Miller China Trade
Transcript of Miller China Trade
China – International Trade
Matt Miller
March 1st, 2005
Outline:
1. History/Background
2. Current Demographics
3. Labor Market
4. Economics
5. International Trade
Background History
Timeline:1949 – People’s Republic of China (PRC) founded1953-57 The Transition to Socialism1958-60 The Great Leap Forward1966-76 The Cultural Revolution Decade
1966-68 The Militant Phase1969-71 The 9th National Congress Party to the Demise of Lin Biao1972-76 End of the Era of Mao Zedong
1976-78 The Post-Mao Period1979-82 Four Modernizations of China1980-88 Reforms2001 – Admission to the WTO
Capital: Beijing
Largest City:
Shanghai
Demographics:Demographics:
44thth Largest Country in the World Largest Country in the World• Highest Population ≈ 1.3 Billion peopleHighest Population ≈ 1.3 Billion people
Speculation that figures underestimate true total Speculation that figures underestimate true total populationpopulation
• Geographic area slightly smaller than U.S.Geographic area slightly smaller than U.S. Age StructureAge Structure
• 0-14 years = 22.3% of population0-14 years = 22.3% of population• 15-64 years = 70.3% of population15-64 years = 70.3% of population• 65 years and over = 7.5% of population65 years and over = 7.5% of population
Median Age = 31.8 yearsMedian Age = 31.8 years Population Growth Rate = 0.57% (2004 est.)Population Growth Rate = 0.57% (2004 est.) Birth Rate = 12.98 births/1,000 populationBirth Rate = 12.98 births/1,000 population Death Rate = 6.92 deaths/1,000 populationDeath Rate = 6.92 deaths/1,000 population
Sex RatioSex Ratio• At birth = 1.12 males/femalesAt birth = 1.12 males/females• Total Population = 1.06 males/femalesTotal Population = 1.06 males/females
Infant Mortality Rate = 25.28 deaths per 1,000 Infant Mortality Rate = 25.28 deaths per 1,000 live birthslive births
Life Expectancy at birth = 71.96 yearsLife Expectancy at birth = 71.96 years Literacy Rates = 90.9% over 15 years of age Literacy Rates = 90.9% over 15 years of age
can read and writecan read and write Multi-ethnic nation - 56 recognized ethnicitiesMulti-ethnic nation - 56 recognized ethnicities
• Han Chinese = 93% of total populationHan Chinese = 93% of total population Several different Chinese dialectsSeveral different Chinese dialects
Demographics:Demographics:
Labor Market
• Labor Force ≈ 778.1 Million (2003)• Labor Force by Occupation:
– Agriculture = 50%– Services = 28%– Industry = 22%
• Unemployment Rate – 2003 = 10.1% (CIA.gov) World Factbook– 2003 = 4.4% (Official NBS figures)
• NBS figures do not include underemployment or the migrant population
• Major Industries– Iron & Steel, Coal, Machine Building, Textiles & Apparel, Petroleum,
Cement, Footwear, Toys, Food Processing, Automobiles, Consumer Electronics, Telecommunications, etc.
EconomyEconomy
GDP - $1.409 Trillion USD (2003) GDP - $1.409 Trillion USD (2003) 6th6th GDP (PPP) - $6.449 Trillion USD (2003) GDP (PPP) - $6.449 Trillion USD (2003) 2nd2nd GDP Real Growth Rate = 9.1% (2003)GDP Real Growth Rate = 9.1% (2003)
GDP per Capita = $1,227 USD (2003) GDP per Capita = $1,227 USD (2003) 113th113th GDP per Capita (PPP) = $5,000 (2003) GDP per Capita (PPP) = $5,000 (2003) 9191stst
Population below poverty line = 10% (2001)Population below poverty line = 10% (2001) Distribution of Household Consumption Distribution of Household Consumption
Income/ConsumptionIncome/Consumption Lowest 10% = 2.4%Lowest 10% = 2.4% Highest 10% = 30.4% (1998)Highest 10% = 30.4% (1998)
19919988
19919999
20020000
20020011
20020022
20020033
7.87.8%%
7.17.1%%
8.08.0%%
7.57.5%%
8.08.0%%
9.19.1%%
EconomyEconomy GDP Composition by Sector (2003)GDP Composition by Sector (2003)
Industry & Construction = 52.9%Industry & Construction = 52.9% Services = 32.3% Services = 32.3% Agriculture = 14.8%Agriculture = 14.8%
Ave Rural income ≈ 1/3 of Urban areasAve Rural income ≈ 1/3 of Urban areas Currency = Renminbi Currency = Renminbi (yuan)(yuan) Inflation on the rise due to high food pricesInflation on the rise due to high food prices
CPI hit 5.3% in July & August 2004 after averaging CPI hit 5.3% in July & August 2004 after averaging 3.6% in the first half of 2004. Steepest rise in over 3.6% in the first half of 2004. Steepest rise in over 6 years.6 years.19981998 19991999 20002000 20012001 20022002 20032003
-0.8%-0.8% -1.4%-1.4% 0.4%0.4% 0.7%0.7% -0.8%-0.8% 1.2%1.2%
EconomyEconomy
Gross Fixed Investment = 43.4% of GDP (2003)Gross Fixed Investment = 43.4% of GDP (2003) Budget (2003)Budget (2003)
Revenues = $265.8 Billion USDRevenues = $265.8 Billion USD Expenditures = $300.2 Billion USDExpenditures = $300.2 Billion USD
Government Deficit: (figures in Billions of RMB)Government Deficit: (figures in Billions of RMB)
Budget Deficit ≈ 2.7% of GDPBudget Deficit ≈ 2.7% of GDP Public Debt = 30.1% of GDP (2003)Public Debt = 30.1% of GDP (2003) Tax Revenues increased 20.3% in 2003 from 2002Tax Revenues increased 20.3% in 2003 from 2002 Foreign Reserves = $403.3 Billion (2003) - up 40% from Foreign Reserves = $403.3 Billion (2003) - up 40% from
20022002
19981998 19991999 20002000 20012001 20022002 20032003
92.292.2 174.174.44
249.249.11
251.251.77
315.315.00
319.319.88
Foreign Investment in ChinaForeign Investment in China
• Despite the government’s efforts to cool the economy, FDI in China continues to rise
• In 2004, the total number of contracts signed was up 15%
• In 2004, the contracted amount of FDI rose 42.7%• Retail investment has increased
– Wal-mart– 7-Eleven
• Financial Institutions – HSBC Holdings
Foreign Investment in ChinaForeign Investment in China• Government is trying to spur investment in
northeastern & western China• Intel Corp. announced a $375 million chip testing &
packaging facility in Chengdu• Other major investors in Western China include:
– Ford Motor Co.– Tenneco Automotive– Lear Corp.
• High Tech companies are also establishing operations in western China
Origins of FDI in China (2004)Origins of FDI in China (2004)
Country of Origin Amount
Hong Kong $10.84 Billion
British Virgin Islands $3.79 Billion
South Korea $3.51 Billion
Japan $2.95 Billion
United States $2.43 Billion
Taiwan $1.89 Billion
Trends and Issues to WatchTrends and Issues to Watch
• Power Shortages continue
• R&D Investment keeps rising
• Rising costs of popular destinations
• Trading & Distribution rights – New rules
• Regulatory Developments– Anti-Monopoly Law– Bankruptcy Law– Direct Selling Law
International International TradeTrade
• China’s Trade with the World ($ Billion)China’s Trade with the World ($ Billion)
19991999 20002000 20012001 20022002 20032003
ExportExportss
194.9194.9 249.2249.2 266.2266.2 325.6325.6 438.4438.4
ImportImportss
165.7165.7 225.1225.1 243.6243.6 295.2295.2 412.8412.8
TotalTotal 360.6360.6 474.3474.3 509.8509.8 620.8620.8 851.2851.2
% Change: 31.5% 7.5% 21.8% 37.1%
100
150
200
250
300
350
400
450
500
1997 1998 1999 2000 2001 2002 2003
ExportsImports
** Figures in ($ Billions)
International International Trade - Trade - ExportsExports
• Exports = $438.4 Billion f.o.b. (2003)Exports = $438.4 Billion f.o.b. (2003)• Export CommoditiesExport Commodities
– Machinery & Equipment, Textiles & Machinery & Equipment, Textiles & Clothing, Footwear, Toys, Sporting Goods, Clothing, Footwear, Toys, Sporting Goods, Mineral Fuels, etc.Mineral Fuels, etc.
• Top Export Partners (2003):Top Export Partners (2003):– U.S. = 21.1%U.S. = 21.1%– Hong Kong = 17.4%Hong Kong = 17.4%– Japan = 13.6%Japan = 13.6%– South Korea = 4.6%South Korea = 4.6%– Germany = 4%Germany = 4%
China’s Top Exports (2003)China’s Top Exports (2003)
RankRank CommodityCommodity 20022002 20032003 %Change%Change
11 Electrical Machinery Electrical Machinery & Equipment& Equipment
58.69158.691 78.47378.473 33.7%33.7%
22 Power Generation Power Generation EquipmentEquipment
45.40445.404 73.95873.958 62.9%62.9%
33 ApparelApparel 33.25033.250 41.28741.287 24.2%24.2%
44 Toys & GamesToys & Games 10.73410.734 12.23912.239 14.0%14.0%
55 FootwearFootwear 10.06910.069 11.65111.651 15.7%15.7%
66 FurnitureFurniture 8.9538.953 11.55511.555 29.1%29.1%
77 Iron & SteelIron & Steel 8.6158.615 11.51711.517 33.7%33.7%
** Figures in ($ Billion)
• China maintains export bans and restrictive China maintains export bans and restrictive licensing procedures on certain items.licensing procedures on certain items.
• Prohibited Exports:Prohibited Exports:– Musk, Copper, Platinum, Specified Chemical Musk, Copper, Platinum, Specified Chemical
Compounds, and products whose export is banned Compounds, and products whose export is banned under international treaties.under international treaties.
• Products subject to strict licensing controls Products subject to strict licensing controls include dual-use chemicals, chemical include dual-use chemicals, chemical precursors, heavy water, and exports of fish, precursors, heavy water, and exports of fish, fresh vegetables and fruits to Hong Kong & fresh vegetables and fruits to Hong Kong & Macao.Macao.
• Foreign-invested companies are restricted to Foreign-invested companies are restricted to exporting only products that they manufacture.exporting only products that they manufacture.
Export Regulations:Export Regulations:Chinese Export Chinese Export ControlsControls
• Imports = $412.8 Billion f.o.b. (2003)Imports = $412.8 Billion f.o.b. (2003)
• Import CommoditiesImport Commodities– Machinery & Equipment, Mineral Fuels, Machinery & Equipment, Mineral Fuels,
Plastics, Iron & Steel, ChemicalsPlastics, Iron & Steel, Chemicals
• Top Import Partners (2003)Top Import Partners (2003)– Japan = 18%Japan = 18%– Taiwan = 11.9%Taiwan = 11.9%– South Korea = 10.4%South Korea = 10.4%– U.S. = 8.2%U.S. = 8.2%– Germany = 5.9%Germany = 5.9%
International Trade International Trade ––Imports Imports
China’s Top Imports (2003)China’s Top Imports (2003)
RankRank CommodityCommodity 20022002 20032003 %Change%Change
11 Electrical Machinery Electrical Machinery & Equipment& Equipment
65.84265.842 92.91092.910 41.1%41.1%
22 Power Generation Power Generation EquipmentEquipment
46.86746.867 64.24564.245 37.1%37.1%
33 Mineral Fuel & OilMineral Fuel & Oil 17.58817.588 26.34926.349 49.8%49.8%
44 Iron & SteelIron & Steel 14.53614.536 23.29123.291 60.2%60.2%
55 Optics & Medical Optics & Medical EquipmentEquipment
12.02012.020 22.19222.192 84.6%84.6%
66 PlasticsPlastics 15.79515.795 18.92818.928 19.9%19.9%
77 ChemicalsChemicals 11.83911.839 16.90216.902 42.8%42.8%
** Figures in ($ Billion)
Import Regulations:Import Regulations:Chinese Import Chinese Import ControlsControls• The following items are prohibited from The following items are prohibited from
entering China:entering China:– Arms, ammunition, explosives, counterfeit Arms, ammunition, explosives, counterfeit
currencies, printed matter, magnetic media, films or currencies, printed matter, magnetic media, films or photographs that are deemed detrimental to the photographs that are deemed detrimental to the political, economic, cultural, or moral interests of political, economic, cultural, or moral interests of China, lethal poisons, illicit drugs, disease-carrying China, lethal poisons, illicit drugs, disease-carrying animals and plants, foods, medicines, and other animals and plants, foods, medicines, and other articles, and old/used garmentsarticles, and old/used garments
• In addition rules went into effect in 1999 that In addition rules went into effect in 1999 that further restrict or prohibit importation of certain further restrict or prohibit importation of certain commodities related to the processing trade.commodities related to the processing trade.
International TradeInternational Trade
• China posted a trade deficit for the first time in China posted a trade deficit for the first time in over a decade in 2004over a decade in 2004
• Overall trade grew roughly 39% in the first half Overall trade grew roughly 39% in the first half of 2004 – same as in first half of 2003of 2004 – same as in first half of 2003
• US-China Trade expanded the largest margin US-China Trade expanded the largest margin the past decadethe past decade– Mostly due to jump in exports to U.S.Mostly due to jump in exports to U.S.– Grew a record 36%Grew a record 36%
• In 2004, China export mix remained mostly the In 2004, China export mix remained mostly the same except toys failed to make the top 10 same except toys failed to make the top 10 export list for the first time in more than 15 export list for the first time in more than 15 years!years!
China’s Competitive China’s Competitive AdvantageAdvantage
• Labor-rich countryLabor-rich country– Low-skilled, Labor-Low-skilled, Labor-
intensive goodsintensive goods– Manufacturing (Low-Tech)Manufacturing (Low-Tech)
• Capital-poor countryCapital-poor country– FDI FDI
Trade BarriersTrade Barriers• While China has an increasingly While China has an increasingly
open and competitive economy, open and competitive economy, substantial barriers have yet to be substantial barriers have yet to be dismantled!dismantled!
TariffsTariffs Import QuotasImport Quotas Tariff-Rate QuotasTariff-Rate Quotas Import LicensingImport Licensing Export LicensesExport Licenses TransparencyTransparency Legal FrameworkLegal Framework Trading RightsTrading Rights Distribution RightsDistribution Rights Import SubstitutionImport Substitution Standards/TestingStandards/Testing Anti-Competitive Anti-Competitive
PracticesPractices Services BarriersServices Barriers
U.S.– China TradeU.S.– China Trade
• In 2003, US/China Trade topped $190 BillionIn 2003, US/China Trade topped $190 Billion– US Trade Deficit with China totaled $134 BillionUS Trade Deficit with China totaled $134 Billion
• U.S. exports to China are increasingU.S. exports to China are increasing– US has benefited from China’s demand for raw US has benefited from China’s demand for raw
materialsmaterials– US Cotton exports to China increased over 500%!US Cotton exports to China increased over 500%!– US Soybean exports to China rose over 188%!US Soybean exports to China rose over 188%!
• US/China trade grew more than 30% in first US/China trade grew more than 30% in first half of 2004half of 2004
U.S.– China TradeU.S.– China Trade
19991999 20002000 20012001 20022002 20032003
U.S.U.S.
ImportsImports13.113.1 16.316.3 19.219.2 22.122.1 28.428.4
U.S.U.S.
ExportsExports87.887.8 107.6107.6 109.4109.4 133.5133.5 163.3163.3
TotalTotal 100.9100.9 123.9123.9 128.6128.6 155.6155.6 191.7191.7
* Figures in $ Billion
U.S. Balance: -74.7 -91.3 -90.2 -111.4 -134.9
U.S. BenefitsU.S. Benefits
• Firms ---Firms --- gain a large export market gain a large export market
• Consumers ---Consumers --- opportunity to purchase opportunity to purchase cheap imports from Chinacheap imports from China
China BenefitsChina Benefits
• Obtain raw materials to convert into Obtain raw materials to convert into products for exportproducts for export
• Obtain agricultural imports from U.S.Obtain agricultural imports from U.S.
U.S.– China TradeU.S.– China Trade