Introduction to China & India

Population, Wealth, Distribution and is it ‘and’ or

‘or’?

Population FactsNational Populations 2010

13301180

310

62

0

200

400

600

800

1000

1200

1400

China India USA UK

millions

Population Growth In 1979, concerned about population growth,

the Chinese Communist Party brought in a policy of ‘One child per family’; India has no equivalent

Broad population predictions:China India

20091,330m 1,175m 20301,465m 1,465m 20501,400m 1,593m

The China growth storyTotal GDP, in constant US $s 1978-2010

0500000

1000000150000020000002500000300000035000004000000450000050000005500000

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

$ms

ChinaIndiaBritain

Why is China growing so fast?

Huge investment levels (40%+ of GDP each yr for 20 yrs); Chinese investment in fixed assets is nearly 5 times higher than India’s

Spending on construction is nearly 8 times higher in China

Literacy level is much higher: 33% illiterate in India; 6% in China

… so the huge rural workforce can find jobs

What changed in China in 1990/91?

A freeing up of market access and the private sector; a major policy change to welcome FDI (foreign direct investment, e.g. Volkswagen and KFC)

Govt. policy change to hugely increased capital spending, especially infrastructure

… probably influenced by the political pressure for change after 1989 Tienanmen Square protests (brutally suppressed)

Inward Foreign Direct Investment (Source: Unctad)

0100002000030000400005000060000700008000090000

100000110000120000

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

$millions

ChinaIndia

Economy basics (2009/10 figs)

China India UKGDP per capita $3,735 $1,055 $35,000

GDP at PPP ($s) $6,700 $3,200 $34,200

Annual GDP growth 9-10% 7-8.5% 2-2.5%% of workforce onthe land 39.5% 52% 1.4%% in service sector 33.2% 34% 80.4%

China – world’s biggest car market

Annual automobile sales, by country

02468

101214161820

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

M. cars

ChinaIndiaUSA

Extraordinary growth potential% of h/holds

with a car

% of households with a bike

Number of households

Car sales 2010 (ms)

% change since 2009

China 4.1 73.3 385m 18.1 30%

India 2.9 51.1 218m 1.75 25%

USA 88.1 44.6 117m 11.6 9%

Brazil 35.6 12.8 54m 3.5 14%

  *Euromonitor 2010          

Can China Outstrip America?

US$ PPPtrillions

2009 2019 2029 2039

UK $2.12 $2.71 $3.47 $4.45India $3.68 $7.24 $14.24 $28.01America $14.12 $19.10 $25.67 $34.50China $8.82 $20.88 $49.43 $117.02Assumed growth: UK = 2.5%; US 3%; China 9%; India 7% (exc currency ch.)

Composition of China and India Economies 2009/10

0%10%20%30%40%50%60%70%80%90%

100%

India Pop India GDP China Pop China GDP

TertiarySecondaryPrimary

Secondary China, Tertiary India

The Chindia problem (western perception)

Both have huge populations Both are growing sustainedly rapidly Both have extraordinarily low wage rates Both have massive rural populations Both seem scary from a Western

viewpoint … for jobs and for security A two-horse carriage about to overtake

the west

But isn’t it China versus India?

Definitely that’s how India sees it … … and China is starting to look

beyond overtaking America China and India are hugely different

at the moment … … and it seems likely to stay that way While China dominates secondary,

India may come to dominate tertiary

From the UK perspective: The business opportunities must be

a core focus: Chinese middle classes ($8,000-$25,000

income) were close to zero in 1995, 87 million in 2005 and estimated at 320 million in 2015! (Source: American Express)

Indian middle classes amounted to 5 million in 1995, 50 million in 2005 and an estimated 200 million in 2015 (Source: The Economist)

World's biggest GDPs 2009 and 2050; source: PwC

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000

US

Japan

Germany

UK

Mexico

Nigeria

2009 GDP 2050 GDP

Different consumers

China, India and America

Distribution of Consumer Spending 2009**Source: Euromonitor 2011

0%10%20%30%40%50%60%70%80%90%

100%

USA China India UK

Other

Housing & Household

Health Goods

Education

Clothing

Food&drink

Leisure

Transport

Hotels and eating out

Actual $ spending in 3 categories 2009

0250500750

1,0001,2501,5001,7502,0002,2502,5002,7503,0003,2503,500

USA China India

$bill

ions

LeisureHealth GoodsFood&drink

Trends in Consumer Spending in China (1990-2009)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 2000 2009

OtherHousing & HouseholdHealth GoodsEducationClothingFood&drinkLeisureTransportHotels and eating out

Annual per capita spending on toilet paper 2009 (Source: Euromonitor 2011)

25.06

4.8

0.010

5

10

15

20

25

USA China India

US$s

Growth Potential in the East

Carbonated soft drinks - annual per capita 2009 (Source: Euromonitor 2011)

118.81

60.22

6.71.13

0102030405060708090

100110120

USA UK China India

US$

Grocery distribution channels 2009 (Euromonitor 2011)

0%10%20%30%40%50%60%70%80%90%

100%

USA China India

Others

Butchers,greengrocer etcSmall groceries

Supermarkets

Hypermarkets

Potential & Environment

Ease of Doing Business (2011)**World Bank: Doing Business, published November 2010

China India UKCompany formation

38 days 29 days 13 days

Cost to start up

4.5% of p.c.income

56.5% of p.c.income

0.7% of p.c.income

Minimum capital

118% of p.c.income

188% of p.c.income

0% of p.c. income

Closing a business

1.7 years 7 years 1 year

Recovery 36.4% 16.3% 88.6%

Supermarket Opportunities

UK China IndiaMarket share of Top 5 Grocers

82.6%* 13.4%** Under 1%

*No 1 retailer is Tesco with a 31% share; source Kantar Worldpanel, 12 weeks to Nov 2010

**No 1 retailer is Walmart with a 3.6% share; source Kantar Worldpanel 24 wks to September 10th 2010

No overseas company is allowed to invest in a ‘multi-brand retailer’, ie Zara or Marks & Spencer OK; Tesco NO.

At present, retailers such as Walmart, Tesco and Carrefour are opening Cash & Carry (wholesale) businesses in India; waiting for when the grocery market is liberalised/deregulated.

China Potential for UK Fashion

In 2009 Mulberry repositioned itself as a maker of young, luxury (£600) leather bags

In 2009 and 2010 it saw that many of its customers in London & Tokyo were from China … so it opened its first Beijing store

… and plans 20 more by 2015 … It has increased capacity by 30% at its

Somerset factory but looks to open another Burberry also there, but Primark? Topshop?

And the environment?Tonnes of CO2 Total CO2 per cap. p.a. M tonnes

India 1.25 1,400China 4.75 6,300UK 9.3 560US 20.0 6,000Russia 11.8 1,700World 4.5 30,000Source: Energy Information Administration 2009, see http://tonto.eia.doe.gov

Conclusions China is set fair for many more years of

sustained growth at 8-11%p.a. India will continue to grow rapidly, but

more cyclically; it needs to invest in education and transport – but perhaps can’t afford it

China is the horse to win the race – Britain has missed out so far, but growth in food and fashion sales provide bright prospects.

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