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A forward look at the developing Chinese economy

A forward look at the developing Chinese economy. Dimitri de Boer. Disclaimer.

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A forward look at the developing Chinese economy

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  1. A forward look at the developing Chinese economy Dimitri de Boer

  2. Disclaimer The figures and views in this presentation are my personal opinions gained through experience with China and do not represent official positions of UNIDO, nor are they intended to oppose or support any people or organizations.

  3. Overview • Economic Developments • Social Developments • Problems for Doing Business • Forecasts and Expectations • ChinaChem 2004

  4. Distances between Shanghai-Guangzhou vs. London-Madrid Beijing London Nanjing ca 1050 km Shanghai ca 1200 km Madrid Guangzhou

  5. Economic Developments • Average 8% GDP growth since 1978 • Prosperous coastal cities, poor rural areas • FDI magnet • FX Reserves, Credit and NPL • WTO entry

  6. GDP Growth 1979 2002 Real GDP (billion $) 180 1,250 Real GDP per capita 185 1,000 US GDP (billion $) 10,500 US GDP per capita 37,000 Source: The World Bank 2002 World Development Report

  7. GDP Growth, limited Inflation Source: 2003 Statistical Yearbook of China

  8. Structure of the Economy Source: 2003 Statistical Yearbook of China

  9. Income Growth

  10. FDI magnet

  11. Source: Finance Asia, accredited to UBS Warburg Recent Economic Indicators

  12. FX Reserves Build-Up

  13. Credit Expansion 2002 2003 Credit (trillion RMB) 0.9 1.9 Will it go bust? • Credit and debit cards: • Total sum of bank card transactions has increased by approximately 76% per year • Number of retailers who accept cards has increased by about 51% per year • Average person still prefers cash Source: Access Asia ‘Credit and Debit Cards in China: Market Analysis’

  14. Chinese government US$218bn US$680bn Standard and Poor’s ??? Real number Non-Performing Loans 2002

  15. Challenges • More Regulations that focus on foreign • business • More competition • More imports Opportunities • Short-term (1-2 years) • TRIMS • Tariffs • Service sector • Mid-term (3-4 years) • Distribution and trading rights • Tariffs and NTBs • Long-term (5 and more years) • Business environment “Grey” areas that WTO does not really cover • The limits of partner choice and “national treatment” • Licensing and Technical Standards • Environmental Laws that focus on imports WTO Accession Opportunities and Challenges

  16. Social Developments • Emerging Middle Class • Urbanization • Huge Workforce, Rising Unemployment • Virtually Unlimited Labor – Lack of Talent • Gaps in Culture, Attitudes and Values • Hot Markets: Cars, Houses, Communication • Threats: Energy (Oil), Water, Environment

  17. Emerging ‘Xiao Kang’ Middle Class

  18. Urbanization • Still over 600million people in rural China • An estimated 100million urban workers come from rural areas

  19. Huge Workforce, Unemployment • An estimated total of 50 million laid-off public sector workers • Every year an estimated 10 million new laborers enter the job market • Official unemployment rate 4.7%*

  20. Unlimited Labor - Lack of Talent • Qualified higher and middle management is hard to find • % of GDP spent on education about half of the US and Europe • 2.8 million college and university graduates this year (up 25%) • Poor flow of information in job market, lack of trust Source: China Ministry of Personnel

  21. Gaps in Culture, Attitudes and Values • The government has gone into business • Differences between every city and region, generations, education etc. • Low quality, safety and health standards in production

  22. Hot Markets • Cars • Houses • Communication

  23. Internet Use Source: CNNIC Statistical Survey Report on Internet Development in China

  24. Mobile Phone Use • Largest market in the world since end of 2001 2003 2004 Mobile phone users 260m310m Source: China Ministry of Information Industry

  25. Threats: Energy (Oil), Water, Environment Source: BMO Nesbitt Burns

  26. Threats: Energy (Oil), Water, Environment • Water: Increasing Demand, Diminishing Supplies • 400 out of the 600 1st and 2nd tier cities in China already face water shortages • Renewable water sources will decrease by 30% per capita by 2030 • Pollution of surface water in rural areas poses threat to health Source: China Ministry of Water, 2004

  27. Threats: Energy (Oil), Water, Environment • Desertification and urbanization leading to reduction of arable land • Frequent flooding • Chinese cities and seas amongst the most polluted in the world

  28. Problems for Doing Business • Legal environment • Law enforcement • JV Disputes • Corruption • Government Relations • Intellectual Property Rights, Patents • Distribution Difficulties

  29. Main Cities to Cover North Shenyang Dalian Tianjin Qingdao Beijing Xian East Nanjing Hangzhou Ningbo Shanghai Wuxi Suzhou Wuhan South Shenzhen Guangzhou Dongguan Zhuhai Chengdu Qongqing Kunming Shenyang Dalian Dalian Beijing Xian Tianjin Qingdao Shanghai Nanjing Shanghai Wuhan Wuxi Hangzhou Ningbo Chengdu Qongqing Guilin Shenzhen Dongguan Shantou Zhuhai Hongkong Distribution Difficulties

  30. Forecasts and Expectations • Some fear of inflation this year • Privatization, M&A, Consolidation • Labor prices will stay cheap for a long time • Improvements in Business Environment

  31. Realistic Expectations of Growth • China’s goal is to quadruple GDP by 2020 • This amounts to an 8.3% annual increase • If achieved, per capita GDP will be about $4000 by 2020

  32. Aging Population

  33. Conclusion • Huge opportunities • Know your market and environment • Expect hot competition • Expect many things to improve

  34. ChinaChem 2004 • See China Chemical Industries for 400 Euros, everything covered • 40 European SMEs and more than 60 selected Chinese SMEs • November 12 – 15 • Sponsored by EU Asia Invest

  35. ChinaChem 2004 • Flights reimbursed • 3 days accommodation and meals • 1 page company intro • Several practical seminars • Comprehensive printed and online catalogue • Pre-arranged individual business meetings

  36. Emphasis of Cooperation • Trade both ways, outsourcing, dealership • Technical and know-how cooperation

  37. Objectives • Promoting SME business cooperation between the EU and China • Enhancing safety, health and environmental performance in China • Strengthening the position of EU companies in China

  38. Who may attend? • Must be from the EU • Must be SME • Must be in Chemical Industries • Must indicate desired cooperation with Chinese counterparts Register at: www.chinachem.org

  39. Organizers and Sponsors Sponsored by: • European Union Asia Invest II Organized by: • Merchants Promotion Bureau of Dongying Co-Organized by: • Chemical Industries Association • UNIDO ITPO-China • VCI, Federchimica, VNCI • China Fine Chemicals Association

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