over 2008
-10-
0
100
200
300
400
500
J-F M A M J J A S O N D J-F M A M J J A S O N D J-F M A M J J A S O N D
Monthly Urban Fixed Asset Investment (USD bn, 2007-2009)
Total FAI 2007: USD 1,804.8 bnTotal Urban: USD 1,544.1 bn
2008 20092007
Total FAI 2009: USD 3,286.8 bnTotal Urban: USD 2,837.9 bn
Total FAI 2008: USD 2,480.8 bnTotal Urban: USD 2,133.4 bn
Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
FIXED ASSET INVESTMENT EXPERIENCED RAPID GROWTH AS A DIRECT RESULT OF THE STIMULUS PACKAGE
During 2009, total fixed asset investment increased by 30.1% over 2008 to USD 3,287 billion
-11-
GOVERNMENT EXPENDITURE ALSO PICKED UP TO COINCIDE WITH THE STIMULUS PACKAGE
During Q1-Q3 2009, China’s government expenditure increased by 26% over the same period last year to reach a total of USD 661.6 billion
0
50
100
150
200
250
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
2008 20092007
Monthly Government Expenditure (USD bn, 2007-Nov 2009)
Q1-Q3 2007: USD 379.3 bn
Q1-Q3 2008: USD 523.4 bn
Q1-Q3 2009: USD 661.6 bn
2007: USD 659.9 bn 2008: USD 903.6 bn
Source: Ministry of Finance of The People's Republic of China; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
-12-
0
40
80
120
160
200
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Monthly Retail Sales of Consumer Goods (USD bn, 2007-2009)
2007: USD 1,174.5 bn 2008: USD 1,563.4 bn
2008 20092007
2009: USD 1,832.3 bn
Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
THROUGH THE STIMULUS PACKAGE, THE GOVERNMENT MANAGED TO BOOST DOMESTIC CONSUMPTION
During 2009, China’s retail sales increased by 15.5% over 2008, reaching a total of USD 1,832 billion
-13-
CHINA SURPASSED THE US AS THE WORLD’S LARGEST CAR MARKET IN 2009
Leading car manufacturers enjoyed record monthly sales on the back of government incentives to boost domestic consumption
0
500
1,000
1,500
J F M A M J J A S O N D J F M A M J J A S O N D
China US
Monthly Vehicle Sales (1,000 units, 2008-2009)
2008 2009
Source: Automotive News Data Center; China Auto Industry Association; THE BEIJING AXIS Analysis
US government incentives for the automobile industry end in
August
In January, China obtains the position of the largest
car market worldwide
-14-
40
60
80
100
120
140
160
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%Exports Export Growth Rate (m-o-m)
Exports average growth rate: 1.7%
Monthly Exports (USD bn, 2007-2009)
2008 20092007
Source: MOFCOM; THE BEIJING AXIS Analysis
THE DECLINE IN TOTAL EXPORTS CONTINUED TO BE THE MAIN CONSTRAINT TO GROWTH DURING 2009
However, a small revival in exports occurred towards the end of 2009, elevating China’s total for the year to USD 1,201.7 billion, still 16% less than in 2008
-15-
0
50
100
150
J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N
China Germany US
CHINA, DESPITE LOWER EXPORTS, HAS SURPASSED GERMANY AS THE WORLD LARGEST EXPORTER IN 2009
Chinese exports amounted to USD 1,201.7 bn from January to December of 2009, while Germany lagged behind with USD 1,121.9 bn for the same period
Goods Exports, Monthly (USD bn, 2005-Nov 2009)
2008 20092006 20072005
Source: Destatis; US Department of Commerce; China Statistics Bureau; THE BEIJING AXIS Analysis
China surpassed Germany as the world’s largest
exporter
Worldwide trade shock induced by
global financial crisis
-16-
CHINA’S IMPORTS ALSO DECLINED IN 2009 During 2009, China’s total imports reached USD 1,005.6 billion,
11.2% lower than the previous year
40
50
60
70
80
90
100
110
120
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%Imports Import Growth Rate (m-o-m)
Imports’ average growth rate: 2.0%
Monthly Imports (USD bn, 2007-2009)
2008 20092007
Source: MOFCOM; THE BEIJING AXIS Analysis
Worldwide trade shock induced by
global financial crisis
-17-
CHINA NEVERTHELESS IMPORTED RECORD AMOUNTS OF CERTAIN COMMODITIES, DRIVING PRICES HIGHER IN 2009
These rising imports have been attributed to their stockpiling of key commodities in order to offset higher future contract prices
1130%
212%
112% 119%42% 14%
0%
200%
400%
600%
800%
1000%
1200%
Primary Aluminium Coal Refined Nickel Refined Copper Iron Ore Crude Oil
Imports Comparison, Selected Commodities (‘000 tons, 2008 and 2009)
y-o-y change
2009: 1,4962008: 122
2009: 125,8342008: 40,344 2009: 250
2008: 118 2009: 3,1902008: 1,458
2009: 204,0002008: 179,000
2009: 627,7802008: 443,347
Source: China Customs; World Aluminium Market; THE BEIJING AXIS Analysis
-18-
0
5
10
15
20
J-F M A M J J A S O N D J-F M A M J J A S O N D J-F M A M J J A S O N D
Monthly Industrial Production (%, y-o-y, 2007-2009)
2008 20092007Note: National Bureau of Statistics does not publish industrial production information for the month of JanuarySource: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
CHINA’S INDUSTRIAL PRODUCTION CONTINUED TO RECOVER DURING MID-2009, DRIVEN BY DOMESTIC DEMAND
China's industry value added rose 11% from January to December in 2009, but the year's growth rate was still 1.9% lower than 2008
China’s industrial production started climbing in April,
indicating a strengthening economic recovery
-19-
CHINA’S INDUSTRIAL PRODUCTION RECOVERED BEFORE ADVANCED AND EMERGING ECONOMIES
After five months of decline from September 2008 to January 2009, growth resumed in February 2009 at 6.4% y-o-y
-50
-25
0
25
50
J F M A M J J A S O N D J F M A M J J
World Advanced economies Emerging economies Emerging Asia China
Industrial Production* (y-o-y %, 2008-July 2009)
2008 2009*Note: Annualised three-month percentage change in three-month moving averageSource: IMF; THE BEIJING AXIS Analysis
-20-
THE RISE OF CHINA’S PMI ABOVE THE 50 MARK ALSO SUPPORTED CHINA’S ECONOMIC RECOVERY DURING 2009
In December 2009, China’s PMI reached 56.6, signaling an expansion in the manufacturing sector and in the overall economy
Purchasing Managers Index (2007-2009)
35
40
45
50
55
60
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
A PMI reading of above 50 signals expansion in the
manufacturing sector
PMI dropped to 38.8 which was the lowest point since 2005 when the China Federation of
Logistics & Purchasing initiated the survey
2008 20092007
-21-Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
CPI Monthly (2008-2009)
90
95
100
105
110
J F M A M J J A S O N D J F M A M J J A S O N D
CPI
2008 20092008 2009
Government worries about the possibility of deflation
PPI Monthly (2008-2009)
Government worries about the possibility of
deflation
HOWEVER, CHINA’S INFLATION FIGURES HAVE ALSO EXCEEDED CONSENSUS EXPECTATIONS
CPI and PPI increased at an annual pace of 1.9% and 1.7% in Q4 compared to the same period in 2008
Inflationary concerns Inflationary
concerns
90
95
100
105
110
J F M A M J J A S O N D J F M A M J J A S O N D
PPI
-22-
IN 2009, CHINA RECORDED IMPRESSIVE GROWTH LARGELY DUE TO STIMULUS-INDUCED DOMESTIC DEMAND AND TO A MODEST GLOBAL
ECONOMIC RECOVERY
Although 2009 was one of the most challenging years for China’s economic development in the 21st century, China has successfully completed the transition from rebound to recovery. China reached and surpassed its 8% growth target for 2009, expanding by 8.7%, denoting a V-shaped pattern of economic recovery
This impressive result will likely propel China to the position of the world’s second largest economy in early 2010, surpassing Japan. China’s GDP is expected to continue its steady growth during 2010, while developed and other developing economies will continue to recover at a much slower pace
The same major drivers that spurred growth during 2009 – the stimulus package and its accompanying proactive fiscal and monetary policies – continue to be critical components for growth in 2010. However, in order to have sustainable growth throughout the medium and long-term, the economy must be successfully rebalanced from government spending to domestic consumption
Total exports continue to be the major constraint to China’s economic growth, as global demand still remains weak. Nevertheless, China’s economy managed to accomplish solid growth through the year, mostly driven by domestic demand
Exports will resume its role as a driver of economic growth once global economic conditions become more favourable. Imports will continue to increase, as domestic demand increases and fuel and commodity prices continue their upward trends
Source: THE BEIJING AXIS Analysis
-23-
HOWEVER, THE FUTURE OF CHINESE ECONOMIC GROWTH STILL FACES SOME CHALLENGES
China’s export growth continues to be challenged by international trade protectionism. During 2009, a number of countries enacted protectionist measures in order to defend the competitiveness of their domestic products
According to the Ministry of Commerce, 19 economies launched 103 cases, consisting of anti-dumping, anti- subsidy, and safeguarding actions, against Chinese products at the end of November 2009. The statistics coming from the Global Trade Alert Report give figures for the whole 2009 which say that 148 protectionist measures were taken against China, making it a major target of trade protectionism worldwide
Corresponding with its economic growth, China has also showed indications of overheating. The CPI jumped sharply at the end of 2009, signifying that the economy is running the risk of overheating. As a result of what some economists have called the biggest easing in monetary and financial conditions in history, China’s banks issued USD 1.4 trillion new loans, a 135% increase from 2008. This rapid loan growth has already raised the concern that asset price bubbles may have formed in the economy
If these remain unchecked, the very same drivers for growth could, in turn, have a negative impact on the overall Chinese economy and on the world
Source: THE BEIJING AXIS Analysis
-24-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic IndicatorsSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-25-
0
1,000
2,000
3,000
4,000
5,000
6,000
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10F
CAGR 10%
Note: GDP is calculated at current pricesCAGR: compound annual growth rate
Source: China Statistical Yearbook; China Monthly Economic Indicators; IMF; THE BEIJING AXIS Analysis
Nominal GDP (USD bn, 1978-2010F)
CHINA’S ECONOMY HAS GROWN TREMENDOUSLY AND IS POISED TO OVERTAKE JAPAN AS THE SECOND-LARGEST ECONOMY
In 2009, China’s GDP reached USD 4.9 trillion, which is more than four times its 1998 level (USD 1 trillion). From 1978, it grew at a CAGR of 10%
-26-
0 200 400 600
GuangdongShandong
JiangsuZhejiang
HenanHebei
ShanghaiLiaoningSichuan
HubeiHunanFujian
BeijingAnhui
HeilongjiangInner
GuangxiShanxi
ShaanxiJiangxi
JilinTianjin
YunnanChongqing
XinjiangGuizhou
GansuHainan
NingxiaQinghai
Tibet
123456789
10111213141516171819202122232425262728293031
2
4
35
1
Henan
Zhejiang
Shandong
Top 5 provinces’GDP equate to 46%
of total GDP
Guangdong
Jiangsu
GDP by Province (USD bn, 2008)
CHINA HAS A LARGE GDP YET IT IS HIGHLY CONCENTRATED IN A FEW PROVINCES NEAR THE COAST
The top five provinces of Guangdong, Shandong, Jiangsu, Zhejiang, and Henan account for roughly 46% of GDP
31
30 29
28
27
Qinghai
Tibet
Gansu
Hainan
Ningxia
Note: GDP is calculated at current pricesSource: China Statistics Yearbook; THE BEIJING AXIS Analysis
-27-
0
4
8
12
16
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10F
7-10% GDP growth band
Past periods of
overheating
7-8% GDP growth band
Temporary slowdown due to the
global financial crisis
Overheating concerns
Source: World Bank; China Statistical Abstract; OECD; IMF; THE BEIJING AXIS Analysis
China Nominal GDP Growth Rate (% y-o-y, 1978-2010F)
ACCORDING TO A WORLD BANK FORECAST, CHINA’S ANNUAL GDP GROWTH RATE WILL REACH 9% IN 2010
Other financial organisations such as UBS and Standard Chartered Bank have even bolder expectations, forecasting growth of more than 9.5%
-28-
4
12
3
Tianjin
Inner Mongolia
Shanghai
Shaanxi
Jilin
5
GDP Growth Rate by Province (%, 2008)
ALTHOUGH GDP IS CONCENTRATED IN THE EAST, THE CENTRAL PROVINCES HAVE THE HIGHEST GDP GROWTH RATES
This underlines the central government’s plan to develop the central and western regions of the country
31
30
29 28
27 Hainan
Chongqing
Beijing
Sichuan
Shanxi
123456789
10111213141516171819202122232425262728293031
0 5 10 15 20
Inner MongoliaTianjin
JilinShaanxi
ChongqingHubei
LiaoningFujianHunan
GuangxiAnhui
QinghaiJiangxiJiangsuNingxia
ShandongHenan
HeilongjiangYunnan
XinjiangGuizhou
GuangdongZhejiang
HebeiGansu
TibetHainan
ShanghaiSichuanBeijingShanxi
Source: China Monthly Indicators; THE BEIJING AXIS Analysis
-29-
0
1,000
2,000
3,000
4,000
78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10F
CAGR 9%
Note: GDP is calculated at current pricesSource: China Statistical Yearbook; National Bureau of Statistics of China; IMF; THE BEIJING AXIS Analysis
GDP Per Capita (USD, 1978-2010F)
CHINA’S GDP PER CAPITA HAS GROWN CONSIDERABLY IN THE LAST 30 YEARS
In 2009, China’s GDP per capita reached USD 3,672, which represents a CAGR of 9% over the last 30 years
-30-
5
4
32
Shanghai1
Zhejiang
Jiangsu
Source: Various; THE BEIJING AXIS Analysis
GDP Per Capita by Province (USD, 2008)
31
30
29
28
27
Beijing
Tianjin
Tibet
Gansu
YunnanGuizhou
Anhui
123456789
10111213141516171819202122232425262728293031
THE PROVINCES WITH THE HIGHEST GDP PER CAPITA ARE LOCATED IN EASTERN CHINA
The lowest GDP per capita is found in central and western China
0 2,000 4,000 6,000 8,000 10,000
ShanghaiBeijingTianjin
ZhejiangJiangsu
GuangdongShandong
InnerLiaoning
FujianJilin
HebeiHeilongjiang
ShanxiXinjiang
HubeiHenan
ShaanxiChongqing
NingxiaQinghai
HunanHainan
SichuanGuangxiJiangxi
AnhuiTibet
YunnanGansu
Guizhou
Inner Mongolia
-31-
259274
302
369
489
522
179174 178 181 191 200 210
0
1,000
2,000
3,000
4,000
5,000
6,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-10%
0%
10%
20%
30%
40%
CAGR 10%
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Composition of GDP by Sector (USD bn, 1997-2009)
PRIMARY INDUSTRY CONSTITUTES ROUGHLY 11% OF CHINA’S GDP
The primary industry grew at a CAGR of 10% from 1997, and contributed USD 522 billion to total GDP in 2009
Primary industry Secondary industry
Tertiary industry Growth rate of primary industry
-32-
0
400
800
1,200
1,600
2,000
2,400
989900010203040506070809
Primary10.6%
Secondary46.8%
Tertiary42.6%
Breakdown of Secondary Industry and Trends (2009)
CAGR 13%
Value-Added Totals of Secondary Industry (at current prices, USD bn, 1998-2009)
SECONDARY INDUSTRY IS THE LARGEST CONTRIBUTOR TO CHINA’S GDP, CONSTITUTING 47%
The secondary industry grew at a CAGR of 13% from 1997 to 2009, and contributed USD 2.3 trillion to GDP in 2009
Note: CAGR is calculated for the last ten yearsSource: China Statistical Yearbook; THE BEIJING AXIS Analysis
-33-
0
500
1,000
1,500
2,000
09 08 07 06 05 04 03 02 01 00 99
Hotels and catering services Real estate Transport, storage, and postFinancial intermediation Wholesale and retail tradesOthers
CAGR 15.6%
Primary10.6%
Secondary46.8%
Tertiary42.6%
37%
19%
14%
14%
11%5%
Value-Added total of the Tertiary Industry (at current prices, USD bn, 1999-2009)
Breakdown of Tertiary Industry and Trends (2009)
TERTIARY INDUSTRY IS THE SECOND-LARGEST CONTRIBUTOR TO CHINA’S GDP, COMPRISING 43% OF TOTAL OUTPUT
Between 1999 and 2009 the tertiary industry grew at a CAGR of 16%, and contributed USD 2.1 trillion to GDP
Note: CAGR is calculated for the last ten years; The breakdown figures are not available for 2009Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
-34-
-30%
-10%
10%
30%
50%
70%
90%
98 99 00 01 02 03 04 05 06 07 08 09
Net exports of goods and servicesGross capital formationFinal consumption expenditure (household + gov)
-4
-2
0
2
4
6
8
98 99 00 01 02 03 04 05 06 07 08 09
Net exports of goods and servicesGross capital formationFinal consumption expenditure (household + gov)
Note: The three components of GDP by expenditure approach are final consumption expenditure (composed of household and government consumption), gross capital formation and net exports of goods and services. For 2009 the 92% gross capital formation, 52% final consumption expenditure and the -44% net exports of goods and services were reduced proportionately to form the bar representing 100%
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Contribution/Share of the Three Components of GDP Growth (1998-2009)
GROSS CAPITAL FORMATION AND FINAL CONSUMPTION EXPENDITURE ARE THE MAIN COMPONENTS OF CHINA’S GDP In 2009, gross capital formation and final consumption respectively contributed
92.3% and 52.5% to GDP growth while net exports subtracted -44.8%Contribution to the Growth of GDP(Percentage Points, 1998-2009)
-35-
20%
40%
60%
80%
100%
0 50 100 150 200 250
Shandong
Jiangsu
Inner Mongolia
Fujian
Shanghai
Liaoning
Zhejiang
Jilin
Chongqing
Total capital formation, USD bn
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
China’s Gross Capital Formation in 2008
Size of the bubble represents % of
total
Guangdong
HenanHebei
Sichuan
HubeiHunan
Shaanxi
Ningxia
Tibet
Qinghai
HainanGansu
Tianjin
Anhui
ShanxiGuangxi
BeijingHeilongjiangYunnan
XinjiangGuizhou
Capital formation takes place mostly in coastal provinces
Provinces in central and western China had higher capital formation
rates
CHINA’S GROSS CAPITAL FORMATION IS CONCENTRATED IN THE MORE DEVELOPED REGIONS
In 2008, China’s top five provinces by annual gross capital formation accounted for nearly 40% of the national total
% of Province GDP
Jiangxi
-36-
20%
40%
60%
80%
0 50 100 150 200 250 300
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
China’s Final Consumption (2008)
Total final consumption, USD bn
34% of China’s total final consumption is centered in
the coastal provinces
Size of the bubble represents % of
total
Shandong
Guangdong
Jiangsu
Zhejiang
Henan
Shanghai
ChongqingGuizhou
SichuanHunanBeijing
Hubei
HebeiLiaoning
Fujian
Anhui
Heilongjiang
GuangxiQinghai
Tibet
NingxiaHainan
Gansu
Yunnan
JiangxiXinjiang JilinShaanxi
Inner Mongolia
Shanxi
Tianjin
THE LARGEST SHARE OF CHINA’S FINAL CONSUMPTION TAKES PLACE IN THE COASTAL PROVINCES
In 2008, Shandong, Guangdong, Jiangsu and Zhejiang were responsible for 34% of China’s total annual final consumption
% of Province GDP
-37-Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Government Expenditure Breakdown (USD bn, 2008)
73.120.930.733.939.7
58.560.2
60.665.4
89.7
98.0
129.7
141.0901.2
0%
20%
40%
60%
80%
100%
Tota
l go
vern
men
tex
pend
iture
Gen
eral
pub
licse
rvic
es
Educ
atio
n
Soci
al s
ecur
ityan
dem
ploy
men
t
Indu
stry
,co
mm
erce
and
bank
ing
Agr
icul
ture
,fo
rest
ry a
ndirr
igat
ion
Urb
an &
rura
lco
mm
unity
affa
irs
Nat
iona
lde
fens
e
Publ
ic s
ecur
ity
Med
ical
and
heal
th c
are
Tran
spor
tatio
n
Scie
nce
and
tech
nolo
gy
Envi
ronm
enta
lpr
otec
tion
Oth
ers
GOVERNMENT EXPENDITURE IS LARGELY AIMED AT IMPROVING THE POPULATION’S QUALITY OF LIFE
In 2008, 48% of government expenditure was focused on public services, education, social security, employment and community affairs
-38-
0
2,000
4,000
6,000
8,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-50%
-25%
0%
25%
50%Industrial production Growth rate
Source: CEIC Data; THE BEIJING AXIS Analysis
Gross Industrial Output (USD mn, 1998-2008)
CHINA’S INDUSTRIAL OUTPUT GROWTHACCELERATED AFTER ACCESSION TO THE WTO IN 2001
Since then, a large number of foreign companies have established manufacturing bases in China, driving gross industrial output up at a CAGR of 22% from 1998-
2008
CAGR 22%
WTO accession11 December 2001
-39-
0
10
20
30
40
50
Oil Nickel Copper Aluminium Zinc Lead Steel Coal Seaborneiron ore
Tin
2nd
1st 1st
1st 1st 2nd 1st1st
1st 1st
Note: The percentages for Zinc, Lead and Tin are for 2007Source: WBMS; Barlow Jonker; IEA; BP; Macquarie; THE BEIJING AXIS Analysis
China’s Share of the World’s Consumption of Selected Resources (%, World Ranking, 2008)
CHINA IS THE WORLD’S LEADING CONSUMER OF SEVERAL RESOURCES
Rapid modernisation, industrialisation and urbanisation are the key drivers of the trend and are unlikely to recede anytime soon
-40-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic IndicatorsSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-41-
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09-20%
-10%
0%
10%
20%
30%
40%
50%
Retail sales (Urban) Retail sales (Suburban) Retail sales (Rural)Urban growth Suburban growth Rural growth
1. Figures converted from RMB to USD using the average exchange rate for the respective years. The growth rate, however, does not factor in exchange rate fluctuations
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Annual Retail Sales and Growth Rate by Administrative Level (USD bn1, 1978-2009)
AS A REFLECTION OF CHINA’S RAPID DEVELOPMENT, PERSONAL CONSUMPTION HAS BEEN ON THE RISE (I)
While retail sales were quite volatile in the 1980s and 1990s, there has been substantial, stable growth in the last decade
-42-
0
50
100
150
200
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
0
400
800
1,200
1,600
2,000
79 82 85 88 91 94 97 00 03 06 09
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Annual Retail Sales (USD bn, 1979-2009) Monthly Retail Sales (USD bn, 2006-2009)
AS A REFLECTION OF CHINA’S RAPID DEVELOPMENT, PERSONAL CONSUMPTION HAS BEEN ON THE RISE (II)
The sustained growth of retail sales reflects China’s rapid development and consequent increase in the purchasing power of the population
Dec
-09
-43-
3.58.9
86.9
Wholesale and retail trade Hotels and catering servicesOthers
28.41
1,550.19
264.68
1978 2009
84%
14%
2%
87%
4%9%
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Annual Retail Sales of Consumer Goods by Sub-sector (USD bn, 1978 vs. 2009)
AS A REFLECTION OF CHINA’S RAPID DEVELOPMENT, PERSONAL CONSUMPTION HAS BEEN ON THE RISE (III)
Wholesale and retail trade continue to dominate retail sales; however, hotels and catering services have seen considerable growth in the past 30 years
-44-
0 50 100 150 200
GuangdongShandong
JiangsuZhejiang
HenanHubei
LiaoningHebei
SichuanBeijing
ShanghaiHunanFujianAnhui
HeilongjiangJilin
Inner MongoliaShanxi
GuangxiShaanxiJiangxi
ChongqingTianjin
YunnanXinjiangGuizhou
GansuHainan
NingxiaQinghai
Tibet
Guangdong
Jiangsu
Shandong
Zhejiang
1
5
4
3
2
123456789
10111213141516171819202122232425262728293031
27
28
293031
Gansu
Hainan
Ningxia
QinghaiTibet
1. The top five provinces in terms of population do not include Zhejiang, but do include the four other provinces2. The top five provinces in terms of income per capita do not include Henan, but do include the four other provincesSource: China Statistical Yearbook; THE BEIJING AXIS Analysis
Total Retail Sales of Consumer Goods by Province (USD bn, 2008)
Henan
THE LARGEST SHARE OF RETAIL SALES IS CONCENTRATED IN THE EASTERN COASTAL PROVINCES
Unsurprisingly, the top five provinces in terms of retail sales are also the leading provinces in terms of population1, employed persons and income per capita2
-45-
Russia
USA17.8%
Hong Kong 13.3%
South Korea5.2%
Japan8.1%
Germany4.1%
Top exported commodities• Electrical machinery, equipment and parts
• Nuclear reactors, boilers, machinery and mechanical appliances
• Articles of apparel and clothing
China’s Top Export Destinations (USD bn, 2008)
Total exports = USD 1,430.7 bn
48% OF CHINA’S EXPORTS ARE DESTINED FOR THE US,HONG KONG, JAPAN, SOUTH KOREA, AND GERMANY
The US and Hong Kong1 are China’s main export destinations
1. Hong Kong is admittedly used as a gateway to the rest of the worldSource: UN Comtrade; THE BEIJING AXIS Analysis
31.6
32.3
33.1
36.1
45.9
59.2
73.9
116.1
190.7
252.8
India
Singapore
Russia
UK
Netherlands
Germany
South Korea
Japan
Hong Kong
US
-46-
0
200
400
600
800
1,000
1,200
1,400
1,600
97 98 99 00 01 02 03 04 05 06 07 08 09-30%
-20%
-10%
0%
10%
20%
30%
40%Exports Exports' growth rate
0
20
40
60
80
100
120
140
160
Jan-
07
Mar
-07
May
-07
Jul -
07
Sep-
07N
ov-0
7Ja
n-08
Mar
-08
May
-08
Jul-0
8Se
p-08
Nov
-08
Jan-
09M
ar-0
9M
ay-0
9Ju
l-09
Sep-
09N
ov-0
9
-80%
-60%
-40%
-20%
0%
20%
40%
60%Exports Exports' monthly growth rate
China’s entry into the WTO
CHINA’S EXPORTS EXPERIENCED RAPID GROWTH FOLLOWING THE COUNTRY’S ACCESSION TO THE WTO
Although the onset of the global financial crisis has sharply affected exports, growth resumed in March 2009
Annual Exports (USD bn, 1997-2009) Monthly Exports (USD bn, 2007-2009)
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Dec
-09
-47-
94.9 127.0 187.9268.3
352.3456.4
577.2
87.1101.2
126.1
156.4
194.2
238.0
296.9
43.853.0
69.0
100.7
129.1
174.8
219.9
673.3
335.9
263.3
0
300
600
900
1,200
1,500
2001 2002 2003 2004 2005 2006 2007 2008
OthersMineral itemsFoodstuffsChemicals and related productsProducts classified by material SundryMachinery equipment
COMMONLY REGARDED AS THE WORLD’S FACTORY FLOOR, CHINA IS KNOWN FOR ITS COMPETITIVE PRODUCTS
This is supported by the fact that the bulk of the country’s exports are manufactured goods
1. SITC Classification SystemSource: MOFCOM; THE BEIJING AXIS Analysis
Export Commodity Composition1 (USD bn, 2001-2008)
-48-
Top imported commodities• Electrical machinery, equipment and parts• Mineral fuels, mineral oils and products of their
distillation• Nuclear reactors, boilers, machinery and mechanical appliances
Russia
US7.2%
Taiwan9.1%
South Korea9.9%
Japan13.3%
Germany4.9%
Top Countries of Origin for China’s Imports (USD bn, 2008)
25.7
29.9
31.0
32.1
37.4
55.8
81.6
103.3
112.1
150.6
Thailand
Brazil
Saudi Arabia
Malaysia
Australia
Germany
US
Taiwan
South Korea
JapanTotal Imports = USD 1,132.6 bn
45% OF CHINA’S IMPORTS COME FROM JAPAN, SOUTH KOREA, TAIWAN, THE US AND GERMANY
In 2008, Japan and South Korea were the top suppliers, accounting for 23% of China’s total imports
Source: UN Comtrade; THE BEIJING AXIS Analysis
-49-
0
200
400
600
800
1,000
1,200
97 98 99 00 01 02 03 04 05 06 07 08 09-30%
-20%
-10%
0%
10%
20%
30%
40%Imports Imports' growth rate
40
50
60
70
80
90
100
110
120
Jan-
07M
ar-0
7M
ay-0
7Ju
l-07
Sep-
07N
ov-0
7Ja
n-08
Mar
-08
May
-08
Jul-0
8Se
p-08
Nov
-08
Jan-
09M
ar-0
9M
ay-0
9Ju
l-09
Sep-
09N
ov-0
9
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%Imports Imports' growth rate
China’s entry into the WTO
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
CHINA’S IMPORTS EXPERIENCED RAPID GROWTH AFTER THE COUNTRY’S ACCESSION TO THE WTO
Imports, battered by the crisis, stopped free-falling in February 2009, and kept growing up to the end of the year
Annual Imports (USD bn, 1997-2009) Monthly Imports (USD bn, 2007-2009)
Dec
-09
-50-
107.04 137.03 192.90 252.62 290.63 357.11 412.5141.94 48.49
63.9074.07
81.1686.96
102.87 107.17
32.1139.04
49.0065.74
77.7487.08
107.50119.19
441.77
0
200
400
600
800
1,000
1,200
2001 2002 2003 2004 2005 2006 2007 2008
OthersFoodstuffsSundryMineral itemsChemicals and related productsProducts classified by material Machinery equipment
AS AN ECONOMIC SUPERPOWER WITH AN AMBITIOUS DEVELOPMENT PLAN, CHINA NEEDS IMPORTED GOODS
The majority of these imports are machinery equipment, chemicals and related products, as well as, of course, minerals
Import Commodity Composition1 (USD bn, 2001-2008)
1. SITC Classification SystemSource: MOFCOM; THE BEIJING AXIS Analysis
-51-
Russia
US13.0%
Hong Kong 7.9%
South Korea7.3%
Japan10.4%
Taiwan5.0%
China’s Largest Trading Partners (USD bn, 2008)
China’s total trade with the world = USD 2,563.25 bnTotal exports = USD 1,430.69 bnTotal imports = USD 1,132.56 bn
52.5
53.6
56.9
59.7
115.0
129.2
186.1
203.6
266.7
333.7
Singapore
Malaysia
Russia
Australia
Germany
Taiwan
South Korea
Hong Kong
Japan
US
44% OF CHINA’S TOTAL TRADE IS WITH THE US, JAPAN, HONG KONG, SOUTH KOREA, AND TAIWAN
The US accounted for USD 334 billion in 2008
Source: UN Comtrade; THE BEIJING AXIS Analysis
-52-
Russia
US
Hong Kong
South Korea
Japan
UK
UAE
Angola
Netherlands
TaiwanSaudi Arabia
Hong KongUS
NetherlandsUK
UAEAngola
Saudi ArabiaJapan
South KoreaTaiwan -77.5
-38.2
-34.5-20.2
-19.4
19.026.5
40.6171.3
177.8
China’s Trade Balance with the Five Largest Surplus and Deficit Regions (USD bn, 2008)
China’s world trade surplus = USD 298.13 bn
CHINA HAS A LARGE TRADE SURPLUS WITH HONG KONG AND THE US, WHILE IT HAS A TRADE DEFICIT WITH TAIWAN AND S. KOREA
The larger share of China’s trade deficit is centered in Asia Pacific
Source: UN Comtrade; THE BEIJING AXIS Analysis
-53-
0
10
20
30
40
50
Jan-
05
Mar
-05
May
-05
Jul-0
5
Sep-
05
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep-
06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep-
07
Nov
-07
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-
08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Nov
-09
-60%
-40%
-20%
0%
20%
40%
60%Trade balance Exports, % change y-o-y Imports, % change y-o-y
Source: China Customs; THE BEIJING AXIS Analysis
China’s Monthly Trade Balance (USD bn, 2005-2009)
THE JANUARY 09 USD 39.1 BILLION TRADE SURPLUS WAS THE 2nd
HIGHEST EVER AFTER THE USD 40.1 BILLION OF NOVEMBER 08 This surprising figure, at the height of the global crisis, was the result of
plummeting imports that greatly exceeded the drop in exports
Dec
-09
-54-
0%
2%
4%
6%
8%
10%
97 98 99 00 01 02 03 04 05 06 07 08 090%
2%
4%
6%
8%
10%
06- I
06-II
06-III
06-IV
07- I
07-II
07-III
07-IV
08- I
08-II
08-III
08-IV
09- I
09-II
09-III
09-IV
1. Total consumption = private household consumption + government consumptionSource: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Net Exports / Annual GDP (1997-2009) Net Exports / Quarterly GDP (2006-2009)
CHINA’S TRADE SURPLUS PEAKED AT AROUND 8% OF GDP IN 2007
However, the turbulent global environment caused China’s trade to plunge in late 2008, leaving fixed investment and total consumption1 as the primary drivers of GDP
-55-
Percentage of China’s total trade value
Top 65 %Next 25 %Next 10 %
HunanShandong
ShaanxiHenan
Imports: USD 1,133.1 bnExports: USD 1,428.5 bn
Total trade: USD 2,561.6 bn
Hunan
Hainan
FujianTaiwan
Guangdong26.4%
Guangxi
Guizhou
Yunnan
Heilongjiang
Jilin
Liaoning
Hebei
Jiangsu, 15.4%
Shanghai, 12.6%
Anhui
ZhejiangJiangxi
Tibet
Hubei
Inner Mongolia
Ningxia
Sichuan
Qinghai
Xinjiang
Gansu
ShanxiTianjin
Chongqing
Beijing10.8%
Source: China Monthly Economic Indicators; THE BEIJING AXIS Analysis
China Total Trade Value by Province (2008)
90% OF CHINA’S TOTAL INTERNATIONAL TRADE VALUE IS CONCENTRATED IN NINE PROVINCES
These coastal areas also have the highest GDP, GDP per capita, retail sales, fixed asset investment, FDI, and personal income
-56-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic IndicatorsSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-57-
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%
10%
20%
30%
40%Fixed asset investment Growth rate
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Fixed Asset Investment (USD bn, 1997-2009)
CHINA HAS DEPENDED HEAVILY ON INVESTMENT FOR ITS ECONOMIC GROWTH
Fixed asset investment has been growing at an increasing pace since 1999, reaching 3,286 billion in 2009
-58-
231.5 271.7 286.7 316.8 362.5 428.8 553.5 713.2 916.7
2854.9
69.3 71.4 74.0 80.9 87.1 96.8117.9
138.3167.0
208.6
261.2
347.2
451.6
1,171.21,544.8
2,132.5
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Urban areas Rural areas
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Total Investment in Urban and Rural Areas (USD bn, 1997-2009)
MORE THAN 80% OF CHINA’S FIXED ASSET INVESTMENT HAS OCCURRED IN URBAN AREAS
In 2008, China’s total fixed asset investment was USD 3,206.5 billion, of which 86% was invested in urban areas
-59-
1
4
3
2
5
JiangsuHenan
Guangdong
Shandong
Fixed Asset Investment by Province (USD bn, 2008)
123456789
1011121314151617181920212223242526272829303132
Liaoning
0 50 100 150 200 250
ShandongJiangsu
GuangdongHenan
LiaoningZhejiang
HebeiSichuan
AnhuiHubei
HunanInner
FujianJilin
ShanghaiJiangxi
ShaanxiChongqing
BeijingGuangxi
Not ClassifiedHeilongjiang
ShanxiYunnanTianjin
XinjiangGuizhou
GansuNingxiaHainan
QinghaiTibet
Not classified by region – 2.2%
Second-tier provinces –
64.1%
Top 5 provinces - 35.9%
CHINA’S FIXED ASSET INVESTMENT IS PRIMARILY FOCUSED ON THE COASTAL PROVINCES
China’s coastal provinces have greater demand for fixed asset investment due to the development of their economies
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
-60-
177.5 236.6 324.4 427.6585.3
816.4158.8
201.5238.1
307.6
426.6
582.3
76.092.4
117.4
152.3
186.1
245.1
52.861.3
76.6
102.3
133.5
194.9
47.970.0
92.2
107.7
124.5
158.3
21.529.0
43.8
58.7
77.3
111.0
137.0160.7
191.2
223.7
272.6
380.4
0
500
1,000
1,500
2,000
2,500
2003 2004 2005 2006 2007 2008
OthersMining Utilities Environmental protection and public facilitiesTransport, storage and postReal estateManufacturing
Fixed Asset Investment by Sector (USD bn, 2003-2008)
MANUFACTURING AND REAL ESTATE HAVE BEEN THE TOP TWO SECTORS FOR ATTRACTING FIXED ASSET INVESTMENT
China’s ongoing industrialisation has prompted an increasing amount of investment in some sectors, especially manufacturing
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
-61-
0
20
40
60
80
100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-20%
-10%
0%
10%
20%
30%FDI inflow FDI growth
Note: FDI = foreign direct investmentSource: IMF; MOFCOM; THE BEIJING AXIS Analysis
FDI Inflow (USD bn, 1997-2008)
FDI FLOWS INTO CHINA HAVE BEEN GROWING STEADILY THROUGHOUT THE LAST DECADE
China’s low manufacturing costs, large market potential and attractive investment environment are key factors in attracting FDI
-62-
41.0
16.0
4.4
3.7
3.1
3.1
2.9
2.5
1.9
1.5
Hong KongVirgin Is.SingaporeJapanCayman Is.South KoreaUSSamoaTaiwanMauritius
12
3
4
5
6
7
8
9
10
USA 3.2%
HK 44.4%
Japan 4.0%South Korea3.4%
Taiwan 2.0%
Samoa 2.8%Mauritius 1.6%
British Virgin Islands17.3%
Cayman Islands3.4%
Singapore4.8%
USD bn
China’s total FDI inflow for 2008 amounted to USD 92.4 bn
Source: MOFCOM; THE BEIJING AXIS Analysis
OFFSHORE FINANCIAL CENTRES HAVE BEEN THE TOP ‘SOURCES’ OF FDI FOR CHINA
In 2008, 87% of China’s FDI came from ten countries, but the true countries of origin are hidden by the use of HK, BVI, Cayman Islands, Mauritius, etc.
China’s FDI Inflow by Source Region (USD bn, 2008)
-63-
0 5,000 10,000 15,000 20,000 25,000
JiangsuGuangdong
ShandongZhejiangLiaoning
ShanghaiTianjinBeijingFujianHunan
JiangxiHenanAnhuiHubei
ShanxiHebei
Inner MongoliaSichuanShaanxi
HainanChongqing
JilinGuangxi
HeilongjiangYunnanQinghaiGuizhouXinjiang
GansuNingxia
Tibet
123456789
10111213141516171819202122232425262728293031
3
4
2
1
5
Zhejiang
Liaoning
Jiangsu
Guangdong
Shandong
Top 5 provinces account for
56.8% of China’s total FDI
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
FDI Inflow by Province (USD mn, 2007)
CHINA’S COASTAL PROVINCES HAVE ATTRACTED SUBSTANTIALLY MORE FDI THAN INLAND PROVINCES
Larger market size, infrastructure and the more attractive nature of the business environment are key drivers for attracting FDI to coastal provinces
-64-
36.9 43.0 42.5 40.1 40.949.9
5.26.0 5.4 8.2
17.1
18.6
2.8 3.8 4.2
4.0
5.1
6.0
4.42.9
6.26.4 6.7
8.1
11.6
3.2
2.7
1.81.01.1
2.0
2.01.31.3
0.9
1.6
0
20
40
60
80
100
2003 2004 2005 2006 2007 2008
OthersTransport, storage and postWholesale and retail tradesLeasing and business servicesReal estateManufacturing
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
China’s FDI Inflow by Sector (USD bn, 2003-2008)
ALMOST HALF OF CHINA’S FDI HAS BEEN INVESTEDIN ITS MANUFACTURING SECTOR
This is rooted in the context of China’s industrialisation and the perceived status of the country as the world’s factory floor
-65-
0
20
40
60
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F0%
50%
100%
150%OFDI flow OFDI growth rate (from 2003)
Source: IMF; MOFCOM; THE BEIJING AXIS Analysis
China Outward FDI Flow (USD bn, 1997-2008)
CHINA’S OUTBOUND FDI (OFDI) HAS SEEN SHARP GROWTH IN RECENT YEARS
Over the past five years China has become more active in its OFDI activities, driven by its increasing need for new markets, technology and resources
-66-
China’s Outward FDI Stock by Region (2008)
115.9
20.310.5
3.43.3
3.0
2.41.8
1.61.4
Hong KongCayman Is.Virgin Is.AustraliaSingaporeSouth AfricaUSRussiaMacauKazakhstan
USD bnHK 63%
12
Cayman Islands11.1%
3
British Virgin Islands5.7%
7USA 1.3%
Australia 1.8%
4
5 Singapore 1.8%
Russia 1%8
Macau 0.9%9
Kazakhstan0.8% 10
6 South Africa 1.7%
CHINA’S OFDI HAS EXTENDED TO ALL CONTINENTS Usually via international financial centres such as HK, Cayman Islands and BVI
Source: MOFCOM; THE BEIJING AXIS Analysis
China’s total cumulative outward FDI stock for 2008 amounted to USD 183.97 bn
-67-
0 500 1,000 1,500
GuangdongZhejiang
ShandongHunanGansu
LiaoningShanghai
FujianJiangsuYunnanHenan
BeijingXinjiang
TianjinShaanxi
HeilongjiangSichuan
ChongqingGuangxi
JilinAnhuiHebeiHubei
ShanxiNingxiaJiangxi
Inner MongoliaQinghaiHainan
GuizhouTibet
123456789
10111213141516171819202122232425262728293031
3
42
GuangdongHunan
Zhejiang
Shandong
Top 5 provinces’ OFDI accounts
for 50%
The remaining provinces’ OFDI
accounts for 50%
Tibet has no reported OFDI
1
5
Gansu
Source: MOFCOM; THE BEIJING AXIS Analysis
OFDI by Province (USD mn, 2008)
IN 2008, HALF OF CHINA’S NON-FINANCIAL OFDI CAME FROM FIVE PROVINCES
Unlike with FDI, Chinese sources of OFDI are not restricted to the coastal areas
-68-
0.74.9 4.5 5.6
21.73.5 1.7
14.0
0.8
2.31.1
6.6
6.5
1.8
1.7
8.54.1
5.8
0.8
0.6
1.4 4.1
2.7
0.8
2.3
0.92.1
1.8
0.6
0.5
1.2
2.3
3.38
0
10
20
30
40
50
60
2004 2005 2006 2007 2008
OthersManufacturingTransport, storage and postMiningWholesale and retail tradesFinanceLeasing and business services
China OFDI Flow by Sector (USD bn, 2004-2008)
CHINA’S OFDI COVERS MANY SECTORS BUT THERE IS A DISPROPORTIONATE FOCUS ON CERTAIN SECTORS
A substantial portion of China’s outward investments are in leasing and business services, mining, wholesale and retail trades, and in manufacturing
Note: Business services includes investment in holding companies, regional headquarters and SPVs often established in offshore financial centers from where investments are made in other countries and sectors; Finance includes investments in the banking industry such bank branch offices, bank affiliated institutions, bank rep. offices and insurance institutions; Wholesale and retailing as well as transportation, warehousing and postal services are closely linked with China export and import activities
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
-69-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic IndicatorsSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-70-
92
96
100
104
108
97 98 99 00 01 02 03 04 05 06 07 08 09
Annual CPI
1
4
2
3
5Guangxi107.8
Xinjiang108.1
Qinghai110.1
Gansu108.2
Ningxia108.5
Jilin
105.14
5Sichuan105.1
3 Zhejiang105
2Liaoning104.6
1 Fujian104.6
1. Preceding year = 100Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Consumer Price Index Annual (1997-2009)1 Consumer Price Index by Province (2008)1
Bottom 5 provincesTop 5 provinces
CHINA HAS SEEN PHASES OF INFLATION, DISINFLATION AND DEFLATION OVER THE PAST DECADE
In 2008, the provinces with the highest CPI were concentrated in western China while the provinces with the lowest CPI were concentrated along the coastline
Commodity and food price pressures
Overheating and overinvestment
Deflation and overcapacity
-71-
92
96
100
104
108
97 98 99 00 01 02 03 04 05 06 07 08
Annual PPI
1
32
2
Shaanxi122.4
Hebei116.7
3 Xinjiang108.1
5Heilongjiang114
4
Ningxia112.9
4 Tianjin104.1
Beijing103.3
5 Fujian104.6
Guangdong103.1
1 Shanghai102.2
1. Preceding year = 100Source: China Statistical Yearbook; Various; THE BEIJING AXIS Analysis
Producer Price Index, Annual (1997-2008)1 Producer Price Index by Province (2008)1
Bottom 5 provincesTop 5 provinces
CHINA’S PPI HAS SEEN SIMILAR FLUCTUATIONS IN THE PAST DUE TO THE RISE IN RAW MATERIAL, FUEL AND ENERGY COSTSIn 2008, the regions with the lowest PPI were the coastal provinces of Fujian and
Guangdong, and the directly controlled municipalities of Shanghai, Beijing, and Tianjin
-72-
95
100
105
110
115
99 00 01 02 03 04 05 06 07 08 09
Selling price index of housesLand transaction price indexRenting price index of houses
5
2
3Shaoguan100.1
3
1
Yinchuan108.4
4
1
Jinhua110.6
Xuzhou100.6
Taiyuan100.5
Hangzhou109.2 Wenzhou
111.9
Shenzhen116.4
1. Preceding year = 100 Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Bottom 5 CitiesTop 5 Cities
Property Price Index, Annual (1999-2009)1 Selling Price Index of Houses by Cities (Q4, 2009)
CHINA’S PROPERTY MARKET HAS SEEN DRAMATIC PRICE INCREASES OVER THE PAST DECADE
Although housing prices fell at the start of 2009, they soared by the end of the year, rising 7.8% in December1
4
2
Tangshan98.0
5
Jilin98.9
-73-
30
40
50
60
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep-
06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep-
07
Nov
-07
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-
08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Nov
-09
PMI 2 month moving average (PMI)
FROM A TROUGH OF 38.8% IN NOV 2008, CHINA’S PMI HAS RISEN PAST THE 50% BENCHMARK, REACHING 56% IN DEC 2009 A PMI index of over 50% signals expansion of the manufacturing industry
Purchasing Manager Index of the Manufacturing Industry (2006-2009)
Source: China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Dec
-09
-74-
103.9103.3
103.4102.8
102.7
102.1
100.9
101.2
100.5
100.4
112
113.1
111.6
110
110.3
109.7
110
109.8
110.3
109.3
109
107.8105.3
101.9
101.3
100.9
80
85
90
95
100
105
110
115
120
Nov
-07
Dec
-07
Jan-
08
Feb-
08
Mar
-08
Apr
-08
May
-08
Jun-
08
Jul-0
8
Aug
-08
Sep-
08
Oct
-08
Nov
-08
Dec
-08
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9
Aug
-09
Sep-
09
Oct
-09
Nov
-09
Dec
-09
Consumer Confidence Index (%, Nov 2007- 2009)
CONSUMER CONFIDENCE IN CHINA HAS BEEN IMPACTED BY THE GLOBAL FINANCIAL CRISIS
However, the effects of the government’s stimulus plan has hada positive impact in 2009
Although consumer confidence has decreased, it is still among
the highest in the world
Source: CEIC Data; THE BEIJING AXIS Analysis
When Consumer Confidence is over the 100 mark it shows that
consumers have become optimistic
-75-
0
5
10
15
20
21-M
ar-9
8
21-N
ov-9
9
21-S
ep-0
3
25-A
pr-0
4
5-Ju
l-06
15-A
ug-0
6
15-N
ov-0
6
15-J
an-0
7
25-F
eb-0
7
16-A
pr-0
7
15-M
ay-0
7
5-Ju
n-07
15-A
ug-0
7
25-S
ep-0
7
25-O
ct-0
7
26-N
ov-0
7
25-D
ec-0
7
25-J
an-0
8
25-M
ar-0
8
25-A
pr-0
8
20-M
ay-0
8
7-Ju
n-08
25-J
un-0
8
15-S
ep-0
8
15-O
ct-0
8
26-N
ov-0
8
13-J
an-1
0
Economicslowdown
Economy overheating
Note: The Bank Deposit-Reserve Ratio is a standard determined by a central bank. It governs the relationship between the amount of money that banks must keep on hand and the amount that they can lend. By raising and lowering the ratio, the central bank can decrease or increase money supply
Source: BNET Business Dictionary; THE BEIJING AXIS Analysis
Bank Deposit-Reserve Ratio (%, 1998-2010)
CONCERNS OVER INFLATIONARY PRESSURE ARE DRIVING A MORE TIGHTENING MONETARY POLICY IN 2010
China began to implement a loose monetary policy at the end of 2008 to fight the fallout of the financial crisis
-76-
0
2
4
6
8
10
25-M
ar-9
8
01-J
ul-9
8
7-D
ec-9
8
10-J
un-9
9
21-F
eb-0
2
29-O
ct-0
4
19-A
ug-0
6
19-A
ug-0
6
18-M
ar-0
7
19-M
ay-0
7
21-J
ul-0
7
22-A
ug-0
7
15-S
ep-0
7
21-D
ec-0
7
09-O
ct-0
8
30-O
ct-0
8
27-N
ov-0
8
23-D
ec-0
8
5 years 1 year 6 months 3 months
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Deposit Interest Rate (% p.a., 1998-2008)
UNTIL THE FINANCIAL CRISIS, MONETARY POLICY WAS AIMED AT PREVENTING THE ECONOMY FROM OVERHEATING
But during 2008 deposit interest rates were lowered as the full extent of the economic slowdown became clear
-77-
0
3
6
9
12
23-O
ct-9
7
25-M
ar-9
8
1-Ju
l-98
7-D
ec-9
8
10-J
un-9
9
21-F
eb-0
2
29-O
ct-0
4
28-A
pr-0
6
19-A
ug-0
6
18-M
ar-0
7
19-M
ay-0
7
21-J
ul-0
7
22-A
ug-0
7
15-S
ep-0
7
21-D
ec-0
7
16-S
ep-0
8
9-O
ct-0
8
30-O
ct-0
8
27-N
ov-0
8
23-D
ec-0
8
Longer than 5 years 1 year to 3 years (including 3 years) 6 months to 1 year (including 1 year)
First decrease in loan interest rates
in six years
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Loan Interest Rate (%, 1997-2008)
LENDING RATES STARTED TO SHIFT LOWER FOR THE FIRST TIME IN SIX YEARS DURING SEPTEMBER 2008Rates were lowered relatively rapidly since September 2008 as the economic
slowdown in Q3-Q4 2008 unfolded
-78-
-1,000
1,000
3,000
5,000
7,000
9,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Loans Deposits
Deposits CAGR: 18.5%
Loans CAGR: 16.0%
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Total Loans and Deposits (USD bn, 1997-2009)
DURING THE PAST TEN YEARS, CHINESE BANK DEPOSITS HAVE BEEN RISING FASTER THAN BANK LENDING
By the end of 2009, China’s total deposits amounted to USD 9 trillion, while loans amounted to USD 6.3 trillion
-79-
6,710 3,136
2,269
53154145260
316
0%
20%
40%
60%
80%
100%
T o t ald ep osit s
Ho useho ldsavings
dep o sit s
C ompanyd ep osit s
D ep osit s o fg o vernment
d epart ment s &o rg anisat io ns
F iscald ep osit s
A g ricult urald epo sit s
T rustd ep osit s
Ot herd ep osit s
1,251.9 1,444.5 1,721.9 2,027.0 2,269.03,135.9875.8
1,023.01,173.7
1,420.51,823.7
2,268.7
0
2,000
4,000
6,000
8,000
10,000
2003 2004 2005 2006 2007 2008
Other depositsTrust depositsAgricultural depositsFiscal depositsDeposits of government departments & organisationsCompany depositsHousehold savings deposits
Source: China Statistical Yearbook; The People’s Bank of China; THE BEIJING AXIS Analysis
Sources of Deposits (USD bn, 2008) Sources of Deposits (USD bn, 2003-2008)
HOUSEHOLD SAVINGS HAVE BEEN THE MAIN DRIVER OF THE HIGH GROWTH IN DEPOSITS
In 2008, household banking deposits accounted for 47% of total deposits, while company deposits accounted for 34%
47%
34%
-80-
291
4,367 2,231
720
4453
254255
520
0%
20%
40%
60%
80%
100%
Tot a l l oa ns M e di um &l ong- t e r m
l oa ns
Ot he r S hor t -t e r m Loa ns
S hor t - t e r ml oa ns t o
i ndust r i a lse c t or
S hor t - t e r ml oa ns t o
c omme r c i a lse c t or
S hor t - t e r ml oa ns t o
a gr i c ul t ur a lse c t or
S hor t - t e r ml oa ns t o
c onst r uc t i onse c t or
Tr ust l oa nsOt he r l oa ns
766.0 926.7 1,067.7 1,336.61,729.8
2,230.9380.5
401.7 414.7456.5
576.5
719.5
274.9288.7
274.9
359.4
442.2
520.2
0
1,000
2,000
3,000
4,000
5,000
2003 2004 2005 2006 2007 2008
Other loansTrust loansShort-term loans to construction sectorShort-term loans to agricultural sectorShort-term loans to commercial sectorShort-term loans to industrial sectorOther short-term loansMedium & long-term loans
Source: China Statistical Yearbook; The People’s Bank of China; THE BEIJING AXIS Analysis
Loan Duration (USD bn, 2008) Loan Duration (USD bn, 2003-2008)
MEDIUM AND LONG-TERM LOANS MAKE UP THE BULK OF TOTAL LOANS
In 2008, medium and long-term loans made up 51% of total loans, while short-term loans made up 41%
51%
-81-
646 715 780 837 834 842 860 864 864
514509 507
540 547 592690 740 830
0
400
800
1,200
1,600
2001 2002 2003 2004 2005 2006 2007 2008 2009
Number of companies listed on the Shenzhen Stock ExchangeNumber of companies listed on the Shanghai Stock Exchange
525.8 463.1 513.0 447.7 395.9 1,121.5 4,302.2 1,746.8 3,655.0
Source: China Statistical Yearbook; China Monthly Economic Indicators; World Federation of Exchanges; THE BEIJING AXIS Analysis
Number of Listed Companies
IN 2009, THE SHENZHEN AND SHANGHAI STOCK EXCHANGES HAD THE 3rd AND 7th LARGEST INDEX RISES IN THE WORLD
In 2009, China’s total market capitalisation reached USD 3,655 billion, with 1,694 listed companies
Total market
value, USD bn
2007 stock market bubble
-82-
0
500
1,000
1,500
2001 2002 2003 2004 2005 2006 2007 2008 20090
5,000
10,000
15,000
0
1,000
2,000
3,000
4,000
5,000
6,000
2001 2002 2003 2004 2005 2006 2007 2008 20090
2,000
4,000
6,000
8,000
Volume, bn shares Price
Average P/E ratio 37.7 34.4 36.5 24.2 16.3 33.3 59.2 14.9 28.73
Total turnover USD bn
274 205 252 320 235 725 4,017 2,597 6,469
Average P/E ratio 39.8 37.0 36.2 24.6 16.4 32.7 69.7 16.7 46.01
Total turnover USD bn
188 133 136 192 152 410 2,040 1,248 2,909
PriceVolume, bn shares
Source: China Statistical Yearbook; China Monthly Economic Indicators; Shanghai Stock Exchange; Shenzhen Stock Exchange; www.sina.com.cn; THE BEIJING AXIS Analysis
Shanghai Stock Exchange (2001- 2009) Shenzhen Stock Exchange (2001- 2009)
THE GLOBAL FINANCIAL CRISIS, ALONG WITH OTHER FACTORS, CAUSED LARGE DECLINES IN FINANCIAL MARKETS
In 2009, however, Chinese stock markets recovered at a faster pace compared to their global counterparts
-83-
0
500
1,000
1,500
2,000
2,500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%
20%
40%
60%
80%Foreign exchange reserves Growth rate
Lowest level since 2000, caused by slowing of ‘hot
money’ inflows
Source: China Statistical Yearbook; China Monthly Economic Indicators; THE BEIJING AXIS Analysis
Foreign Exchange Reserves (USD bn, 1997-2009)
CHINA HAS THE LARGEST FOREIGN EXCHANGE RESERVES IN THE WORLD
In 2009, China’s foreign reserves reached USD 2.4 trillion – consisting mainly of US government and institutional bonds
-84-
70
90
110
130
150
2001 2002 2003 2004 2005 2006 2007 2008 May 2009
EUR AUD ZAR USD RUB JPY KRW
Note: Index 2001 = 100 (EUR Index 2002=100)Source: PBOC; THE BEIJING AXIS Analysis
Annual RMB Exchange Rate (2001- May 2009)
THE CHINESE RENMINBI (RMB) HAS APPRECIATED BY 18% AGAINST THE USD SINCE CHINA AMENDED ITS EXCHANGE RATE
POLICY IN 2005
AUD
EUR
USD
ZAR
KRW
JPY
RUB
-85-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic IndicatorsSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-86-
0
200
400
600
800
1,000
1,200
1,400
1,600
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 20080.0%
0.5%
1.0%
1.5%
2.0%Population Population growth rate
Source: IMF; National Bureau of Statistics of China; THE BEIJING AXIS Analysis
Population Indicators (mn, 1978-2009)
CHINA’S LARGE POPULATION IS A DEFINING FEATURE OF ITS SOCIETY
Amid concerns about resource sustainability, the central government’s One Child Policy has served to slow the population growth rate to 0.6%
-87-
0
10
20
30
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 20080%
10%
20%Birth rate Natural growth rate
Children born during the boom of the mid-1980’s will soon
enter childbearing age
Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
China’s Annual Births (mn, 1980-2008)
HOWEVER, EVEN WITH FAMILY PLANNING MEASURES, CHINA STILL HAS AROUND 16 MILLION BIRTHS PER YEAR Introduced in 1979, the One Child Policy has been a controversial issue
-88-
6.7%
25.7%
67.6%
0-14 15-64 65 and over
8.1%
19.8%
72.1%
1998 (Total Population - 1.2 bn) 2009 (Total Population - 1.3 bn)
Source: National Bureau of Statistics of China; THE BEIJING AXIS Analysis
Population Breakdown by Age (mn, 1998-2009)
108.5
964.8
265.183.6
843.4
320.6
CURRENT DEMOGRAPHICS REVEAL A POPULOUS COUNTRY WITH A RELATIVELY SMALL YOUTH GROUP
China has an aging population, and with the continuation of the One Child Policy those aged 65 and older could make up 25% of the population by 2040
-89-
0 20 40 60 80 100
Guangdong Henan
Shandong Sichuan Jiangsu
Hebei Hunan Anhui Hubei
Zhejiang Guangxi Yunnan Jiangxi
Liaoning Heilongjiang
Guizhou Shaanxi
Fujian Shanxi
Chongqing Jilin
Gansu Inner Mongolia
Xinjiang Shanghai
Beijing Tianjin Hainan
Ningxia Qinghai
Tibet
Urban populationRural population
123456789
10111213141516171819202122232425262728293031
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
3
4
2 5
1
Henan
Hainan
Shandong
Guangdong
JiangsuSichuan
31Tibet
30Qinghai 29
Ningxia
28
27 Tianjin
Population by Urban and Rural Residence and Province (mn, 2008)
THE MAJORITY OF THE MOST POPULOUS PROVINCES ARE LOCATED IN MORE DEVELOPED AREAS IN EASTERN CHINA
Unsurprisingly, these areas also adjoin the coast or major waterways and have a solid agricultural or manufacturing base
Top 5Bottom 5
-90-
0
100
200
300
400
500
600
700
800
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
SINCE CHINA’S ACCESSION TO THE WTO, THE COUNTRY’S EMPLOYED POPULATION HAS GROWN MORE RAPIDLY
In terms of job creation, there is a clear movement away from state-owned enterprises into private companies
Rural areas
Urban areas
Number of Employed Persons at Year-end in Urban and Rural Areas (mn, 1997-2008)
Employee Breakdown in Urban and Rural Areas (mn, 1997 vs. 2008)
0
100
200
300
400
500
600
700
800
1997 2008
Others rural
Self-employed individuals inrural areas Private companies in ruralareas Township and villagecompanies Others, urban
Joint ownership units
Cooperative units
Units with funds from HK,Macau and Taiwan Collectively-owned units
Share holding corporations
Foreign funded units
Limited liability corporations
Self-employed individuals inurban areas Private companies in urbanareas State-owned units
Rural
Urban
-91-
123456789
10111213141516171819202122232425262728293031
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
3
451
2
HainanGuangdong
31Tibet
30Qinghai
29
Ningxia
28
27
ShandongJiangsu
Tianjin
SichuanHenan
Number of Employed Persons by Province (mn, 2008)
PREDICTABLY, THE MORE POPULATED PROVINCES HAVE THE HIGHEST NUMBER OF EMPLOYED PERSONS
The majority of the workforce can be found in townships, villages and private companies, underscoring the country’s agricultural and manufacturing roots
0 10 20 30 40 50 60
Tibet Qinghai Ningxia Hainan Tianjin
Xinjiang Shanghai
Inner Jilin
Beijing Gansu
Shanxi Heilongjiang
Chongqing Shaanxi
Fujian Liaoning
Jiangxi Guizhou Yunnan
Guangxi Hubei Anhui Hebei
Zhejiang Hunan
Jiangsu Sichuan
Shandong Guangdong
Henan
Urban Rural
Inner Mongolia
Top 5Bottom 5
-92-
0
100
200
300
400
500
600
700
800
78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Primary industry
Secondary industry
Tertiary industryPrimary industry
40%
Tertiary industry
33%
Secondary industry
27%
Note: The sizeable gap between the 1989 and 1990 figures is due to the adjustment of urban and rural employed persons’ subtotals in accordance with the data obtained from the 5th National Population Census
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Total Employed Persons By Sector (mn, 1978-2008)
2008
FOLLOWING THE TREND SET BY DEVELOPED COUNTRIES, CHINA IS STEADILY DEVELOPING ITS SERVICES SECTOR
However, a large proportion of the population is still employed in the primary and secondary sectors
-93-
622
931
655 707 759 829
1,0241,138
1,281
1,475
1,813
2,271
672545
450397355317299
286272267261252
0
500
1,000
1,500
2,000
2,500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080%
5%
10%
15%
20%
25%
30%Urban Rural Urban growth Rural growth
Note: Growth rates are calculated at current pricesSource: National Statistics Database; THE BEIJING AXIS Analysis
Annual Disposable Income of Urban Households and Net Income of Rural Households Per Capita (USD, 1997-2008)
INCOME LEVELS OF URBAN AND RURAL HOUSEHOLDS HAVE BEEN STEADILY INCREASING
Urban households initially saw a higher growth rate compared to their rural counterparts, but this disparity in growth rates has decreased in recent years
-94-
123456789
10111213141516171819202122232425262728293031
Source: National Statistics Database; THE BEIJING AXIS Analysis
Guangdong
Shanghai
Zhejiang
Tianjin
Beijing
1
5
4
3
231
30
29
28
27
Gansu
Guizhou
Qinghai
Xinjiang
Tibet
Disposable Income of Urban Households and Income of Rural Households Per Capita by Province (USD, 2008)
INCOME LEVELS ARE PARTICULARLY HIGH IN THE MORE DEVELOPED EASTERN COASTAL PROVINCES
As the political and commercial capitals of China, Beijing and Shanghai maintain their status as the two most attractive cities in terms of income levels
0 2,000 4,000 6,000
ShanghaiBeijing
ZhejiangTianjin
GuangdongJiangsu
FujianShandong
LiaoningChongqingInner Mong
HunanHebei
GuangxiHubei
JilinHenan
JiangxiShanxi
AnhuiHainan
SichuanNingxia
HeilongjianYunnan
ShaanxiTibet
XinjiangQinghaiGuizhou
Gansu
Urban
Rural
Inner Mongolia
Top 5Bottom 5
-95-
25
35
45
55
65
75
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Urban areas Rural areas
1. Engel's Law states that household expenditure on food, on aggregate, declines as income rises; in other words, the income elasticity of demand for food on aggregate is less than one and declines towards zero with income growth. A common application of this statistic is to regard it as a reflection of the living standards of a country. Engel’s coefficient has an inverse correlation with the standard of living of a country
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Urban and Rural Engel’s Coefficients (%, 1978-2008)
43.7
37.9
57.5
67.7
PEOPLE IN CHINA ARE GRADUALLY SPENDING RELATIVELY LESS ON FOOD DUE TO INCREASING INCOME LEVELS The downward trend of Engel’s coefficient1 is expected to continue
as this reflects a progressively higher standard of living
High food inflation caused temporary increase
Temporary increases from high levels of food inflation
-96-
Note: The Gini Coefficient is a measure of statistical dispersion. It is most prominently used as a measure of inequality of income distribution or inequality of wealth distribution. It is defined as a ratio with values between 0 and 1. A low Gini Coefficient indicates more equal income or wealth distribution, while a high Gini Coefficient indicates more unequal distribution
Source: National Statistics Database; THE BEIJING AXIS Analysis
Gini Coefficient (1978-2008)
ALTHOUGH INCOME LEVELS HAVE BEEN INCREASING, THERE IS STILL A LARGE INEQUALITY IN THE DISTRIBUTION OF INCOME
The inequality of wealth distribution is particularly striking when the urban-rural divide is examined
0.30 0.31 0.310.29
0.27 0.26 0.26 0.26
0.32 0.32 0.33 0.34 0.330.35
0.370.39 0.40 0.39
0.37 0.37 0.38 0.390.41 0.40
0.43 0.44 0.44 0.45 0.46 0.46
0.51
0.00
0.10
0.20
0.30
0.40
0.50
0.60
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
-97-
95.2
78.4
50.5
10.22.6
13.6
15.4
9.9
24.2
27.6
51.1
16.7
17
38.6
1.81.2
5.1 2.40.8
1.3 19.46.97.42
1985 1995 2005 2015 2025
Global affluent
(>USD 25,000)
Mass affluent
(USD 12,500-USD 25,000)
Upper middle class
(USD 5,100-USD 12,500)
Lower middle class
(USD 3,200-USD 5,100)
Poor (<USD 3,200)
99.392.9
77.3
23.29.7
5.7
12.6
49.7
9.4
21.2
59.4
5.67.7
0.5
19.8
1.3 0.5 0.4 3.3
1985 1995 2005 2015 202566 109 191 280 373
Urban households (mn)64 204 644 1,574 3,267
Urban disposable income (USD)
Segments by annual income
1
1 1
1. Base forecast. Certain figures do not amount to 100% due to the effects of roundingSource: National Bureau of Statistics of China; McKinsey Global Institute Analysis
Share of Chinese Urban Households (%) Share of Total Urban Disposable Income (%)
1
A LARGE MIDDLE CLASS IS DEVELOPING IN CHINA’S URBAN AREAS
In 2025, China could have more than 350 million urban households with annual disposable incomes above USD 3,200
-98-
0
10
20
30
40
50
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010F
Source: China Statistical Yearbook; THE BEIJING AXIS Analysis
Urbanisation Rate (%, 1978-2010F)
CHINA’S URBANISATION RATE HAS INCREASED FROM 18% IN 1978 TO 46% IN 2009, WITH THE URBAN POPULATION
EXCEEDING 600 MILLION However, China’s urbanisation rate is currently lower than the world average (50%)
-99-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International ComparisonSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-100-
CHINA AND OTHER ASIAN ECONOMIES LED WORLD GDP GROWTH IN THE FOURTH QUARTER OF 2009
China registered the highest growth rate at 10.7% y-o-y while Russia suffered a severe contraction of -8.9% y-o-y
9.26.9
6.76
5.85.4
4.54.2
42.6
2.11.8
0.40.1
-0.4-1.2
-2.1-3.2-3.3
-8.9
10.7ChinaTaiwan
VietnamIndonesia
South KoreaThailand
IndonesiaMalaysia
Sri LankaSingapore
Hong KongJordan
PhilippinesAustralia
USJapanBrazil
Euro AreaUK
TurkeyRussia
Q4 2009 GDP Growth for Asia and Major Economies (% y-o-y, 2009)
Note: Australia, Brazil, Indonesia, Jordan, Sri Lanka, Russia and Turkey are Q3 2009Source: Bangkok Bank; THE BEIJING AXIS Analysis
-101-
FOR THE WHOLE OF 2009, CHINA PERSEVERED ON ITS PATH OF RAPID EXPANSION
Although 2009 was a year of contraction for most, China quickly recovered from its slow output at the beginning of the year to achieve a robust 8.7% growth rate
Annual GDP Growth for Asia and Major Economies (% y-o-y, 2009)
5.34.5
0.90.2 0.1
-1.7 -1.9 -2 -2.3 -2.4 -2.7
-4-4.8 -5
8.7
China Vietnam Indon Philip SouthKorea
SouthAfrica
Malaysia Taiwan Singap Thailnd US HK EuroArea
UK Japan
Source: IMF; CEIC Database and the Economist; Bangkok Bank; THE BEIJING AXIS Analysis
-102-
MAJOR MACROECONOMIC INDICATORS SHOW THAT ASIAN ECONOMIES WERE THE HIGHLIGHT OF 2009 (I)
Note: The bold figures are newly updated; *Estimated figures; **Dec-09; ***Annual Rates; ****As of Feb 23, 2010.Source: IMF; CEIC Database and the Economist; Bangkok Bank
GDP Consumer Prices Industrial Production Unemploymenty-o-y% q-o-q% Latest 2009 y-o-y% Latest 2009 y-o-y% m-o-m% Latest Rate % Latest
ASEANBrunei (BN) 3.3 - Q4-08 0.2* 2.1 May-09 1.2* - - - 3.7 Dec-08Cambodia (KH) 6.7 - 2008 -2.7* 1.3 Nov-09 -0.6* - - - 1.7 Dec-08Indonesia (ID) 5.4 - Q4-09 4.5 3.7 Jan-10 4.8 5.5 0.4 Dec-09 7.9 Dec-09Laos (LA) 7.2 - 2008 4.6* 3.9 Dec-09 0.0 - - - - -Malaysia (MY) 4.5 - Q4-09 -1.7 1.3 Jan-10 0.6 8.9 4.7 Dec-09 3.6 Sep-09Myanmar (MM) 11.9 - 2007 4.3* 1.4 Nov-09 6.9* - - - - -Philippines (PH) 1.8 - Q4-09 0.9 4.3 Jan-10 3.3 6.5 0.6 Nov-09 7.1 Dec-09Singapore (SG) 4.0 -6.8*** Q4-09 -2.0 0.0 Dec-09 0.2 14.4 18.1 Dec-09 2.1 Dec-09Thailand (TH) 5.8 3.6 Q4-09 -2.3 4.1 Jan-10 -0.9 35.7 10.4 Dec-09 0.9 Dec-09Vietnam (VN) 6.9 - Q4-09 5.3 7.6 Jan-10 6.9 31.2 -4.6 Jan-10 4.7 Dec-08EAST ASIA China (CN) 10.7 - Q4-09 8.7 1.5 Jan-10 -0.7 19.2 - Nov-09 4.3 Dec-09Hong Kong (HK) 2.6 2.3 Q4-09 -2.7 1.0 Jan-10 0.5 -8.6 - Q3-09 4.9 Jan-10South Korea (KR) 6.0 0.2 Q4-09 0.2 3.1 Jan-10 2.8 33.9 2.9 Dec-09 5 Jan-10Taiwan (TW) 9.2 4.2 Q4-09 -1.9 0.3 Jan-10 -0.9 47.3 5.3 Dec-09 5.7 Jan-10SOUTH ASIABangladesh (BD) 5.9 - 2008 5.4* 7.2 Nov-09 5.3* 6.3 3.2 Aug-09 4.2 Dec-06India (IN) 6.7 - Q3-09 - 15.0 Dec-09 10.9 16.8 10.9 Dec-09 9.1 Dec-08Pakistan (PK) 3.7 - 2008 2.0* 13.7 Jan-10 13.6 0.3 -2.8 Nov-09 5.2 Dec-08Sri Lanka (LK) 4.2 - Q3-09 3.0* 6.5 Jan-10 3.4 11.2 -3.7 Dec-09 5.9 Sep-09
-103-Note: The bold figures are newly updated; *Estimated figures; **Dec-09; ***Annual Rates; ****As of Feb 23, 2010.Source: IMF; CEIC Database and the Economist; Bangkok Bank
Export y-o-y %
Import y-o-y %
Tade Balance Current Account FX**** Per USD
Interest Rates %USD bn Latest USD bn Latest Policy Rate 10Y GB Yield
ASEANBrunei (BN) -0.7 16.4 1.8 Q4-08 7.4 2008 1.40 5.50 -Cambodia (KH) -11.4 -13.9 -0.3 Sep-09 0.0 Q1-09 4,196.00 - -Indonesia (ID) 49.8 34.2 3.0 Dec-09 3.4 Q4-09 9,271.00 6.50 -Laos (LA) -26.0 -5.2 -0.2 Sep-09 -0.1 Q2-09 8,481.00 4.00 -Malaysia (MY) 23.5 28.3 3.5 Dec-09 7.2 Q3-09 3.40 2.00 4.27Myanmar (MM) -18.0 78.0 0.0 Sep-09 1.0 2007 985.00 12.00 -Philippines (PH) 23.5** 4.1 0.1 Nov-09 0.7 Sep-09 46.15 6.00 8.06Singapore (SG) 46.4 37.9 2.3 Jan-10 5.8 Q3-09 1.41 0.69 2.54Thailand (TH) 30.8 44.8 0.5 Jan-10 0.8 Dec-09 33.11 1.25 4.02Vietnam (VN) 31.7 86.2 -1.3 Jan-10 2.8 Q1-09 18,544.00 8.00 -EAST ASIA China (CN) 21.0 85.6 14.2 Jan-10 284.1 H2-09 6.83 5.31 3.63Hong Kong (HK) 9.2 18.7 -4.3 Dec-09 3.6 Q3-09 7.76 0.50 2.82South Korea (KR) 46.7 26.4 -0.5 Jan-10 -0.4 Jan-10 1,149.00 2.00 5.40 Taiwan (TW) 75.8 114.7 2.5 Jan-10 8.2 Q3-09 32.05 1.25 1.41SOUTH ASIABangladesh (BD) 0.7 0.4 -0.7 Nov-09 -0.1 Oct-09 69.34 4.50 8.75India (IN) 9.3 27.2 -10.1 Dec-09 -12.6 Q3-09 46.13 3.25 7.74Pakistan (PK) 26.3 31.3 -1.6 Jan-10 -0.5 Q3-09 85.12 12.50 12.21Sri Lanka (LK) 6.4 0.5 -0.3 Dec-09 0.2 Q3-09 115.08 7.50 13.1
MAJOR MACROECONOMIC INDICATORS SHOW THAT ASIAN ECONOMIES WERE THE HIGHLIGHT OF 2009 (II)
-104-Note: The bold figures are newly updated; *Estimated figures; **Dec-09; ***Annual Rates; ****As of Feb 23, 2010.Source: IMF; CEIC Database and the Economist; Bangkok Bank
GDP Consumer Prices Industrial Production Unemployment
y-o-y% q-o-q% Latest 2009 y-o-y% Latest 2009 y-o-y% m-o-m% Latest Rate % Latest
MIDDLE EAST
Jordan (JD) 2.1 - Q3-09 3.0* 3.9 Jan-10 -0.7 4.3 10.9 Dec-09 12.2 Dec-09
Kuwait (KW) 4.4 - 2007 -1.5* 4.2 Jun-09 4.6* 0.2 -1.1 Nov-09 1.3 Dec-06
Oman (OM) 7.8 - 2008 4.1* 0.9 Dec-09 3.5 6.8 -1.8 Nov-09 - -
Qatar (QA) 16.4 - 2008 11.5* 1.3 Q1-09 0.0* 0.6 -0.7 Nov-09 0.3 Dec-09
Saudi Arabia (SA) 0.1 - 2009 0.1 4.1 Jan-10 5.1 -6.8 -2.7 Nov-09 5.4 Dec-09
Turkey (TR) -3.3 2.3 Q3-09 -6.5* 8.2 Jan-10 6.3 7.4 0.6 Dec-09 13.1 Nov-09
UAE (AE) 7.4 - 2008 -0.2 -0.4 Dec-09 1.8 -5.4 -8.3 Nov-09 4.0 Dec-08
MAJOR ECONOMIES
US 0.1 5.7*** Q4-09 -2.4 2.6 Jan-10 -0.4 1.0 0.9 Jan-10 9.7 Jan-10
Euro Area (EA) -2.1 0.1 Q4-09 -4.0 1.0 Jan-10 0.3 -5.0 -1.7 Dec-09 10.0 Dec-09
Japan (JP) -0.4 1.1 Q4-09 -5.0 -1.7 Dec-09 -1.4 5.1 1.1 Dec-09 5.1 Dec-09
UK -3.2 0.1 Q4-09 -4.8 3.4 Jan-10 2.2 -5.7 -6.5 Dec-09 7.8 Nov-09
Brazil (BR) -1.2 1.3 Q3-09 -0.7* 4.6 Jan-10 4.9 18.9 -8.0 Dec-09 6.8 Dec-09
Russia (RU) -8.9 - Q3-09 -7.5* 8.0 Jan-10 11.7 1.8 -20.4 Jan-10 9.2 Jan-10
Austrialia (AU) 0.4 0.2 Q3-09 0.8* 2.1 Q4-09 1.8 -3.9 - Q3-09 5.3 Jan-09
WHILE DEVELOPED ECONOMIES WERE STILL STRUGGLING FROM THE FINANCIAL CRISIS (I)
-105-Note: The bold figures are newly updated; *Estimated figures; **Dec-09; ***Annual Rates; ****As of Feb 23, 2010.Source: IMF; CEIC Database and the Economist; Bangkok Bank
Export y-o-y %
Import y-o-y %
Tade Balance Current Account FX**** Per USD
Interest Rates %
USD bn Latest USD bn Latest Policy Rate 10Y GB Yield
MIDDLE EAST
Jordan (JD) -5.4 13.1 -0.7 Dec-09 -0.5 Q3-09 0.71 4.75 -
Kuwait (KW) -54.9 -29.2 7.7 Q2-09 64.7 2008 0.29 1.75 -
Oman (OM) -31.3 -12.7 0.8 Sep-09 5.5 2008 0.38 0.05 -
Qatar (QA) -37.7 -19.6 2.0 Sep-09 14.2 2008 3.64 5.50 -
Saudi Arabia (SA) -10.5 -39.4 -4.4 Nov-09 134 2008 3.75 2.00 -
Turkey (TR) 30.3 31.4 -4.9 Dec-09 -3.2 Dec-09 1.52 6.50 -
UAE (AE) -37.2 -23.4 -3.2 Sep-09 22.3 2008 3.69 1.00 -
MAJOR ECONOMIES
US 12.1 5.7 -46.4 Dec-09 -124.1 Q3-09 1.00 0.00-0.25 3.69
Euro Area (EA) 7.4 1.5 6.4 Dec-09 0.2 Nov-09 0.74 1.00 3.56
Japan (JP) 39.3 7.4 -0.9 Jan-10 10 Dec-09 91.00 0.10 1.34
UK 14.2 12.7 -9.2 Dec-09 -7.7 Q3-09 0.65 0.50 4.11
Brazil (BR) 15.6 11.3 -0.2 Jan-10 -3.8 Jan-10 1.82 8.65 6.16
Russia (RU) 20.6 -11.5 15.3 Dec-09 15.6 Q4-09 30.15 8.50 7.96
Austrialia (AU) 4.4 18.9 -1.5 Dec-09 -15.2 Q3-09 1.11 3.75 5.47
WHILE DEVELOPED ECONOMIES WERE STILL STRUGGLING FROM THE FINANCIAL CRISIS (II)
-106-
GDP of Top 30 Economies (USD bn, % of World GDP, 2008)
0
1,000
2,000
3,000
4,000
5,000
US
Japa
n
Chi
na
Ger
man
y
Fran
ce UK
Italy
Rus
sia
Spai
n
Bra
zil
Can
ada
Indi
a
Mex
ico
Aus
tral
ia
S. K
orea
Net
herla
nds
Turk
ey
Pola
nd
Indo
nesi
a
Bel
gium
Switz
erla
nd
Swed
en
Saud
i Ara
bia
Nor
way
Aus
tria
Taiw
an
Gre
ece
Iran
Den
mar
k
Arg
entin
a
23.5%
8.1%
7.3%
6.0%
4.7%4.4%
3.8%
2.8% 2.7%2.6% 2.5%2.0%1.8%1.7%1.6%1.4%1.2% 0.9%0.8% 0.8%0.8%0.8% 0.8%0.8%0.7% 0.6% 0.6%0.6% 0.6% 0.5%
The US economy is the world’s largest, reaching
USD 14.26 tn in 2008
Source: IMF; THE BEIJING AXIS Analysis
IN 2008, CHINA WAS THE WORLD’S THIRD-LARGEST ECONOMY, WITH GDP OF USD 4.4 TRILLION
In 2009, China came close to becoming the second largest, as its GDP reached USD 4.9 trillion
World GDP in 2008 was
USD 60.7 tn After growing 8.7% in
2009, China’s GDP reached USD 4.9 tn
-107-
513446
436309
264233
197193
180163160156151
128119
11210310098939291
8273
604846
211614
6
95
160
128
102 91 90
16
89 84
69 60 47
127
158
90
180
512 452
415 319
262 241
182 200
163
5 14 21
46
156
107
600 400 200 0 200 400 600
GuangdongShandongJiangsuZhejiangHenanHebeiShanghaiLiaoningSichuanHubeiHunanFujianBeijingAnhuiHeilongjiangInnerGuangxiShanxiShaanxiJiangxiJilinTianjinYunnanChongqingXinjiangGuizhouGansuHainanNingxiaQinghaiTibet
Inner Mongolia
Source: China Statistical Yearbook; IMF; THE BEIJING AXIS Analysis
China GDP by Province Compared with Similar World Economies (USD bn, 2008)
SOME CHINESE PROVINCES’ GDP ARE THE SAME SIZE AS NATIONAL ECONOMIES IN EUROPE, ASIA, AFRICA AND S. AMERICA
For example, the size of Guangdong’s economy is larger than that of Indonesia, Norway and Austria
IndonesiaNorwayAustria
VenezuelaUAE
ColombiaRomania
SingaporeUkraine
EgyptAlgeriaKuwait
HungaryNew Zealand
PeruCaribbean
QatarSlovak Republic
IraqLibya
VietnamMorocco
BangladeshCroatiaBelarus
LithuaniaAzerbaijan
TanzaniaParaguayHonduras
Niger
-108-
0
1,000
2,000
3,000
4,000
5,000
6,000
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10F
JapanGermanyChinaUKFranceItaly
CHINA’S ECONOMY HAS RECORDED DRAMATIC GROWTH IN THE PAST TEN YEARS
With a fourfold increase since 1998, China was the 3rd largest economy after the US and Japan in 2008, and is set to become the 2nd largest in 2009/10
CHINA’S ECONOMY HAS RECORDED DRAMATIC GROWTH IN THE PAST TEN YEARS
With a fourfold increase since 1998, China was the 3rd largest economy after the US and Japan in 2008, and is set to become the 2nd largest in 2009/10
Source: CEIC Data; IMF; THE BEIJING AXIS Analysis
Trend for the past 10 years
Top 6 Economies’ GDP, excl. US (USD bn, 1980-2010F)
Rank 7 8 8 8 8 8 8 8 8 9 10 10 9 7 9 8 7 7 7 7 6 6 6 6 6 5 4 3 3 3 2?
2000:Surpassed
Italy 2005:Surpassed
France
2006:Surpassed
UK
2007:Surpassed Germany
From 1980 to 1994, China’s economy grew
steadily, varying between the 7th and 10th largest in
the world
1995:Surpassed
Canada
1996:Surpassed
Brazil
1993:Surpassed
Spain
-109-
-4
0
4
8
12
16
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10F
World Average China y-o-y GDP growth US y-o-y GDP growth
Source: IMF; THE BEIJING AXIS Analysis
China vs. US, Annual GDP Growth (% y-o-y, 1980-2010F)
SINCE 1980, CHINA HAS EXPERIENCED AN ANNUAL AVERAGE GDP GROWTH RATE OF 9.66%
Since the country’s economic reform, China’s growth rate has always been above the world average (3.4%) while the US has grown at 2.69% for the same period
-110-
Less than USD 2,500 or no data
Brazil
RussiaEurope
JapanUS
India
China
USD 25,000 or more USD 10,000-USD 25,000
USD 2,500-USD 10,000
Source: IMF; National Bureau of Statistics of China; THE BEIJING AXIS Analysis
Nominal GDP Per Capita (USD, 2008)
HOWEVER, CHINA’S GDP PER CAPITA IS STILL LOW COMPARED TO OTHER ECONOMIES OF SIMILAR SIZE
In 2008, China’s GDP per capita reached USD 3,258
-111-
-20%
0%
20%
40%
60%
80%
100%
US
Japa
n
Chi
na
Ger
man
y
Fran
ce UK
Italy
Rus
sia
Spai
n
Bra
zil
Can
ada
Indi
a
Mex
ico
Aus
tral
ia
S. K
orea
Net
herla
nds
Turk
ey
Pola
nd
Indo
nesi
a
Bel
gium
Switz
erla
nd
Swed
en
S. A
rabi
a
Nor
way
Aus
tria
Gre
ece
Iran
Den
mar
k
Arg
entin
a
Ven
ezue
la
S. A
fric
a
Net exports Final consumption expenditure Gross capital formation
Source: UNCTAD; THE BEIJING AXIS Analysis
Composition of GDP - Expenditure Approach (%, 2008)
GDP rank2008
IN CONTRAST TO OTHER MAJOR ECONOMIES, CHINA’S ENGINE OF GROWTH IS GROSS CAPITAL FORMATION
With gross capital formation at 49% of GDP in 2008, China’s investment/GDP ratio is the highest in the world
-112-
0%
50%
100%
US
Japa
n
Chi
na
Ger
man
y
Fran
ce UK
Italy
Spai
n
Rus
sia
Can
ada
Bra
zil
Indi
a
Mex
ico
Aus
tral
ia
S. K
orea
Net
herla
nds
Turk
ey
Indo
nesi
a
S. A
rabi
a
Switz
erla
nd
Pola
nd
Bel
gium
Swed
en
Nor
way
Aus
tria
Iran
Gre
ece
Arg
entin
a
Vene
zuel
a
Den
mar
k
S. A
fric
a
Agriculture Industry Services
Source: CIA World Factbook; UNCTAD; THE BEIJING AXIS Analysis
Share of GDP by Industry (%, 2008)
CHINA’S ECONOMY IS DOMINATED BY ITS SECONDARY INDUSTRY, UNLIKE THE ECONOMIES OF OTHER MAJOR NATIONS
THAT ARE DRIVEN BY THE SERVICES INDUSTRY
GDP rank2008
-113-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International ComparisonSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-114-
World’s Major Exporters (USD bn, 2008)2
Note: 1. Annual figures for 2009 were not available at the time of publication 2. To make international comparisons, this section utilises China’s export figures from the IMF instead of the one from MOFCOMSource: IMF; THE BEIJING AXIS Analysis
0
500
1,000
1,500
2,000
0 20 40 60 80 100 120 140
US
Germany
China
Exports
Exports/GDP
Belgium
UAE
Japan
Brazil
FranceItaly
Russia
MexicoAustria
Ireland
Canada
Netherlands
Thailand
Hungary
Ireland
Czech Republic
Size of bubble represents
nominal GDP
IN 2008, CHINA WAS THE WORLD’S SECOND-LARGEST EXPORTER, AFTER GERMANY; IN 2009 IT BECAME THE WORLD’S LARGEST1
In 2008, China exported a total of USD 1,430 billion, about 33% of its GDP, surpassing the US, with exports of USD 1,300 billion, the second-largest country total for 2008
Switzerland
SwedenNorway
Denmark Finland
Poland
South Africa Australia
Turkey
UK
-115-
0 100 200 300 400
ChinaHKUS
GermanyJapan
SingaporeMexico
NetherlandFrance
UKItaly
HungaryCzech Rep.
ThailandSwedenPolandFinland
BelgiumAustriaCanada
Top 20 World Exporters of Electrical Machinery (USD bn, 2008)
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
CHINA IS THE WORLD’S LARGEST EXPORTER OF ELECTRICAL MACHINERY AND EQUIPMENT In 2008, China exported a total of USD 342 billion or 21.3%
of the world’s total electrical machinery and equipment
% of world total
85
84
61
72
62
73
90
94
87
95
Other
24%
19%
4%4%4%
2%
31%
3%3%3%3%
Total: USD 1,430 bn
China’s Top 10 Export Commodities 2008 (HS Code)
Electrical machinery and equipment
Nuclear reactors, boilers, machinery and mechanical appliancesArticles of apparel and clothing accessories (knitted)Iron and steel
Articles of apparel and clothing accessories (not knitted)Articles of iron and steel
Optical, photographic and cinematographic, measuring equipmentFurniture, incl. bedding, mattresses and mattress supportsVehicles, other than railway or tramway rolling stock, and partsToys, games and sporting equipment
21.3%9.6%9.5%8.7%8.6%6.8%4.7%3.0%3.0%2.2%2.1%1.9%1.6%1.6%1.4%1.3%1.2%1.2%1.1%1.1%
-116-
0 100 200 300
ChinaGermany
USJapan
ItalyNetherland
FranceUK
SingaporeHK
BelgiumCanadaMexicoAustria
ThailandCzech Rep.Switzerland
SwedenHungary
Poland
Top 20 World Exporters of Power Generation Equipment (USD bn, 2008)
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
% of world total
CHINA IS THE WORLD’S LARGEST EXPORTER OF MACHINERY AND MECHANICAL APPLIANCES
In 2008, China exported a total of USD 269 billion or 15.1% of the world’s power generation equipment
85
84
61
72
62
73
90
94
87
95
Other
24%
19%
4%4%4%
2%
31%
3%3%3%3%
Total: USD 1,430 bn
China’s Top 10 Export Commodities 2008 (HS Code)
Electrical machinery and equipment
Nuclear reactors, boilers, machinery and mechanical appliancesArticles of apparel and clothing accessories (knitted)Iron and steel
Articles of apparel and clothing accessories (not knitted)Articles of iron and steel
Optical, photographic and cinematographic, measuring equipmentFurniture, incl. bedding, mattresses and mattress supportsVehicles, other than railway or tramway rolling stock, and partsToys, games and sporting equipment
15.1%14.8%11.9%
8.5%6.4%4.3%4.3%3.9%3.2%2.7%2.1%2.0%1.9%1.8%1.7%1.6%1.6%1.6%1.2%1.2%
-117-
0 20 40 60
ChinaHK
ItalyTurkey
GermanyBelgium
FranceNetherland
UKPortugalThailand
USPakistan
MexicoDenmarkSri Lanka
El SalvadorPeru
AustriaPoland
Top 20 World Exporters of Knitted Articles of Apparel (USD bn, 2008)
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
CHINA IS THE WORLD’S LARGEST EXPORTER OF KNITTED ARTICLES OF APPAREL AND CLOTHING ACCESSORIES
In 2008, China exported a total of USD 61 billion or 41.2% of the world’s knitted apparel and clothing accessories
% of world total
85
84
61
72
62
73
90
94
87
95
Other
24%
19%
4%4%4%
2%
31%
3%3%3%3%
Total: USD 1,430 bn
China’s Top 10 Export Commodities 2008 (HS Code)
Electrical machinery and equipment
Nuclear reactors, boilers, machinery and mechanical appliancesArticles of apparel and clothing accessories (knitted)Iron and steel
Articles of apparel and clothing accessories (not knitted)Articles of iron and steel
Optical, photographic and cinematographic, measuring equipmentFurniture, incl. bedding, mattresses and mattress supportsVehicles, other than railway or tramway rolling stock, and partsToys, games and sporting equipment
41.2%9.6%6.0%5.3%4.8%3.1%3.0%1.8%1.6%1.6%1.4%1.4%1.3%1.3%1.2%1.1%1.0%1.0%0.8%0.8%
-118-
0 20 40 60
ChinaGermany
JapanRussia
BelgiumUS
FranceItaly
NetherlandsTurkey
UKBrazil
SwedenAustria
S. AfricaCanadaPolandFinland
Czech Rep.Slovakia
Top 20 World Exporters of Iron and Steel(USD bn, 2008)
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
CHINA IS THE WORLD’S LARGEST EXPORTER OF IRON AND STEEL
In 2008, China exported a total of USD 53 billion or 12.7% of the world’s iron and steel
% of world total
85
84
61
72
62
73
90
94
87
95
Other
24%
19%
4%4%4%
2%
31%
3%3%3%3%
Total: USD 1,430 bn
China’s Top 10 Export Commodities 2008 (HS Code)
Electrical machinery and equipment
Nuclear reactors, boilers, machinery and mechanical appliancesArticles of apparel and clothing accessories (knitted)Iron and steel
Articles of apparel and clothing accessories (not knitted)Articles of iron and steel
Optical, photographic and cinematographic, measuring equipmentFurniture, incl. bedding, mattresses and mattress supportsVehicles, other than railway or tramway rolling stock, and partsToys, games and sporting equipment
12.7%9.3%9.3%6.8%6.6%5.6%5.3%4.5%3.6%3.5%3.2%3.0%2.4%2.3%2.1%2.0%1.5%1.5%1.4%1.2%
-119-
0 20 40 60
ChinaItalyHK
GermanyFranceTurkey
BelgiumNetherla
UKRomania
MexicoTunisia
DenmarkPoland
USSri
ThailandPakistan
AustriaSwitzerl
85
84
61
72
62
73
90
94
87
95
Other
Top 20 World Exporters of Non-knitted Articles of Apparel (USD bn, 2008)
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
24%
19%
4%4%4%
2%
31%
3%3%3%3%
Total: USD 1,430 bn
China’s Top 10 Export Commodities 2008 (HS Code)
CHINA IS THE WORLD’S LARGEST EXPORTER OF NON-KNITTED ARTICLES OF APPAREL
In 2008, China exported a total of USD 52 billion or 35.5% of the world’s non-knitted articles of apparel
% of world total
Electrical machinery and equipment
Nuclear reactors, boilers, machinery and mechanical appliancesArticles of apparel and clothing accessories (knitted)Iron and steel
Articles of apparel and clothing accessories (not knitted)Articles of iron and steel
Optical, photographic and cinematographic, measuring equipmentFurniture, incl. bedding, mattresses and mattress supportsVehicles, other than railway or tramway rolling stock, and partsToys, games and sporting equipment
35.5%9.8%8.3%6.7%4.3%3.6%3.2%2.1%2.1%2.0%2.0%1.9%1.5%1.4%1.1%1.1%0.9%0.9%0.9%0.8%
Netherlands
Sri Lanka
Switzerland
-120-
-300
-200
-100
0
100
200
300
US
Japa
n
Chi
na
Ger
man
y
Fran
ce UK
Italy
Rus
sia
Spai
n
Bra
zil
Can
ada
Indi
a
Mex
ico
Aus
tral
ia
S. K
orea
Net
herla
nds
Turk
ey
Pola
nd
Indo
nesi
a
Bel
gium
Switz
erla
nd
Swed
enSa
udi
Ara
bia
Nor
way
Aus
tria
Gre
ece
Iran
Den
mar
k
Arg
entin
a
Vene
zuel
a
Note: To make international comparisons, this section utilises the China trade surplus figure from the IMF instead of the one from MOFCOM Source: IMF; THE BEIJING AXIS Analysis
-865
Trade Surpluses of the World’s Major Economies (USD bn, 2008)
DESPITE NOT BEING THE WORLD’S LARGEST EXPORTER IN 2008, CHINA ALREADY HAD THE WORLD’S LARGEST TRADE SURPLUS
In 2008, China’s total trade surplus reached USD 298 billion, which is 14% higher than that of Germany, the world’s largest exporter at the time
11 -15 19 12 -219 14 -196 16 16 -209 12 28 7 0 -13 15 13 7 -9 -7 -227 0 32 35 -7 11 -236 9 -209 27
-6.1 0.4 6.8 7.1 -3.5 -6.6 -0.7 12.0 -8.0 1.6 3.2 -11.1 -1.6 -0.5 0.6 5.9 -9.6 -7.3 1.5 1.3 3.5 3.4 42.6 17.3 -0.7 -17.8 9.0 1.5 3.9 11.9
As % of GDP
CAGR %98-08
-121-
World’s Major Importers (USD bn, 2008)
0
700
1,400
2,100
2,800
0 20 40 60 80 100
US
Brazil
Japan
RussiaAustralia
Norway
Turkey
FranceUK
Italy
Mexico
China
Canada
Portugal
Sweden
Germany
PolandAustria
NetherlandsThailand
UAE
Czech Republic
Belgium
Hungary
Size of bubble represents
nominal GDP
Note: To make international comparisons, this section utilises China’s import figure from the IMF instead of the one from MOFCOM Source: IMF; THE BEIJING AXIS Analysis
Imports
Imports/GDP
IN 2008, CHINA WAS THE WORLD’S THIRD-LARGEST IMPORTER AFTER THE US AND GERMANY
In 2008, China imported a total of USD 1,133 billion, about 26% of its GDP
Switzerland FinlandDenmark
Greece
-122-
0 100 200 300
ChinaUSHK
GermanySingapore
JapanMexico
UKFrance
MalaysiaNetherlands
CanadaItaly
ThailandRussia
HungaryCzech Rep.
BelgiumIndia
Poland
Top 20 World Importers of Electrical Machinery (USD bn, 2008)
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
% of world total
CHINA IS THE WORLD’S LARGEST IMPORTER OF ELECTRICAL MACHINERY AND EQUIPMENT
In 2008, China imported a total of USD 267 billion or 14.3% of the world’s electrical machinery and equipment
85
27
84
26
90
39
29
87
74
72
Other
24%
15%
12%
8%
7%4%3%2%2%
20%
China’s Top 10 Import Commodities 2008 (HS Code)Total: USD 1,133 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillationNuclear reactors, boilers, machinery and mechanical appliancesOres, slag and ash
Optical, photographic and cinematographic, measuring equipmentPlastics and articles thereof
Organic chemicals
Vehicles other than railway or tramway rolling stock, and parts Copper and articles thereof
Iron and steel
2%
14.3%13.7%
8.4%6.3%4.4%4.2%3.5%3.2%3.0%2.6%2.5%2.2%2.1%1.5%1.5%1.4%1.2%1.2%1.2%1.2%
-123-
0 100 200 300 400 500
USJapanChina
GermanyFrance
IndiaNetherlands
SingaporeUK
ItalyBelgiumCanadaTurkey
ThailandBrazil
IndonesiaAustralia
MexicoSweden
Poland
Top 20 World Importers of Mineral Fuels (USD bn, 2008)
CHINA IS THE WORLD’S THIRD-LARGEST IMPORTER OF MINERAL FUELS
In 2008, China imported a total of USD 169 billion or 6.6% of the world’s mineral fuels
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
85
27
84
26
90
39
29
87
74
72
Other
24%
15%
12%
8%
7%4%3%2%2%
20%
China’s Top 10 Import Commodities 2008 (HS Code)Total: USD 1,133 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillationNuclear reactors, boilers, machinery and mechanical appliancesOres, slag and ash
Optical, photographic and cinematographic, measuring equipmentPlastics and articles thereof
Organic chemicals
Vehicles other than railway or tramway rolling stock, and parts Copper and articles thereof
Iron and steel
2%
19.6%10.4%
6.6%6.4%4.6%4.5%3.5%3.4%3.2%3.1%2.8%2.0%1.9%1.5%1.3%1.2%1.2%1.1%0.9%0.9%
% of world total
-124-
0 100 200 300
USGermany
ChinaFrance
UKNetherlan
CanadaJapan
ItalyHK
SingaporeRussiaMexico
BelgiumIndia
PolandAustralia
BrazilAustriaCzech
Top 20 World Importers of Power Generation Equipment (USD bn, 2008)
CHINA IS THE WORLD’S THIRD-LARGEST IMPORTER OF POWER GENERATION EQUIPMENT
In 2008, China imported a total of USD 139 billion or 7.8%of the world’s power generation equipment
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
85
27
84
26
90
39
29
87
74
72
Other
24%
15%
12%
8%
7%4%3%2%2%
20%
China’s Top 10 Import Commodities 2008 (HS Code)Total: USD 1,133 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillationNuclear reactors, boilers, machinery and mechanical appliancesOres, slag and ash
Optical, photographic and cinematographic, measuring equipmentPlastics and articles thereof
Organic chemicals
Vehicles other than railway or tramway rolling stock, and parts Copper and articles thereof
Iron and steel
2%
14.4%8.1%7.8%4.8%4.5%3.7%3.4%3.3%2.9%2.8%2.8%2.6%2.6%2.3%1.6%1.6%1.6%1.4%1.4%1.3%
% of world total
Netherlands
Czech Rep.
-125-
0 30 60 90
ChinaJapan
GermanyIndia
UKUS
BelgiumNetherla
ItalyFinlandCanadaFranceRussia
UkraineBrazil
AustriaBulgariaMexico
ChilePoland
Top 20 World Importers of Ores, Slag and Ash (USD bn, 2008)
CHINA IS THE WORLD’S LARGEST IMPORTER OF ORES, SLAG AND ASH
In 2008, China imported a total of USD 86 billion or 46.7% of the world’s ores, slag and ash
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
85
27
84
26
90
39
29
87
74
72
Other
24%
15%
12%
8%
7%4%3%2%2%
20%
China’s Top 10 Import Commodities 2008 (HS Code)Total: USD 1,133 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillationNuclear reactors, boilers, machinery and mechanical appliancesOres, slag and ash
Optical, photographic and cinematographic, measuring equipmentPlastics and articles thereof
Organic chemicals
Vehicles other than railway or tramway rolling stock, and parts Copper and articles thereof
Iron and steel
2%
46.7%15.4%
5.1%2.9%2.5%2.4%1.7%1.7%1.6%1.6%1.5%1.4%1.3%1.1%0.8%0.8%0.7%0.7%0.7%0.7%
% of world total
Netherlands
-126-
0 20 40 60 80
ChinaUS
GermanyJapan
FranceNetherland
UKHK
MexicoItaly
CanadaBelgium
RussiaSingapore
SwitzerlandAustralia
BrazilPoland
IndiaSweden
85
27
84
26
90
39
29
87
74
72
Other
Top 20 World Importers of Optical, Photographic (USD bn)
24%
15%
12%
8%
7%4%3%2%2%
20%
China’s Top 10 Import Commodities 2008 (HS Code)Total: USD 1,133 bn
CHINA IS THE WORLD’S LARGEST IMPORTER OF OPTICAL AND PHOTOGRAPHIC EQUIPMENT
In 2008, China imported a total of USD 78 billion or 18.6% of the world’s optical and photographic equipment
Source: UN Comtrade Database; THE BEIJING AXIS Analysis
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillationNuclear reactors, boilers, machinery and mechanical appliancesOres, slag and ash
Optical, photographic and cinematographic, measuring equipmentPlastics and articles thereof
Organic chemicals
Vehicles other than railway or tramway rolling stock, and parts Copper and articles thereof
Iron and steel
2%
18.6%13.9%
7.1%5.2%4.4%3.9%3.9%3.0%3.0%2.9%2.8%2.3%1.9%1.8%1.5%1.5%1.4%1.3%1.1%1.1%
% of world total
Netherlands
-127-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International ComparisonSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-128-
0 70 140 210 280 350
US France
Germany Japan
UK Switzerland
Canada Spain
BelgiumHK
NetherlandsRussiaChina
Italy Sweden Australia Denmark
Austria Norway
Brazil
0 50 100 150 200 250 300 350
US France
ChinaUK
Russia Spain
HK Belgium Australia
Brazil Canada Sweden
IndiaS. Arabia
Germany Japan
SingaporeMexicoTurkey
Switzerla
China ranked 3rd
China ranked 13th
Note: To make international comparisons, this section utilises China’s FDI figure and China’s OFDI figure from the WIR 2009 instead of the China MOFCOM figures Source: WIR 2009; THE BEIJING AXIS Analysis
Top 20 World FDI Inflows (USD bn, 2008) Top 20 World FDI Outflows (USD bn, 2008)
IN 2008, CHINA’S FDI INFLOW WAS SUBSTANTIALLY GREATER THAN ITS FDI OUTFLOW
China ranked third in the world in 2008 for FDI inflow with USD 108 billion, while it ranked only 13th for OFDI with USD 52 billion
Switzerland
-129-
0 500 1,000 1,500 2,000 2,500 3,000 3,500
USUK
FranceNetherla
HKSwitzerl
JapanSpain
BelgiumCanada
ItalySweden
RussiaAustraliaDenmark
TaiwanBrazil
AustriaChina
Finland
0 500 1,000 1,500 2,000 2,500
USFrance
UKHK
NetherlandsSpain
BelgiumCanada
ChinaSwitzerland
ItalyMexico
BrazilAustraliaSweden
RussiaJapan
PolandDenmark
Austria
Top 20 World FDI Inward Stock (USD bn, 2008) Top 20 World FDI Outward Stock (USD bn, 2008)
China ranked 9th
China ranked 19th
CHINA IS THE SECOND-LARGEST ASIAN RECIPIENT OF FDI STOCK
In 2008, China ranked 9th for FDI stock with USD 378 billion, while for OFDI it ranked 19th with USD 148 billion
Source: WIR 2009; THE BEIJING AXIS Analysis
Switzerland
Netherlands
-130-Note: GFCF = Gross fixed capital formationSource: WIR 2009; THE BEIJING AXIS Analysis
Top 20 GDP Countries FDI In/Out Flow as a Percentage of Gross Fixed Capital Formation (2008)
IN 2008, BOTH CHINA’S FDI INFLOWS AND OUTFLOWS, AS A PERCENTAGE OF GFCF, WERE RELATIVELY SMALL
From 2007 to 2008, China’s FDI outflows grew much faster than its FDI inflows
60
30
0
30
60
US
Japa
n
Chi
na
Ger
man
y
Fran
ce UK
Italy
Rus
sia
Spai
n
Bra
zil
Can
ada
Indi
a
Mex
ico
Aus
tral
ia
S. K
orea
Net
herla
nds
Turk
ey
Pola
nd
Indo
nesi
a
Bel
gium
Inward Outward
Growth 2007-2008
Growth 2007-2008
39% 0% 2% -57% -36% -51% -62% 1% 17% 1% -61% 66% -36% 82% 211% -103% -21% -23% -13% 24%
2% 57% 81% -18% -16% -53% -56% -14% -39% 119% 36% 17% -93% 29% -15% 58% 13% -14% -7% 16%
-131-
120
60
0
60
120
US
Japa
n
Chi
na
Ger
man
y
Fran
ce UK
Italy
Rus
sia
Spai
n
Bra
zil
Can
ada
Indi
a
Mex
ico
Aus
tral
ia
S. K
orea
Net
herla
nds
Turk
ey
Pola
nd
Indo
nesi
a
Bel
gium
Inward Outward
Source: WIR 2009; THE BEIJING AXIS Analysis
Top 20 GDP Countries FDI Stock as a percent of GDP (%, 2008)Growth
2007-2008
Growth 2007-2008
IN 2008, BOTH CHINA’S INWARD AND OUTWARD FDI STOCKS, AS A PERCENTAGE OF GDP, WERE RELATIVELY SMALL
Yet China’s small inward and outward FDI stocks, as a percentage of GDP, show substantial potential for growth
6% 37% -14% 1% -13% -24% -14% -49% 6% -27% -20% 48% -9% -20% -20% -16% -57% -9% -4% -38%
10% 12% 13% 7% -11% -8% -9% -39% -15% 4% -10% 92% -16% -36% 51% -13% 0% -13% 6% 14%
-132-
0 50 100 150 200 250
USUK
CanadaAustralia
SpainGermanySweden
EgyptNorway
SingaporeRussiaTurkey
IndiaJapan
HKBrazil
SwitzerlandDenmark
GreeceUkraine
0 20 40 60 80
USGermany
FranceJapan
NetherlandsUK
CanadaChina
BelgiumSwitzerland
ItalyAustralia
RussiaFinland
IndiaIsrael
MalaysiaLuxembour
SwedenSingapore
China ranks 23rd with figures of USD 5.1 billion
China ranks 8th
Note: Cross-border M&A sales and purchases are calculated on a net basis as follows: Net cross-border M&A sales in a host economy = Sales of companies in the host economy to foreign TNCs (-) Sales of foreign affiliates in the host economy; net cross-border M&A purchases by a home economy = Purchases of companies abroad by home-based TNCs (-) Sales of foreign affiliates of home-based TNCs
Source: WIR 2009; THE BEIJING AXIS Analysis
Value of Cross-Border M&A ‘Net Purchases’ for World’s Top 20 Countries (USD bn, 2008)
Value of Cross-Border M&A ‘Net Sales’ for World’s Top 20 Countries (USD bn, 2008)
IN TERMS OF VALUE, CHINA’S INTERNATIONAL M&A ‘NET SALES’ ARE RANKED MUCH LOWER THAN ITS M&A ‘NET PURCHASES’
China’s cross-border M&A ‘net purchases’ grew dramatically in 2008. This trend is expected to continue
Luxembourg
-133-
Russia
Europe
US
<USD 100 bn
>USD 500 bn
USD 300 bn – USD 500 bn
USD 100 bn – USD 300 bn
Top 30 Principal Sovereign Wealth Funds (2007)
China
THE ESTABLISHMENT OF THE CHINA INVESTMENT CORPORATION (CIC) IS IN LINE WITH INCREASING GLOBAL
INVESTMENT FLOWS BY SOVEREIGN WEALTH FUNDS
China1. State Administration of
Foreign Exchange (SAFE)2. China Investment
Corporation (CIC)3. Central Huijin Investment
Corporation4. Hong Kong Monetary
Authority (HKMA)-Exchange Fund
Note: We provide a breakdown in the next slideSource: WIR 2008; THE BEIJING AXIS Analysis
-134-Source: WIR 2008; THE BEIJING AXIS Analysis
Rank Economy Fund Assets under management($ billion)
1 United Arab Emirates Abu Dhabi Investment Authority (ADIA) 500–8752 Norway Government Pension Fund-Global (GPF-G) 3733 Singapore Government of Singapore Investment Corporation (GIC) 3304 Saudi Arabia Saudi Arabia Monetary Authority foreign holdings 3275 Netherlands Stichting Pensioenfonds ABP 3166 China State Administration of Foreign Exchange (SAFE) 3127 Kuwait Kuwait Investment Authority (KIA) 2508 United States California Public Employees’ Retirement System 2379 China China Investment Corporation (CIC) 20010 Hong Kong, China Hong Kong Monetary Authority (HKMA)-Exchange Fund 16311 Singapore Temasek Holdings 16012 Canada Caisse de dépôt et placement de Québec 15713 Russian Federation Oil and Gas Fund (OGF) 15714 China Central Huijin Investment Corporation 10015 United Arab Emirates Investment Corporation of Dubai 8216 Australia Queensland Investment Corporation (QIC) 6517 Australia Australian Government Future Fund (AGFF) 6118 Qatar Qatar Investment Authority (QIA) 6019 France Pension Reserve Fund 5120 Libyan Arab Jamahiriya Reserve Fund 5021 Algeria Revenue Regulation Fund 4722 United States Alaska Permanent Fund (APF) 3723 Australia Victorian Funds Management Corporation (VFMC) 3624 Brunei Darussalam Brunei Investment Agency (BIA) 3525 Ireland National Pensions Reserve Fund (NPRF) 3126 Korea, Republic of Korea Investment Corporation (KIC) 3027 Malaysia Khazanah Nasional Fund BHD (KNF) 2628 Saudi Arabia Kingdom Holding Company 2529 Kazakhstan Kazakhstan National Fund (NFRK) 2330 Venezuela, Bolivarian Rep. of National Development Fund (FONDEN) 28
Names and Locations of World‘s Top 30 Sovereign Wealth Funds (2007)
CHINESE SOVEREIGN WEALTH FUNDS, SAFE AND CIC, RANK IN THE WORLD’S TOP TEN
-135-
Saudi Arabia 139 bn
US -673 bn
Source: WIR 2009; THE BEIJING AXIS Analysis
Current Account Balance (USD bn, 2008)
Russia102 bn
Japan157 bn
China440 bn
IN 2008, CHINA HAD THE WORLD’S LARGEST CURRENT ACCOUNT BALANCE WITH USD 440 BILLION
Followed by Germany (USD 235 billion) and Japan (USD 157 billion)
Spain -154 bn
UK -45 bn
Greece -51 bn
Italy -73 bn
Germany 235 bn
Top 5 current account surplusesTop 5 current account deficits
-136-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International ComparisonSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-137-
0
400
800
1,200
1,600
2,000
Chi
na
Japa
n
Rus
sia
Taiw
an
Indi
a
S.K
orea
Hon
g K
ong
Bra
zil
Sing
apor
e
Ger
man
y
Alg
eria
Thai
land
Switz
erla
nd
Fran
ce
Italy US
Mex
ico
Mal
aysi
a
Pola
nd
Turk
ey
Indo
nesi
a
UK
Isra
el
Can
ada
Nor
way
Arg
entin
a
2,399
CHINA HAS THE WORLD’S LARGEST FOREIGN EXCHANGE RESERVES
China possesses more than double the foreign exchange reserves of the next largest holder, Japan.
Official Foreign Exchange Reserves of Select Countries/Regions (USD bn, 2010)
Asia
Note: China’s data as of December 2009Source: SAFE; IMF; Various; THE BEIJING AXIS Analysis
-138-
0
4,000
8,000
12,000
US
UK
Ger
man
y
Fran
ce
Italy
Net
herla
nds
Spai
n
Irela
nd
Japa
n
Luxe
mbo
urg
Bel
gium
Switz
erla
nd
Swed
en
Can
ada
Aus
tral
ia
Aus
tria
Hon
g K
ong
Den
mar
k
Gre
ece
Nor
way
Port
ugal
Rus
sia
S.K
orea
Chi
na
Finl
and
Bra
zil
Pola
nd
Turk
ey
Indi
a
Hun
gary
13,672
Source: IMF; Department of U.S. Treasuries; SAFE; THE BEIJING AXIS Analysis
CHINA’S EXTERNAL DEBT IS RELATIVELY SMALL COMPARED TO OTHER MAJOR ECONOMIES
In Q3 2009, China accounted for less than 1% of the world’s total external debt with USD 387 billion
World’s Top 30 Countries’ External Debt (USD bn, Q3 2009)
As of Q3 2009, the external debt of the US
was USD 13,672 bn
At the end of Q3 2009 , China’s external debt amounted to USD 387 bn
-139-
0
5
10
15
20
Bra
zil
Turk
ey
Arg
entin
a
Rus
sia
Sout
h A
fric
a
Indo
nesi
a
Indi
a
Mex
ico
Aus
tral
ia
Chi
na
Euro
Are
a
Sout
hK
orea
Can
ada
UK US
Japa
n
Saud
iA
rabi
a
2.79
High rate countries
1. The interest rate charged by a central bank on loans to its member banks. A change in the discount rate is usually followed by similar changes in the interest rates charged by banks and in money markets
Source: IMF; THE BEIJING AXIS Analysis
CHINA HAS A RELATIVELY LOW CENTRAL BANK DISCOUNTRATE IN COMPARISON TO ITS GLOBAL PEERS
In December 2009, China’s discount rate stood at 2.79%, comparable to that of Australia and the Euro Area
Central Bank Discount Rate1 (%, Dec 2009)
Medium rate countries
Low rate countries
-140-
0
20
40
60
Zim
babw
e
Hai
ti
Mad
agas
car
Bra
zil
STP
Laos
Gam
bia
Mal
awi
Kyr
gyzs
tan
Para
guay
Gre
ece
Mex
ico
Chi
na
Qat
ar
Om
an
Fran
ce
Bos
nia.
Cze
ch R
ep.
Finl
and
UK
Bah
amas
Bru
nei
Pola
nd
Sing
apor
e
Swed
en
Switz
erla
nd
Japa
n
579
7.5
… …
1: Prime Lending Rate: A short-term interest rate quoted by a commercial bank as an indication of the rate being charged on loans to its best commercial customers. Even though banks frequently charge more and sometimes less than the quoted prime rate, it is a benchmark against which other rates are measured. For various reasons, a rising prime rate is generally considered detrimental to security pricesSTP: Sao Tome and Principe; Bosnia.: Bosnia and Herzegovina; Czech Rep.: Czech Republic
Source: CIA World Book 2008; THE BEIJING AXIS Analysis
CHINA ALSO HAS A MODERATE PRIME LENDING RATE COMPARED TO OTHER DEVELOPING ECONOMIES
In 2007, China’s prime lending rate was 7.5%, comparable to prime lending rates of either France or Greece
High rate countries
Commercial Bank Prime Lending Rate1 (%, 2007)
Medium rate countries
Low rate countries
-141-
AGENDA
Foreword
What’s New: China From Rebound to Recovery
China Economic Indicators
International ComparisonSelected Macroeconomic IndicatorsTrade Indicators: Domestic and ForeignInvestment Indicators: Domestic and ForeignFinancial IndicatorsSocial Indicators
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-142-
20015010050050100150200
USJapanChina
GermanyFrance
UKItaly
BrazilSpain
CanadaRussia
IndiaAustralia
MexicoS. Korea
NetherlandsTurkey
IndonesiaSwitzerland
BelgiumPoland
SwedenS. Arabia
AustriaNorway
VenezuelaGreece
IranDenmark
Argentina
Male FemaleGDP rank 2009 Total
317 127
1,354 82 63 62 60
195 45 34
140 1,214
22 110 49 17 76
233 8
11 38 9
26 8 5
29 11 75 5
41
Male/100 female
9795
1089695969597979886
10799999898
10110095969399
1219599
10198
1039996
702 651
627 587
Population for Top 30 Countries by GDP (mn, 2010F)
Source: UN Statistics; CIA World Factbook; THE BEIJING AXIS Analysis
WITH 1.3 BILLION PEOPLE, CHINA HAS THE WORLD’S LARGEST POPULATION
Along with Saudi Arabia and India, China has one of the largest male to female ratios in the world
-143-Source: UN Population Division; THE BEIJING AXIS Analysis
Child and Elderly Population for Selected Countries (%, 2010F)
0
5
10
15
20
25
30
35
40
0 5 10 15 20 25 30 35
Iran
India
% Population under 15
% Population aged 60+
Saudi Arabia
IndonesiaTurkey
Venezuela
Mexico
China
Argentina
S. KoreaRussia
US
Canada
NetherlandsNorway
France
Belgium
SwitzerlandAustria Germany
ItalyJapan
Size of the bubble represents total
population
25% OF CHINA’S POPULATION IS OLDER THAN 60 YEARS The bulk of the population is currently at a working age
BrazilUK
Spain
Poland
Australia
Sweden
Greece
-144-
Annual rate of population change (%) 2005-2010
Source: CIA World Factbook; World Bank; THE BEIJING AXIS Analysis
Urban and Rural Population (%, 2008)
0
1.3 0.2 0.1 2.7 0.5 0.8 0.4 0.9 1 1.8 -0.5 2.4 0.9 1.5 0.7 0.9 1.9 0.3 0.5 3.3 -0.3 0.5 0.7 2.5 0.7 0.6 0.5 1.4 2.1 1.2
100
-0.7 -0.5 -0.4 -1 -0.4 -0.5 -0.3 0.2 0.4 -1.9 -0.4 1.1 -0.6 -0.2 -0.3 -2.7 -0.2 -0.9 0 -1.1 0 0.1 0.3 1.1 -0.3 -0.3 -1.8 -0.7 -0.3 -1.5UrbanRural
CHINA’S POPULATION HAS BEEN STEADILY MIGRATING TO THE CITIES, RAISING THE URBAN-RURAL POPULATION RATIO However, the proportion of China’s population in urban settings remains
much smaller than that of other similar sized economies
8266 74
43
9077 68 77 80 86
73
29
81 7767
8269
9785
5261
73 77 8267 61
87
61 68
92
1834 26
57
1023
3223 20 14
27
71
19 2333
1831
315
4839
27 23 1833 39
13
39 32
8
US
Japa
n
Ger
man
y
Chi
na UK
Fran
ce
Italy
Spai
n
Can
ada
Bra
zil
Rus
sia
Indi
a
S. K
orea
Mex
ico
Aus
tria
Net
herla
nds
Turk
ey
Bel
gium
Swed
en
Indo
nesi
a
Pola
nd
Switz
erla
nd
Nor
way
S. A
rabi
a
Aus
tria
Gre
ece
Den
mar
k
S. A
fric
a
Iran
Arg
entin
a
Urban Rural
-145-
10080604020020406080100
USJapanChina
GermanyFrance
UKItaly
BrazilSpain
CanadaRussia
IndiaAustralia
MexicoS. Korea
NetherlandTurkey
IndonesiaSwitzerland
BelgiumPoland
SwedenS. Arabia
AustriaNorway
VenezuelaGreece
IranDenmark
Argentina
Male FemaleGDP rank 2009
Life Expectancy (years, 2010F)
Source: UN Statistics; CIA World Factbook; THE BEIJING AXIS Analysis
THE AVERAGE LIFE EXPECTANCY IN CHINA IS SLIGHTLY HIGHER THAN IN OTHER LARGE DEVELOPING ECONOMIES
-146-
10080604020020406080100
USJapanChina
GermanyFrance
UKItaly
BrazilSpain
CanadaRussia
IndiaAustralia
MexicoS. Korea
NetherlandTurkey
IndonesiaSwitzerland
BelgiumPoland
SwedenS. Arabia
AustriaNorway
VenezuelaGreece
IranDenmark
Argentina
Male FemaleGDP Rank 2009 Total
Adult (15+) Economic Activity Rate (%, 2010F)
Source: UN Statistics; CIA World Factbook;THE BEIJING AXIS Analysis
CHINA’S ECONOMIC ACTIVITY RATE IS COMPARATIVELY LARGER THAN THE MAJOR DEVELOPED ECONOMIES
Of the top economies in the world, China has the largest female economic activity rate
665875585362486857676258635861645269665153625157687356606367
-147-
0
1
2
3
4
Mex
ico
Slov
ak R
ep.
Pola
nd
Gre
ece
Turk
ey
Indi
aS.
Afr
ica
Hun
gary
Bra
zil
Rus
sia
Italy
N. Z
eala
nd
Port
ugal
Spai
nIre
land
Chi
naC
zech
Rep
.
Nor
way
Luxe
mbo
urg
Net
herla
nds
UK
Bel
gium
Can
ada
Aus
tral
iaFr
ance
Ger
man
yD
enm
ark
Aus
tria
US
Icel
and
Switz
erla
ndS.
Kor
ea
Japa
n
Finl
and
Swed
en
2007 or latest available year 1998 or first available year
Source: OECD Factbook 2009; THE BEIJING AXIS Analysis
Gross Domestic Expenditure on R&D as a Percentage of GDP (%, 1998-2007)
1
DURING THE LAST TEN YEARS, CHINA AND SOUTH KOREA SHOWED THE LARGEST INCREASE IN R&D EXPENDITURE
This supports the surge of technological advancement and the rapid increase in Chinese living standards
-148-
AGENDA
Foreword
What’s New: ‘China: From Rebound to Recovery’
China Economic Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-149-
INDICATORS CONCLUSIONS
Selected Macroeconomic Data
After reaching a growth rate of 8.7% in 2009, the Chinese economy is poised to finally surpass Japan and become the world’s second-largest in 2010. Such impressive growth was made possible through a USD 586 billion economic stimulus package, as well as accompanying proactive fiscal and monetary policies. Since its economic reform from 1979, China has achieved an annual growth rate of 10%, which is substantially above the world’s 3.4% average for the same 30-year period. Furthermore, when compared to other major economies, China’s GDP per capita, consumption expenditure and service industry are still insignificant, implying yet further potential for sustained long term growth.
Trade As a result of the global financial crisis in 2009, China put a number of stimulus programmes in place. These were aimed at boosting domestic consumption and resulted in a substantial increase in retail sales. Although the crisis negatively impacted China’s exports, the country still managed to surpass Germany as the world’s leading exporter for 2009. China thus confirmed its undisputed leadership in world exports of electrical machinery, textiles and steel. China also continues to be one of the major drivers behind the world’s recovery from the crisis. The country is the third-largest importer globally and it leads the world in imports of electrical machinery and ores and ranks third in oil imports.
Investment China's urban fixed asset investment rose significantly in 2009, reflecting the impact of massive government spending in the construction of railways, roads and infrastructure. China has depended heavily on investment for its economic growth, with the bulk of such investment occurring in urban areas. In 2009, China continued to channel increasing amounts of FDI overseas due to the country’s increasing need for new markets, technology and resources. A particularly noteworthy trend in 2009 was Chinese resource firms pursuing overseas acquisitions at attractive prices.
Financial The financial sector in China, with its massive – and even excessive – liquidity, is contrary to the situation in the majority of the world’s markets. While central banks in many countries struggle to increase depressed liquidity after the crisis, the People’s Bank of China is trying to curb it to prevent possible economic overheating. The implementation of bank restructuring and more prudent loan management have created, so far, a stable financial sector. Furthermore, as at the end of 2009, the rise of China’s two stock markets have given the country the second-largest equity value in the world.
Social With 1.3 billion people and 16 million new births per year, China has the world’s largest population. Mass migration to the cities of eastern China, a growing middle class in urban areas and rising income levels in urban and rural households are characteristics that are currently shaping China’s social landscape. Compared to other economies of similar size, China still has an extremely low urbanisation rate, but maintains a relatively high percentage of the population active in the labour market. The large population offers many opportunities as well as challenges.
CONCLUSIONS
-150-
AGENDA
Foreword
What’s New: ‘China: From Rebound to Recovery’
China Economic Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
-151-
INDICATORS IMPLICATIONS
Selected Macroeconomic Data
Although China seems to have weathered the global storm relatively well, concerns over a loose monetary policy and lending growth persist. With such inflationary pressures, it is expected that the Chinese government will act aggressively in tightening monetary and fiscal policies for 2010. China will doubtlessly continue to experience strong economic growth for 2010, but a more sustainable growth pattern and an improved economic structure is essential. Personal consumption is expected to play an even greater role as an engine for economic growth, and it is anticipated that the service industry will fulfill a greater role in the country’s economy, while the manufacturing sector becomes ever more sophisticated.
Trade China’s strong retail sales in 2009 clearly indicate the country’s consumption potential in terms of both domestic and international products. The revival in exports, which occurred towards the end of 2009 is expected to intensify this year as international economies recover from the financial crisis. This will also result in a further expansion of the country’s manufacturing base. As China’s industrialisation and urbanisation processes continue, it is also likely that imports of raw materials such as oil and a variety of ores and commodities, as well as many manufactured products will increase.
Investment Strong fixed asset investment in 2009 resulted in increasing property prices and growing concerns with regards a real estate bubble. As the world economy begins to recover, China is expected to leverage exports and domestic consumption in order to ensure adequate growth. While investment opportunities in manufacturing and real estate are substantial, China’s most impressive investment-based phenomenon resides in its trend toward outward investment, driven, specifically, by the country’s need to secure resources.
Financial Although China’s financial markets remain under-developed compared to other economies, effective reforms and a lesser degree of integration into the global financial system have given rise to stronger Chinese banks, which have, so far, weathered the global financial crisis and resulting slowdown well. The gap between the actual state of China’s financial markets and its potential suggests that many service sector opportunities await foreign businesses. Years of growing exports and FDI have enabled China to attain the position of the world’s largest holder of foreign exchange reserves – a key stability ‘buffer’ – which surpassed USD 2 trillion in 2009.
Social China’s emerging middle class and growing income levels, in both urban and rural areas, are not only indicative of China’s consumption potential, but are also signs of a growing pool of skilled professionals who will progressively compete on the domestic and international labour markets. Higher education levels and growing urbanisation in central provinces evince the potential to not only foster poverty reduction but to also expand industrialisation while keeping domestic talent in the country.
IMPLICATIONS
-152-
AGENDA
Foreword
What’s New: ‘China: From Rebound to Recovery’
China Economic Indicators
International Comparison
Conclusions
Implications
AppendixHistoryCountry Profile
About THE BEIJING AXIS
Disclaimer
-153-
Xia Dynasty
2070BC-1600BC
• First dynasty described in ancient historical records
• Establishment of Chinese dynastic system
• Bronze age
Shang Dynasty
1600BC-1046BC
• Rudimentary writing system using oracle bones; origins of Chinese writing system
• Innovation of charioteering and large-scale taming of horses
Zhou Dynasty
1046BC-256BC
• Production of a corpus of influential literature, i.e. Classic of Changes (I- ching) and the oldest known history of China
• Warring States period (453-221) : Consolidation of feudal system; proliferation of iron works; spread of philosophies of Confucianism and Taoism; publication of Sun Tzu’s Art of War
Qin Dynasty
221BC-206BC
• First unification of China; centralised feudal system and legalistic mode of government
• Unified language, currency, metric and legal systems established
• Commencement of Great Wall construction
Han Dynasty
206BC-220AD
• Commencement of Silk Road trade route; interaction with Roman Empire
• Official adoption of Confucianism
• 105 BC: Invention of paper-making technology
• Buddhism first introduced to China
• Life of China’s famous historian Sima Qian (145-87 BC)
Three Kingdoms
220AD-280AD
• Short, violent period yet greatly romanticized in Chinese literature, most notably with the fictional Romance of the Three Kingdoms
Jin Dynasty
265AD-420AD
South and North Dynasties
420AD-589AD
• Period of civil war and disunity, yet great advances made in medicine, astronomy, mathematics and cartography, as well as a flourishing of poetry, calligraphy, painting and music
Sui Dynasty
581AD-618AD
• Reunification of China, launching of Three Departments and Six Ministries system
• Large-scale construction work on Grand Canal
• 605 AD: First civil service exam, based on the Confucian classics
2 43 51 6 7 8 9
Source: Various; THE BEIJING AXIS Analysis
CHINA IS ONE OF THE WORLD’S OLDEST CIVILISATIONS, WITH RECORDS DATING BACK MORE THAN 4,000 YEARS
-154-
Tang Dynasty
618-907
• Regarded as high point in history of Chinese civilisation
• Golden age of Chinese literature and art; renowned for leisure activities like archery, hunting, polo, football, cockfighting, etc.
• Strong Chinese maritime presence in places like Persian Gulf, Red Sea, Arabia, Egypt and East Africa
• Briefly interrupted by the Second Zhou dynasty (690-705) ruled by China’s only female emperor, Wu Zetian
Five Dynasties and Ten Kingdoms
907-960
• Period of upheaval: Successive brief dynasties and states
• Shift of China’s political power centre from the northwest (Shaanxi) eastward to the Yellow River plain in Henan
• First complete printed edition of 11 Confucian classics produced
Song Dynasty
960-1279 • First government issue of paper money and establishment of permanent standing navy, making use of gunpowder
• c. 960: Invention of the compass
• 1040: Invention of movable type printing
• Substantial exploitation of gold, silver, copper, iron, and other mineral deposits
• Emergence of the earliest manufacturing and processing plants
• 1078: China's steel output reaches 1.25 million tons, levels only attained in the West by 1788
Yuan Dynasty
1271-1368
• China under Mongol rule; society of rich cultural diversity and extensive interchange with West Asian and European societies
• First recorded European travels to China, notably by Marco Polo
• World's largest foreign trade port at Quanzhou
Ming Dynasty
1368-1644
• Return to ethnic Han (Chinese) rule
• 1406-1420: Forbidden City constructed in Beijing
• 1405-1433: Admiral Zheng He undertakes 7 voyages, reaching Africa and more than 30 countries
• Commercial interaction with Portuguese and Dutch traders from 16th century; appearance of Western missionaries in China
Qing Dynasty
1636-1911
• Extended period of stable dynastic rule in the 17th/18th centuries
• Serious threat of Christian Taiping rebellion in 19th century
• Increasing presence of foreign powers in China; rapid growth of Chinese population; Dynasty weakened by Opium Wars, Boxer Rebellion (1899-1901)
Republic of China
1912-1949
• 1912: Republic declared under Sun Yat-sen
• 1919: May Fourth Movement of students protesting foreign violations of Chinese sovereignty
• 1921: Establishment of Communist Party of China
• 1934-1936: The Long March
• 1937-1945: War with Japan
People’s Republic of China (PRC)
Since 1949
Source: Various; THE BEIJING AXIS Analysis
10 11 12 13 14 15 16AD
PRE-MODERN CHINA’S SOCIAL, LEGAL AND ECONOMIC SYSTEMS EVOLVED OVER CENTURIES
-155-
1949 1954
1953: First Five Year Plan released
1959 1964
1958-1960: The Great Leap Forward
1969 1974
1969: First atomic bomb successfully detonated
1979
1970: First satellite launched
1978: Reform and opening up initiated by Deng Xiaoping
1984 1989 1994 1999 2004 2009 2014
1993: Daya Bay Nuclear Power Station commences operations
1997: Hong Kong transfer of sovereignty to China
1999: Macau transfer of sovereignty to China
2001: China joins the WTO
2008: Beijing Olympic Games
2010: Shanghai World Expo
MODERN CHINA
Source: Various; THE BEIJING AXIS Analysis
1950-1952: Land Reform
CHINA’S RECENT HISTORY ILLUSTRATES A BROAD-BASED TRANSFORMATION THAT PAVED THE WAY FOR THE
RISE OF CHINA AS AN ECONOMIC SUPERPOWER
1966-1976: Cultural Revolution
2008: China overtakes Germany as world’s third-largest economy
2009: China set to overtake Japan as world’s second-largest economy
-156-
AGENDA
Foreword
What’s New: ‘China: From Rebound to Recovery’
China Economic Indicators
International Comparison
Conclusions
Implications
AppendixHistoryCountry Profile
About THE BEIJING AXIS
Disclaimer
-157-
Plains, deltas, and hills in the east; mountains, high plateaus and deserts in the west
Terrain
Tropical in the south to sub-arctic in the north
Climate
Capital: Beijing Other major cities: Shanghai, Tianjin, Shenyang, Wuhan, Guangzhou, Chongqing, Harbin and Chengdu
Cities
35º00’ N, 105º00’ EEastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China SeaShares 22,117 kilometres of land boundaries with 14 other countries
Location and Boundaries
9,596,960 sq. km. Area
People’s Republic of China
Source: CIA World Factbook; THE BEIJING AXIS Analysis
N
E
S
O Beijing
CHINA IS THE WORLD’S THIRD-LARGEST COUNTRY BY LAND MASS
The country’s size and location afford it a strategic advantage in trade, natural resources and international relations
-158-
GDP Per Capita (USD, 2008)
3,000-5,000
China Facts and Figures 2009Population 1.33 bnNationality ChineseEthnic Groups Han Chinese (91.5%), Zhuang,
Manchu, Hui, Miao, Uygur, Yi, Mongolian, Tibetan, Buyi, Korean, and other (8.5%)
Religions Officially atheist, Buddhism, Taoism, Islam, Christianity, and Catholicism
Language Mandarin (Putonghua), many local dialects
Labour Force 744.4 mn (2010F)GDP Nominal USD 4,909 bnGDP Growth Rate 8.7%GDP Per Capita USD 3,679Exports USD 1,201.7 bnImports USD 1,005.6 bnForex Reserves USD 2,399 bnCurrency Renminbi (Chinese yuan) Time GMT + 8 hrs
1: China’s GDP per capita in 2009 was USD 3,679, however, the data listed here by province are from the most current data as of publication – 2008.Source: CIA World Factbook; China Statistical Yearbook; China Monthly Economic Indicators; MOFCOM; UN Statistics; THE BEIJING AXIS Analysis
> 5,000
2,000-3,000< 2,000
Shanghai
Hainan
FujianTaiwan
GuangdongGuangxi
GuizhouHunan
YunnanJiangxi
Chongqing Zhejiang
JiangsuTibet
HubeiSichuan
Shaanxi Henan
HebeiShandong
NingxiaQinghai Shanxi Tianjin
Jilin
LiaoningBeijingInner
MongoliaXinjiang
Gansu
Heilongjiang
CHINA HAS 56 ETHNIC GROUPS, OF WHICH THE HAN ETHNIC GROUP ACCOUNTS FOR 91% OF THE TOTAL POPULATION
Anhui
China’s per capita GDP in 2009 was USD 3,6791
-159-
Type of Government Socialist republic (or ‘people's democratic dictatorship’ as defined by PRC constitution)
Branches of Government
Executive - President, Premier, Vice President, State CouncilLegislative - Unicameral National People's CongressJudicial - Supreme People's Court, Local People's Courts, Special People's Courts
Administrative Divisions 23 provinces; 5 autonomous regions; 4 municipalities directly under the State Council
Political Parties Chinese Communist Party, 70.8 million members; 8 minor parties under Communist Party supervision
Constitution 4 December 1982
Independence 221 BC (unification under the Qin or Ch'in Dynasty); 1 January 1912 (Qing or Ch'ing Dynasty replaced by the Republic of China); 1 October 1949 (People's Republic of China established)
National Holiday Anniversary of the founding of the People's Republic of China, 1 October (1949)
Source: CIA World Factbook; US Dept. of State Background Notes; THE BEIJING AXIS Analysis
THE COMMUNIST PARTY OF CHINA (CPC) REMAINS THE DOMINANT FORCE IN GOVERNMENT
-160-
Legal SystemBased on civil law system; derived from Soviet and continental civil code legal principles. Legislature retains power to interpret statutes; constitution ambiguous on judicial review of legislation and has not accepted compulsory International Court of Justice jurisdiction
Flag Red with a large yellow five-pointed star and four smaller yellow five-pointed stars (arranged in a vertical arc toward the middle of the flag) in the upper hoist-side corner
International Organisation Participation
ADB, AfDB (nonregional members), APEC, APT, Arctic Council (observer), ARF, ASEAN (dialogue partner), BIS, CDB, EAS, FAO, G-20, G-24 (observer), G-77, IAEA, IBRD, ICAO, ICC, ICRM, IDA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM (observer), IPU, ISO, ITSO, ITU, LAIA (observer), MIGA, MINURSO, MONUC, NAM (observer), NSG, OAS (observer), OPCW, PCA, PIF (partner), SAARC (observer), SCO, UN, UN Security Council, UNAMID, UNCTAD, UNESCO, UNHCR, UNIDO, UNIFIL, UNITAR, UNMIL, UNMIS, UNMIT, UNOCI, UNTSO, UNWTO, UPU, WCO, WFTU, WHO, WIPO, WMO, WTO, ZC
Source: CIA World Factbook; THE BEIJING AXIS Analysis
THE FOUNDING OF THE PRC IN 1949 ESTABLISHED A LEGAL SYSTEM INFLUENCED BY SOVIET PRINCIPLES
-161-
Other key institutions
High-Level View of China’s Political System
People’s Republic of China
President
Central Committee of theCommunist Party of China
(CCCPC)
General SecretaryPolitburo Standing Committee PolitburoSecretariat
PremierVice Premiers (4)State Councilors (5)Ministers (25)Central Bank GovernorAuditor-General
ChairmanVice ChairmanSpecial Committees of the NPC
State CouncilNational People’s
Congress(NPC)
Central MilitaryCommission
Supreme People’sCourt
Supreme People’sProcuratorate
Source: CIA World Factbook; US Dept. of State Background Notes; THE BEIJING AXIS Analysis
POLITICAL POWER IN CHINA HAS BECOME LESS PERSONAL AND MORE INSTITUTIONAL
The primary organs of state power - the NPC, the President and the State Council - are largely made up of party members
-162-
Order Name Party Positions State Positions1 Hu Jintao General Secretary of the Central Committee,
Chairman of the CPC Central Military CommissionPresident of the People’s Republic of China, and Chairman of the PRC Central Military Commission
2 Wu Bangguo - Chairman of the Standing Committee of the National People’s Congress
3 Wen Jiabao - Premier of the State Council4 Jia Qinglin - Chairman of the People’s Political
Consultative Conference5 Li Changchun - -
6 Xi Jinping Principal of the Central Party School. Top-ranked member of the Secretariat of the Communist Party of China Central Committee
Vice President of the People’s Republic of China
7 Li Keqiang - First Vice-Premier of the State Council8 He Guoqiang Secretary of the Central Commission for Discipline
Inspection-
9 Zhou Yongkang
Secretary of the Political and Legislative Affairs Committee
-
Source: CIA World Factbook; US Dept. of State Background Notes; THE BEIJING AXIS Analysis
Politburo Standing Committee of the Communist Party of China (2009)
THE POLITBURO STANDING COMMITTEE IS THE HIGHEST AND MOST POWERFUL DECISION-MAKING BODY IN CHINA
-163-
700,000 Engineers graduate annually from schools in China53,000 RMB is the average cost of a license plate in Shanghai40,000 Cabs drive around Shanghai daily30,000 Chinese MBA students were expected to graduate in 2008. The number in 1998 was 0
747 Million mobile phones were in circulation in China in 2009500 Coal-fired power plants to be built in China by the next decade160 Cities in China with populations that exceed 1 million. There are 9 in the US and just 2 in the UK97 New airports to be built in the next 12 years, bringing the total number to 244 by 202080 Percent of the world’s zippers are produced in the factories of Qiaotou city in Zhejiang Province80 Percent of the world’s toys are made in China, in more than 10,000 toy factories70 Percent of the world’s pirated goods come from China50 Percent of the world’s pork is eaten in China34 Children are born every minute in China30 Percent of Chinese adults live with their parents30 Nuclear power plants currently being built in China
6.3 Million passenger cars are registered in China. The number in 2004 was 2.4 million6.31 Million students graduated from Chinese universities in 2010. The number in 1977 was 270,000
5 Million Chinese are estimated to visit ski resorts this year. Ten years ago, only 500 people in China could ski1.8 Is the average number of credit cards owned by a person in Shanghai
Source: Various; THE BEIJING AXIS Analysis
VARIOUS FACTORS IDENTIFY CHINA AS ONE OF THE WORLD’S MOST SIGNIFICANT COUNTRIES
-164-
AGENDA
Foreword
What’s New: ‘China: From Rebound to Recovery’
China Economic Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
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THE BEIJING AXIS is a cross-border business bridge to/from China in three principal areas: Strategy, Sourcing and Investment.
Since our establishment in 2002, we have successfully worked with many large international and Chinese MNC clients across various sectors and industries, with a core focus on the Chinese mining & resources sector; and on the burgeoning industrial, engineering & manufacturing sector. Our work is always cross-border - supporting international firms as they act in unfamiliar territory in China, or supporting Chinese firms as they venture out and ‘go global.’ We are committed to safety and sustainability, and our solutions emphasise ‘actions and transactions.’ Our principal office is in Beijing, with additional offices in Hong Kong and international offices in Singapore, Perth, Moscow, London and Johannesburg.
THE BEIJING AXIS (TBA) is organised along three synergistic cross-border China businesses: TBA China Strategy Group, TBA China Sourcing Unit, and TBA China Capital Advisors:
TBA China Strategy Group assists CEOs, boards and senior management with their cross-border China strategy formulation and implementation. For international MNCs we are a trusted China strategy advisor and implementation partner; for Chinese MNCs we do strategic business planning and implementation as they develop global businesses.
TBA China Sourcing Unit supports clients to build and manage supply chains between China and the world – for projects, equipment, components, finished products, raw materials and commodities. We identify and select qualified suppliers, organise tenders, and request and analyse quotations. We also assist clients in negotiating favourable commercial terms, overseeing contract execution (including QA/QC and expediting) and coordinating communications and logistics across the supply chain. We support bulk commodity producers with their international marketing efforts, and assist bulk commodity users with their procurement efforts. We provide these services through Bateman Beijing Axis, a JV between TBA China Sourcing Unit and Bateman Engineering N.V., Bateman Beijing Axis is a China-focused Global Procurement House.
TBA China Capital Advisors provides specialised financial advisory services to Chinese firms that are undertaking outbound cross-border investment, or that are attracting international investment. Similarly, we advise international firms that are undertaking investments in China or that are looking to attract strategic capital from China. We focus on both transaction origination and execution. In 2009, TBA China Capital Advisors entered into a joint venture agreement with Cadiz Corporate Solutions, the corporate finance division of Cadiz, a public listed financial services group. The joint venture is the perfect corporate advisor for companies in search of capital investment from China, and for Chinese companies in search of investment opportunities on the African continent.
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BATEMAN BEIJING AXIS IS A CHINA-FOCUSED GLOBAL PROCUREMENT HOUSE
A JV between Bateman Engineering N.V. and THE BEIJING AXIS Ltd.
www.batemanbeijingaxis.com
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IN 2009, THE BEIJING AXIS CHINA CAPITAL ADVISORS ENTERED INTO A JV AGREEMENT WITH CADIZ CORPORATE SOLUTIONS
The JV is a corporate advisor for companies in search of capital investment from China, and for Chinese companies in search of investment opportunities
in the African continent
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THE CHINA ANALYST IS A KNOWLEDGE TOOL BY THE BEIJING AXIS FOR EXECUTIVES WITH A CHINA AGENDA
May 2009 February 2009
To view or download a copy of current or previous editions of The China Analyst, visit our website at www.thebeijingaxis.com.
September 2009January 2010
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BeijingCheryl TangDirector GM: China, Bateman Beijing Axis [email protected]+86 (0)10 6440 2106
JohannesburgNitesh DullabhDirectorGM: Africa, Bateman Beijing [email protected]+27 (0)11 201 2453
Perth; Singapore; BeijingKobus van der WathFounder & Group Managing DirectorChief ExecutiveBateman Beijing [email protected]+86 138 0111 2112
MoscowLilian Luca DirectorCOO: Bateman Beijing Axis [email protected]+86 186 0102 4757
For further information, please visit our English, Chinese websites at www.thebeijingaxis.com, or contact an appropriate office:
LondonMatt PieterseDirectorChief Executive, TBA China Strategy Group, TBA China Capital [email protected]+44 7769 972 037
Latin America Desk (in Beijing)Javier CuñatManager: Sourcing Strategy & Research/KM (& International Strategic Development)Bateman Beijing [email protected]+86 (0) 10 6440 2106
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AGENDA
Foreword
What’s New: ‘China: From Rebound to Recovery’
China Economic Indicators
International Comparison
Conclusions
Implications
Appendix
About THE BEIJING AXIS
Disclaimer
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This document is issued by THE BEIJING AXIS Ltd. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only, and solely for private circulation. The information presented here has been compiled from sources believed to be reliable. While every effort has been made ensure that the information is correct and that the views are accurate, THE BEIJING AXIS Ltd. cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. THE BEIJING AXIS Ltd., and/or a connected company may have a position in any of the investments mentioned in this document. All readers are advised to make their own independent judgement with respect to any matter contained in this document. .
Copyright Notice: Copyright of all materials, text, articles and information contained herein resides in and may only be reproduced with permission of an authorised signatory of THE BEIJING AXIS Ltd. Copyright in materials created by third parties and the rights under copyright of such parties is hereby acknowledged. Copyright in all other materials not belonging to third parties and copyright in these materials as a compilation vests in and shall remain copyright of THE BEIJING AXIS and should not be reproduced or used except for business purposes on behalf of THE BEIJING AXIS Ltd. or save with the express prior written consent of an authorised signatory of THE BEIJING AXIS Ltd. All rights reserved. © THE BEIJING AXIS Ltd. 2010.
Picture credit: Cover mage by Frankartculinary (flikr), used under a Creative Commons license.