China s new growth? March 2014

Transcription

1 China s new growth? March 2014

2 Growth? China s CSI 300 Plunges to Five-Year Low on Export Slump China manufacturing growth slows to 8-month low China s newest threat: Zombie companies Zombies Spreading Shows Chaori Default Just The Start Deflation fears as China inflation drops to 2% China Property Fears Rattle Markets China's Feb refined copper imports fall 29% on month, rise 27% on year China Feb commodity imports rise despite weak underlying demand China export, import growth seen slowing China February Exports Plunge; Import Growth Accelerates

3 Historic Trend GDP Growth in 2013 at 7.7% with a target of around 7.5% for 2014

4 Global GDP Growth Comparisons World Output United States Euro Area Germany France Japan United Kingdom Canada Emerging Market and Developing Economies Central and Eastern Europe Commonwealth of Independent States Russia Developing Asia China Source: IMF

5 China is in transition Pillars of the current 5 year plan out to 2015 Domestic Consumption Social Safety and Security Sustainability and Energy Conservation Opportunity!! and Risk Enhance and Upgrade Industry Regional Balance Foster Urbanization

6 China s Regions & Provinces

7 Tier 1, 2 & 3 Cites in China Harbin Urumqi Changchun Shenyang Hohhot Tangshan Tianjin Beijing Qinhuangdoa Dalian Lhasa Xining Yinchuan Lanzhou Xian Chengdu Chonqing Taiyuan Shijiazhuang Yantai Weihai Zibo Qingdoa Jinan Zhengzhou Xuzhou Lianyunggang Zhenjiang Nanjing Nantong Shanghai Wuhan Heifei Wuxi Changzhou Suzhou Ningbo Hangzhou Shaoxing Jinhua Changsha Nanchang Taizhou Legend Tier 1 Tier 2 Tier 3 Kunming Guiyang Beihai Zhuhai Zhangjiang Fuzhou Guilin Guangzhou Xiamen Quanzhou Shenzhen Dongguang Nanning Foshan Shantou Jiangmen Huizhou Zhongshan Wenzhou Sanya Haikou

8 2 nd Tier Cities First Class Opportunity Significant government support in central China, where many 2 nd tier markets are located This region was boosted by the Chinese stimulus package that provided it with better highways and faster trains to increase access Spreading urbanization and development has resulted in new commerce centers across the mainland Less competition, lower wages Influx of people into the cities has also aided in the development of the retail market

9 Towards an Urban Billion Foster Urbanization 2011 marked the first year that China s urban population was greater than it s rural population 690 million vs. 656 million Approximately 655 cities in China 160 cities with populations of 1 million or more 12 metro areas with populations greater than 5 million Plan for 8 mega cities (10+ million) by Beijing, Shanghai, Chengdu, Chongqing, Guangzhou, Shenzhen, Tianjin and Wuhan Chinese workers increasingly flocking to these fast growing cities Target of 60% urbanization by 2020 (49% in 2005, 54% in 2013) But the rate of urbanization will slow what China needs is smart development

10 To be Rich is Glorious Domestic Consumption Middle income households average below USD35,000 in China today represent about 6% of the urban population Low income households (below USD16,000) are more than 80% of the urban population But watch the middle IF China can encourage spending Income Level of China Urban Households 2020 Income Level of China Urban Households Rich Middle Low Poor

11 Domestic Consumption Domestic Consumption Grow domestic consumption contribution to GDP Offsetting investment and export driven growth The target for household consumption growth is 14.5% for 2014 Retail sales grew by 13.1 per cent last year National Bureau of Statistics

12 GDP Equivalents of Chinese Provinces 2012

13 Social Safety and Security Source: NYTimes Photograph: Diego Azubel/EPA /ChinaFotoPress/Getty Images Sim Chi Yin for The New York Times

14 Social Safety and Security Social Safety and Security Consumers need a better social safety net to encourage spending About 21 million urban residents are living on an average living allowance of $41.50 a month New China budget saw a 9.8% rise in social welfare and employment spending ($128 billion) Defense spending up 12.2% to billion Yuan ($145 billion) Healthcare spending forecast to nearly triple to $1 trillion by 2020 from $357 billion in 2011 Biomedical is flagged as one of seven new strategic sectors Cost reduction and quality transparency in pharma and equipment is key +2,000 new county hospitals, +29,000 new township hospitals, upgrade another 5,000 clinics and hospitals.

15 Energy Growth Sustainability and Energy Conservation Power consumption to rise 7% Lessen reliance on coal (doesn t mean no growth in coal) Develop renewable energy sources installed a record 12GW of solar in 2013 Development of unconventional energy sources Increase industrial energy efficiency Smart grid market - one third of global total hardware and software Construction building codes

16 Industrial Change Labour cost continue to rise in China at least 10% annually but growth rate is slowing. (14% in 2011, 12% in 2012) Highest hourly rates in Shenzhen, Beijing, Tianjin, Shanghai ($2.96-$2.30) Employer welfare contributions also on the rise and can equal more than 40% of the employee salary Wages in Tier 1 cities are approximately 40% higher than in Tier 2 cities Driving wage growth is the mandated increase in the minimum wage to encourage consumption but this has to be carefully managed Wage growth is exceeding the growth of labour productivity growth of 7% in 2013 lowest rate in 10 years Even with slower economic growth labor markets will be strained as competition in finding qualified higher end employees remains Productivity becomes key information management and innovation

17 Growth Industries Winners Environment Data Management Healthcare/Pharma Auto green auto Urban Security Agricultural - efficiency and safety Transportation more rail E-Commerce Advanced telecom Precious and rare metals Losers Aluminum Steel Low end manufacturing Infrastructure (smart cities) and Electronics??

18 Transitional Growth Picks Sichuan population 81 million Rich natural resources Well developed industrial sector Aero, auto, hydro power, gas Major agricultural production Chengdu Chicago of China Successful at attracting foreign investment Foreign investor infrastructure Average GDP growth rate above national average Home to more than 25,500 millionaires and 1,800 super-rich (assets of more than $16 million)

19 Transitional Growth Picks Henan population 94 million Largest agricultural output of China Steel, aluminum and coal industries to close forcing change Attracting FDI in ICT (Foxconn pulling in other players) Low wage rates still attractive Piloting FTZ

20 Transitional Growth Picks Shandong - population 97 million Oil sector in need of upgrade/consolidation of refineries Strong agrifood industry One of China s largest consumer markets Large foreign investor presence allowing for good infrastructure Growing retail presence Export processing zones

21 Key Contacts: In China Denis L Heureux Chief Representative, Shanghai dlheureux@edc.ca Peter Xu Senior Regional Manager China, Shanghai pxu@edc.ca Hui Wang Associate Regional Manager, Beijing hwang@edc.ca Shelly He Administrator, Shanghai she@edc.ca In Canada Mark Bolger Chief Representative, Asia mbolger@edc.ca Thank You!