The China Compass - August 2012
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Transcript of The China Compass - August 2012
www.thebeijingaxis.com
The China Compass – August 2012
Figures, Forecast and Analysis
China-focused
International Advisory and Procurement
The Beijing Axis 1
Disclaimer
This document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of 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 contained here has been compiled from sources believed to be reliable. While every effort has been made to ensure that the information is correct and that the views are accurate, The Beijing Axis 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, and/or a connected company may have a position in any of the investments mentioned in this document. All concerned are advised to form their own
independent judgement with respect to any matter contained in this document.
The Beijing Axis 4 The Beijing Axis 4
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 5
Foreword
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. 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. 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.
At present, the developed world has been unable to escape from a self-induced sovereign debt crisis, which has fuelled speculation as to whether China’s economy is headed for a ‘soft’ or ‘hard’ landing. While China's GDP growth has subsequently slowed to 9.2% in 2011 and 7.8% y-o-y in H1 2012, fears of ‘hard’ landing seem overblown. Even growth of 7.6% in the second quarter fits with our core view that China’s annual growth rate for 2012 is still expected to be around 8%. As China attempts to rebalance its economy towards a more sustainable growth pattern that puts a greater emphasis on domestic consumption and shelter the economy from the global slowdown, we expect many cyclical and structural changes and volatility. However, we still do not foresee a hard landing.
In this August 2012 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 titled ‘What’s New: China Moves Towards Growth Moderation and Sustainability’. We trust that this edition will be useful for those that are in the midst of planning, and that it will shed light on past developments and future prospects of a uniquely Chinese story of human development.
As always, we welcome all feedback.
Kobus van der Wath
Founder & Group Managing Director, The Beijing Axis
The Beijing Axis 6
Snapshot of key economic indicators for the second quarter
Selected Q2 2012 Economic Indicators
*Note: CPI and PPI growth are based on H1 figures
Source: The Beijing Axis Analysis
Economic Indicator Y-o-Y Growth Q-o-Q Growth
GDP 7.6% 1.8%
Exports 10.5% 22.0%
Imports 6.4% 6.2%
Retail Sales 13.3% -0.8%
CPI* 3.3% N/A
PPI* -0.6% N/A
Monthly Loans 24.4% -2.6%
Urban Fixed Asset Investment 20.8% 114.9%
The Beijing Axis 7
With a GDP of USD 7.3 tn, China now accounts for more than one-tenth of the world economy
Source: IMF; UNCTAD Statistics; China Statistical Yearbook; The Beijing Axis Analysis
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
World GDP2011
World GDP2011
DevelopingCountries GDP
2011
China GDP2011
China GDP2011
China GDP2011
China GDP2011
China GDP2011
Brazil UK
Russia Canada
France
Others
Italy
Germany
Henan Zhejiang
Hebei Liaoning
Hunan
Sichuan Shanghai
Others
Developed
Countries
Japan
Southwest
China Tertiary
Industry
China
US China
China
South
China
Eastern
China
Secondary
Industry
Primary
Industry
USD 70 tn USD 70 tn USD 25 tn USD 7.3 tn USD 7.3 tn USD 7.3 tn USD 7.3 tn
Developing Asia
(excl. China)
Developing
Countries (excl.
China)
China
Northeast
China
USD 7.3 tn
North China
Northwest
China Other
Developing
Countries
Shandong
Jiangsu
Guangdong
Gross Capital
Formation
Final Consumption
Expenditure
(Household +
Government)
Net Exports
The Beijing Axis 8
20,337
19,634
25,807
4,280
4,486
2,259
0
5
10
0% 5% 10% 15% 20% 25% 30% 35% 40%
Asia-Pacific
North America
Europe
Emerging economies are outperforming the developed world in terms of economic growth. The Asia-Pacific region is expected to account for one-third of world GDP by 2015
Regional GDP Comparison (2015F)
South America Africa
Other Asia
A bubble this size represents
GDP = USD 1,000 bn
Developed economies
are expected to
continue to lose share
in world GDP in the
coming years
Asia-Pacific is expected to account
for the largest share of world GDP
(34%) by 2015F
2011 to 2015F
GDP Average Growth Rate (%, 2011-2015F)
Forecast
world average
GDP growth
until 2015F:
3.95%
% of World GDP (2015F)
Shaded bubbles represent 2011E
figures Rising real incomes and
high commodity prices will
continue to drive growth
BRICS 2015F GDP(USD bn) 2011 Growth Rate (%) 2011 GDP Per Capita (USD)
China 10,904 9.2% 5,414
India 2,359 7.4% 1,389
Russia 1,926 4.1% 12,993
Brazil 2,547 2.9% 12,789
South Africa 426 3.1% 8,066 2011 to 2015F
Note: Other Asia includes Bangladesh, Sri Lanka, Nepal, Pakistan, Bhutan, Burma, North Korea, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan.
Source: IMF; The Beijing Axis Analysis
The Beijing Axis 9 Note: The regional breakdown accords to UNCTAD. Regional breakdown numbers will not add to the total due to overlap
Source: IMF; The Beijing Axis Analysis
As Asia’s largest and fastest-growing economy, China plays a crucial role in the region’s ongoing transformation
GDP Comparison of Asia-Pacific Economies (USD bn, 2011)
1,488
7,298
243
1,676 846
1,116
279
162
213
260 467
346
123
0
5
10
15
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
Taiwan
India
Australia
S. Korea
New Zealand
China
Japan
Singapore
Indonesia
Thailand
Malaysia Hong Kong
GDP Per Capita (2011)
Though large, Japan is a
slow growing economy
World average
GDP growth for
2011: 3.9%
China is the largest and
fastest growing economy
in the region
SE economies are
collectively the third-
largest in the region
GDP Growth Rate (%, 2011)
Philippines
Vietnam
A bubble this size represents
GDP = USD 1,000 bn
The Beijing Axis 10 The Beijing Axis 10
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 11
Backdrop
Source: The Beijing Axis Analysis
• With the on-set of the global financial crisis and a booming commodity market, developing regions in Asia, Africa and Latin America
continue to perform above the world average, while developed nations will remain a drag on global growth
• With regard to China, the country was able to remain buoyant during the global financial crisis in 2008-09 due to its large monetary
and fiscal stimulus
• But it came at a price – runaway bank lending, increased local government debt, an overheating property sector and mounting
bottlenecks and price pressures
• In late 2011, the Chinese government began taking measures to slow the domestic economy sufficiently, but not to over-tighten
policy and risk a destabilising hard landing. By early 2012, policy had tilted to become expansionary, especially in light of the weak
global backdrop
• With growth rates above 10% no longer an option, 2011 overall GDP growth stood at 9.2%. In Q1 2012, this had fallen to 8.1% and
to 7.6% in Q2 2012
• However, we anticipate a slight rebound in H2 2012 for a full year GDP growth rate of close to 8%
• Finally, China’s latest Five-Year Plan sets out a path in which the economy will be driven by domestic consumption, marking a large
shift from an export-driven model. This, along with a once-in-a-decade leadership transition set to begin in late-2012, means that
China is facing possibly its toughest policy challenge ‘ever’ in the next 5-10 years
The Beijing Axis 12
0%
5%
10%
15%
Q1 Q1 Q1 Q1
China’s Quarterly Y-o-Y GDP Growth Rate (%, 2009-2012F)
Source: CNBS; World Bank; IMF; The Beijing Axis Analysis
Contribution to China’s GDP (%, 1998-2012F)
China’s economy is heading for a soft landing, with the long-term trend leaning towards more moderate and more sustainable growth
-40
-20
0
20
40
60
80
100
120
140
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F
Net Exports of Goods and Services
Gross Capital Formation
Final Consumption Expenditure (Household + Government)
2009 2010 2011
3-year (2009-2011)
average: 9.4%
Government stimulus
package (USD 586 bn)
2011 y-o-y GDP:
9.2%
2012F
Falling net exports
contribution
2012F y-o-y GDP:
8.0%
Policy easing to
provide room for
growth moderation
Effect from stimulus
package
Gross capital formation remains
the largest contributor
The Beijing Axis 13
180
140
100
60
20
20
60
100
140
180
J F MAM J J A S ON D J F MAM J J A S ON D J F MAM J
Exports Imports
China’s Monthly Exports & Imports (USD bn, 2010-June 2012)
-40
-30
-20
-10
0
10
20
30
40
J FMAM J J A SOND J FMAM J J A SOND J FMAM J
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
China’s Monthly Trade Balance (USD bn, 2010-June 2012)
In 2011, China registered its smallest trade surplus since 2005 as import growth outpaced export growth. Weakened overseas demand is putting pressure on China to expedite its move away from an export-oriented growth model
2010 2011 2012 2010 2011 2012
The Beijing Axis 14
Chinese consumers have remained optimistic thus far in 2012, largely due to easing inflationary pressures as well as brighter income prospects
China’s Consumer Confidence Index (%, 2010-May 2012)
Note: In China, the consumer confidence index measures the level of optimism that consumers have about the performance of the economy.
Source: CEIC Data; Eastmoney; The Beijing Axis Analysis
104.7
104.2
107.9
106.6
108.0
108.9
107.8
107.3 104.4
103.8
102.9
100.4
99.9
99.6
107.6
106.6
105.8 108.1
105.6
105 103.4
100.5 97 100.5
103.9
105 100 103
104.2
80
85
90
95
100
105
110
115
120
Jan-
10
Feb
-10
Mar
-10
Apr
-10
May
-10
Jun-
10
Jul-1
0
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11
Jul-1
1
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb
-12
Mar
-12
Apr
-12
May
-12
Although consumer confidence
decreased, it was still among the
highest in the world
When CCI is over the 100 mark, it
indicates that consumers are optimistic
The Beijing Axis 15
0
400
800
1,200
1,600
2,000
2,400
2,800
3,200
79 83 87 91 95 99 03 07 11
China’s Annual Retail Sales (USD bn, 1979-2012F)
279
0
50
100
150
200
250
300
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: China Statistical Yearbook; China Monthly Economic Indicators; National Bureau Statistics of China; The Beijing Axis Analysis
China’s Monthly Retail Sales (USD bn, 2006-June 2012)
Increased domestic consumption remains in line with the 12th Five-Year Plan. The dramatic increase in retail sales over the past decade still falls short of China’s goal of making domestic consumption a key pillar of the economy
Seasonal peaks
due to Chinese
New Year holiday
Annual retail sales
reached USD 2,851
bn in 2011
The Beijing Axis 16
J F MAM J J A S ON D J F MAM J J A S ON D J F MAM J
95
100
105
110
115
120 Beijing ShanghaiGuangzhou TianjinChongqing Shenzhen
Sales Price of Residential Buildings in Selected Cities (%Y-o-Y, 2010-June 2012)
95
97
99
101
103
105
J FMAM J J A SOND J FMAM J J A SOND J FMAM J
Beijing ShanghaiGuangzhou TianjinChongqing Shenzhen
Source: National Bureau of Statistics of China; The Beijing Axis Analysis
Sales Price of Residential Buildings in Selected Cities (%M-o-M, 2010-June 2012)
Housing prices in China’s major cities have steadily fallen since Q2 2010. The latest readings indicate China’s residential housing market is bottoming out as policymakers move to ease purchase restrictions
2010 2011 2012 2010 2011 2012
The Beijing Axis 17
CPI fell to a two-and-a-half year low of 2.2% in June 2012. Policymakers now have more room to bolster economic growth amidst a global economic slowdown
Consumer Price Index (2010-June 2012)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
92
96
100
104
108
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
General Rural Urban
2010 2011 2012
104 is the designated inflation target
set by the Chinese government
China’s CPI averaged
105.4 in 2011
Room for
policy easing
The Beijing Axis 18
However, with inflation forecast to continue falling, there are now real concerns that deflation will emerge as a new problem. Food prices, which constitute roughly a third of CPI, is the main driver of slowing inflation
CPI Breakdown (2011-June 2012)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
95
100
105
110
115
120
J F M A M J J A S O N D J F M A M J
Food Tobacco, Liquor and Articles
Clothing Household Facilities, Articles and Services
Health Cares & Personal Articles Transportation & Communication
Recreation, Education, Culture Articles and Services Residence
2011 2012
A reduction in food prices has
been the main driver behind
slowing inflation
The Beijing Axis 19
China’s rapidly falling PPI indicates producer prices are easing not just because of declining commodity and other input prices, but also due to weak demand for Chinese goods in the global downturn
Producer Price Index (2010-June 2012)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
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 J F M A M J
2010 2011 2012
PPI for 2011
was 106.0
Depressed overseas
market demand and
sluggish domestic
manufacturing activity
The Beijing Axis 20
Falling producer prices have led to renewed calls from top policymakers to take more aggressive action to support growth. However, there is great emphasis on the need to ‘fine-tune’ such policies in order to prevent an overcorrection
PPI Breakdown by Industries (2011-June 2012)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
95
100
105
110
115
120
J F M A M J J A S O N D J F M A M J
Mining & Quarrying Industry Raw Materials Industry Manufacturing Industry
Food Clothing Articles for Daily Use
Durable Consumer Goods
2011 2012
The Beijing Axis 21
After bottoming out in late 2011, China’s manufacturing industry has remained in expansionary territory. However, weak readings in recent months has renewed calls for a more expansionary stance and a more liberal credit policy
China’s Purchasing Managers’ Index of the Manufacturing Industry (2010-June 2012)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
30
40
50
60
Jan-
10
Feb
-10
Mar
-10
Apr
-10
May
-10
Jun-
10
Jul-1
0
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11
Jul-1
1
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12
PMI 2 Month Moving Average (PMI)
A reading above 50 reflects expansion;
below 50 reflects contraction
The Beijing Axis 22
After bottoming out in January 2011, lending rates in China have steadily increased as the government moves to counter a slowing economy
Monthly Bank Loans (USD bn, 2010-June 2012)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
-80
-60
-40
-20
0
20
40
60
80
100
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
Monthly Loan Size Y-o-Y Growth Rate (rhs)
2010 2011 2012
USD bn % Fall in lending as demand
for credit eased in a
slowing economy
The Beijing Axis 23
After nearly two years of raising interest rates, the PBOC cut the cost of borrowing in June 2012, signaling the government’s commitment towards spurring growth
Benchmark Lending Rates (%, 1997-2012)
Source: China Statistical Yearbook; The Beijing Axis Analysis
4
6
8
10
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
20-O
ct-1
0
26-D
ec-1
0
9-F
eb-1
1
6-A
pr-1
1
7-Ju
l-11
7-Ju
n-12
5-Ju
l-12
Longer than 5 years 3 years to 5 years (including 5 years)
1 year to 3 years (including 3 years) 6 months to 1 year (including 1 year)
First loan interest rate
decrease in six years First loan interest rate
decrease since global
financial crisis
The Beijing Axis 24
0
5
10
15
20
21-M
ar-9
821
-Nov
-99
21-S
ep-0
325
-Apr
-04
5-Ju
l-06
15-A
ug-0
615
-Nov
-06
15-J
an-0
725
-Feb
-07
16-A
pr-0
715
-May
-07
5-Ju
n-07
15-A
ug-0
725
-Sep
-07
25-O
ct-0
726
-Nov
-07
25-D
ec-0
725
-Jan
-08
25-M
ar-0
825
-Apr
-08
20-M
ay-0
87-
Jun-
0825
-Jun
-08
15-S
ep-0
815
-Oct
-08
26-N
ov-0
813
-Jan
-10
25-F
eb-1
02-
May
-10
10-N
ov-1
019
-Nov
-10
10-D
ec-1
014
-Jan
-11
18-F
eb-1
118
-Mar
-11
17-A
pr-1
112
-May
-11
14-J
un-1
130
-Nov
-11
18-F
eb-1
212
-May
-12
Bank Deposit-Reserve Ratio (%, 1998-July 2012)
Note: PBOC- People’s Bank of China is China’s central bank. 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
The PBOC* has responded to a slowing economy by lowering the reserve requirement ratio. The cut in November 2011 signalled a policy shift from curbing inflation to boosting growth
Economic
overheating
Economic
slowdown
First cut in
two years Inflationary
pressures
The Beijing Axis 25
China's first deposit rate cut since the global financial crisis in June 2012 underpins the country’s economic growth concerns
Deposit Interest Rates (% p.a., 1998-July 2012)
Source: China Statistical Yearbook; The Beijing Axis Analysis
0
2
4
6
8
10
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
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
9-O
ct-0
8
30-O
ct-0
8
27-N
ov-0
8
23-D
ec-0
8
20-O
ct-1
0
26-D
ec-1
0
9-F
eb-1
1
6-A
pr-1
1
7-Ju
l-11
7-Ju
n-12
5-Ju
l-12
5 years 1 year 6 months 3 months
First cut since
global financial
crisis
Recent adjustments in 2012 to widen the range at
which banks can set deposit rates mark an
important step towards interest rate liberalisation
The Beijing Axis 26
The PBOC has set an M2 growth target of 14% for 2012 in order to prevent contraction in an economy as market liquidity remains tight
Money Supply (USD tn, 2010-June 2012)
Source: China Monthly Economic Indicators; People’s Bank of China; The Beijing Axis Analysis
0
2
4
6
8
10
12
14
16
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
M2 M1 M0
2010 2011 2012
The Beijing Axis 27
The NDRC* has quickened the appraisal of major infrastructure projects in response to a slowing economy. Thus far, it has rejected calls for a massive investment stimulus package similar to the 2008 stimulus program
Fixed Asset Investment (USD bn, 1997-2012F)
*Note: National Development and Reform Commission - China’s top economic planning agency
Source: China Statistical Yearbook; The Beijing Axis Analysis
-10%
0%
10%
20%
30%
40%
50%
0
1,000
2,000
3,000
4,000
5,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
Fixed Asset Investment Growth Rate
Global financial
crisis induced
stimulus
The Beijing Axis 28
Stressing quality and efficiency to keep local debt levels in check, the central government is promoting reasonable investment growth in urban infrastructure projects such as airports, railways and affordable housing
Monthly Urban Fixed Asset Investment (USD bn, 2010-June 2012)
Source: China Monthly Economic Indicators; National Bureau of Statistics of China; The Beijing Axis Analysis
0
100
200
300
400
500
600
700
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
Urban Fixed Asset Investment 2 Month Moving Average (PMI)
2010 2011 2012
Investments gaining strength
from favourable policies
The Beijing Axis 29
Looking ahead: short, medium and long term
Source: The Beijing Axis Analysis
• For 2012, we anticipate slower growth of around 8.0%. We view such a sub-9% slowdown as essential for the future
structural integrity and sustainability of China’s economic success
• For 2015, and beyond: As the picture for the global environment becomes clearer, China will continue to grapple
with the challenge of having to meet its pressing social and developmental objectives while growing at a rate of
GDP growth of ‘only’ around 8.0% through 2015, well below the 9.2%-14.2% GDP growth rate seen in the past five
years
• Despite these difficult challenges, China’s broad transformation is expected to continue and will present an
environment that is characterised by a long term and sustained shift towards a middle-income economy. This trend
appears firmly entrenched, representing a profoundly different new global landscape
• This will see a further increase in China’s share of global GDP, having risen from 6.5% of world output in 2006 to a
resource hungry 10.4% in 2011
• Looking ahead it looks inevitable that China will become a USD 10 tn economy, making up 15% of global output
within five years
The Beijing Axis 30
China faces a number of important risks on the domestic front. Similarly, the world faces a set of variables and risks as China’s rise unfolds
Source: IMF; The Beijing Axis Analysis
Low Risk High Risk
Long-term
Bubble size: Probability of occurrence Short-term External
Internal
• Local governments are
pushing for a rollback of
property market curbs to prop
up their economies
Domestic
government
finances (debt)
Property
bubble
Ageing population
and social safety
net Social
cohesion
Politics and power
transition
FX risk EU debt
crisis
Degrees of China
dependency
• Commodity producers are the
most exposed to a slowdown
in China
• Handover to the fifth
generation of leaders in
late 2012 is crucial as it
sets the tone for policy
and political reform during
the years ahead
• Social unrest - wealth gap
continues to widen,
potentially undermining
social stability
• RMB must be closely
watched as a more
volatile period could lie
ahead
• Shrinking labour pool unable
to shoulder social costs of
rapidly ageing population
• Worsening of euro zone debt
crisis threatening to further
dampen overseas demand for
Chinese goods
• Unclear whether banks or
local governments can
bear burden of NPLs if
economy were to slow
sharply
The Beijing Axis 31 The Beijing Axis 31
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 32
According to the latest forecasts from the IMF, China’s annual GDP growth rate will reach 8.0% in 2012, the lowest in a decade, due to ‘weak’ growth prospects for the global economy
China Nominal GDP Growth Rate (% y-o-y, 1978-2012F)
Source: World Bank; China Statistical Abstract; OECD; IMF; The Beijing Axis Analysis
7-10% GDP
growth band
Past periods of
overheating
Soft landing amid
global uncertainties
Overheating
concerns
7-8% GDP
growth band
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 10 11 12F
The Beijing Axis 33
0 250 500 750
GuangdongJiangsu
ShandongZhejiang
HenanHebei
LiaoningSichuan
HunanHubei
ShanghaiFujian
BeijingAnhui
Inner MongoliaHeilongjiang
ShaanxiGuangxi
JiangxiTianjinShanxi
JilinChongqing
YunnanXinjiangGuizhou
GansuHainanNingxiaQinghai
Tibet
GDP by Province (USD bn, 2011)
Note: Also includes the centrally-administered municipalities of Beijing, Tianjin, Chongqing and Shanghai
Source: China Statistical Yearbook; The Beijing Axis Analysis
Geographical Distribution of China’s GDP (2011)
China’s GDP is highly concentrated in five coastal provinces, which together account for 40% of the country’s total GDP. This figure however has dropped over the years as other provinces have increased output
1 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17
18 19 20 21 22 23 24 25 26 27 28 29 30 31
3
4
2
5
1
Henan
Zhejiang
Shandong
Guangdong
Jiangsu 31
30 29
28
27
Qinghai
Tibet
Gansu
Hainan
Ningxia
Top 5 provinces’
GDP equate to 40%
of total GDP
Top 5 Provinces by GDP
Bottom 5 Provinces by GDP Highlighted on map on right
The Beijing Axis 34 Note: Also includes the centrally-administered municipalities of Beijing, Tianjin, Chongqing and Shanghai
Source: China Statistical Yearbook; The Beijing Axis Analysis
With the exception of Tianjin, the coastal regions are no longer the fastest growing regions of China. The government has placed greater emphasis on developing the inner provinces including establishing special economic zones
0 10 20
TianjinChongqing
SichuanGuizhou
Inner MongoliaShaanxi
HubeiJilin
YunnanAnhui
QinghaiShanxiHunan
TibetJiangxiGansu
GuangxiHeilongjiang
FujianLiaoning
HainanNingxiaXinjiang
HenanHebei
JiangsuShandong
GuangdongZhejiang
ShanghaiBeijing
GDP Growth Rate by Province (USD bn, 2011) China’s Fastest and Slowest Growing Provinces (2011)
1 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17
18 19 20 21 22 23 24 25 26 27 28 29 30 31
3
4
5
1 Tianjin
Inner Mongolia
Guangdong
Sichuan
31
30
29
28
27 Shandong
Shanghai
Zhejiang
Beijing
Highlighted on map on right
2
Chongqing
Guizhou
Top 5 Provinces by GDP growth
Bottom 5 Provinces by GDP growth
The Beijing Axis 35
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000
TianjinShanghai
BeijingJiangsu
ZhejiangInner Mongolia
GuangdongLiaoning
FujianShandong
JilinTotal
ChongqingHubeiHebei
ShaanxiNingxia
HeilongjiangShanxi
XinjiangHunan
QinghaiHenanHainanJiangxi
SichuanGuangxi
AnhuiTibet
GansuYunnan
GDP Per Capita by Province (USD, 2011)
Note: Also includes the centrally-administered municipalities of Beijing, Tianjin, Chongqing and Shanghai
Source: Various; The Beijing Axis Analysis
The provinces with the highest per capita income are all located on the eastern coast. Tianjin, Shanghai and Beijing, three of the centrally-administered municipalities, lead the way with a per capita greater than USD 12,000
1 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
4
5
1 3
Shanghai 2
Zhejiang
Jiangsu
27
30
31
29 28
Beijing
Tianjin
Tibet
Gansu
Yunnan Guangxi
Anhui
Provinces With Highest and Lowest GDP Per Capita in China (2011)
Highlighted on
map on right
Top 5 Provinces by GDP per capita
Bottom 5 Provinces by GDP per capita
The Beijing Axis 36
-2
0
2
4
6
8
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
China’s secondary sector remains the largest contributor to the country’s GDP. However, the tertiary sector has grown steadily in recent years and its development remains a centerpiece of China’s 12th Five-Year Plan
Composition of GDP by Sector (1997-2012F)
Note: CAGR only includes the primary sector.
Source: China Statistical Yearbook; The Beijing Axis Analysis
Primary Sector
Secondary Sector
Tertiary Sector
Growth Rate of Primary Sector (rhs) USD bn %
The Beijing Axis 37
China’s Industrial Structure (2011)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Industrial Sector Construction Sector
Source: China Statistical Yearbook; The Beijing Axis Analysis
China’s secondary sector and larger economy is still sustained by industry, a remnant of past government policies focusing on industrialisation. The secondary sector now accounts for 47% of China’s output
Primary
10%
Secondary
47%
Tertiary
43%
Value-added Breakdown of Secondary Sector (USD bn, 1997-2011)
The Beijing Axis 38
China’s Industrial Structure (2011)
0
300
600
900
1,200
1,500
1,800
2,100
2,400
2,700
3,000
3,300
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Transport, Storage and Post
Wholesale and Retail Trades
Hostels and Catering Services
Financial Intermediation
Real Estate
Others
Note: 2011 breakdown of tertiary industry will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
Since China joined the WTO a decade ago, national economic restructuring has lead to rapid growth in the tertiary sector. However, the sector remains significantly smaller than other countries on a similar development scale
Primary
10%
Secondary
47%
Tertiary
43%
Value-added Breakdown of Tertiary Sector (USD bn, 1997-2011E)
The Beijing Axis 39
-4
-2
0
2
4
6
8
10
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Net Exports of Goods and Services Gross Capital Formation
Final Consumption Expenditure (household + gov)
Contribution to the Growth of GDP¹ (%, 1997-2011E²)
Note: (1) 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%
(2) 2011 GDP growth contribution will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
Gross capital formation and final consumption expenditures, which are both mainly driven by the government, substantially outpace net exports’ as the two key drivers of China’s GDP growth
The Beijing Axis 40
20
50
80
110
0 50 100 150 200 250 300 350 400
China’s gross capital formation remains concentrated in coastal provinces, while western provinces have far higher capital formation rates as a percent of GDP China’s Gross Capital Formation (2011E)
Note: Provincial breakdown of 2011 gross capital formation will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
Ningxia
Total Capital Formation (USD bn)
% of Provincial GDP
Shandong
Jiangsu Guangdong
Henan
Zhejiang
Liaoning
Hebei
Sichuan Hunan
Fujian
Guangxi Jilin
Tianjin
Yunnan
Shaanxi Shanxi
Beijing
Anhui
Heilongjiang
Jiangxi
Chongqing Xinjiang
Guizhou
Gansu
Hainan
Qinghai
A bubble this size represents 1% of total
Capital formation takes place mostly
in coastal provinces
Provinces in central and western China have
higher capital formation rates
Hubei
Inner Mongolia
Shanghai
Northern & Northeastern
Eastern
Central & Southern
Western & Southwestern
Tibet
The Beijing Axis 41
20
30
40
50
60
70
80
0 50 100 150 200 250 300 350 400
China’s final consumption is slightly more concentrated, with 33% of China’s total final consumption centered in just four coastal provinces led by Guangdong province
China’s Final Consumption (2011E)
Note: Provincial breakdown of 2011 final consumption will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
Total Final Consumption (USD bn)
33% of China’s total final
consumption is centered in just four
coastal provinces
% of Provincial GDP
Qinghai Guangdong
Jiangsu Shandong
Zhejiang
Henan
Shanghai
Hebei Liaoning
Sichuan
Beijing Hunan Hubei
Anhui
Fujian
Inner Mongolia
Tianjin
Shaanxi
Shanxi Jilin
Heilongjiang Guangxi
Yunnan
Jiangxi
Chongqing
Guizhou
Gansu
Tibet
Xinjiang
Hainan
Ningxia
A bubble this size represents 1% of total
Northern & Northeastern
Eastern
Central & Southern
Western & Southwestern
The Beijing Axis 42
China’s industrial value added growth has slowed since 2009 due to weak overseas demand. China’s manufacturing dominance has driven output by 18% from 2000 to 2011
Industrial Value Added Output (USD bn, 2000-2012F)
Source: CEIC Data; The Beijing Axis Analysis
0
15
30
45
0
1,000
2,000
3,000
4,000
00 01 02 03 04 05 06 07 08 09 10 11 12F
Industrial Value Added Output Growth Rate (rhs)
WTO accession on
11 December 2001
USD bn %
The Beijing Axis 43 The Beijing Axis 43
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 44
China’s booming retail sector mirrors consumers’ confidence in China’s economy. Urban areas still make up an overwhelmingly part of retail sales, despite a narrowing growth rate between urban and rural areas
China’s Annual Retail Sales and Growth Rate by Administrative Level (1978-2012F)
Note: (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
(2) Chinese Statistics Bureau has changed the structure of these figures since 2010. In the new category breakdown, urban includes both urban and suburban.
Source: China Statistical Yearbook; China Monthly Economic Indicators; The Beijing Axis Analysis
-10
0
10
20
30
40
0
500
1,000
1,500
2,000
2,500
3,000
3,500
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 10 1112F
Retail Sales (Urban) Retail Sales (Suburban) Retail Sales (Rural)Urban Growth (rhs) Suburban Growth (rhs) Rural Growth (rhs)
USD bn¹ %
The Beijing Axis 45
China’s Annual Retail Sales of Consumer Goods by Sub-sector (USD bn, 1978 vs. 2011)
87%
4% 9%
Wholesale and Retail Trade
Hotels and Catering Services
Others
2,532
320
Source: China Statistical Yearbook; China Monthly Economic Indicators; The Beijing Axis Analysis
While wholesale and retail trade continue to dominate retail sales, hotels and catering services have seen considerable growth, evidenced by the massive rise of five-star hotels in China’s first and second-tier cities
1978
Total: 120.3 bn
2011
Total: 2.9 tn
89%
11%
CAGR = 10%
The Beijing Axis 46
0 50 100 150 200 250 300 350
GuangdongShandong
JiangsuZhejiang
HenanHubei
LiaoningHebei
SichuanBeijing
ShanghaiHunanFujianAnhui
HeilongjiangJilin
Inner MongoliaShanxi
GuangxiShaanxiJiangxi
ChongqingTianjin
YunnanXinjiangGuizhou
GansuHainanNingxiaQinghai
Tibet
Total Retail Sales of Consumer Goods by Province (USD bn, 2011E)
Note: (1) Zhejiang is not among the top five provinces in terms of population
(2) Henan is not among the top five provinces in terms of income per capita
Source: China Statistical Yearbook; The Beijing Axis Analysis
The provinces with the highest population1, employment and income per capita2 generally have the highest retail sales. Further integrating urban and rural markets, especially in terms of logistics and supply, remains a key policy goal
1 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Guangdong
Jiangsu
Shandong
Zhejiang
1
5
4
3
2 27
28
29
30
31
Gansu
Hainan
Ningxia
Qinghai
Tibet Henan
Highlighted on
map on right
Top 5 Provinces by Retail Sales
Bottom 5 Provinces by Retail Sales
Provinces With Highest and Lowest Retail Sales (2011)
The Beijing Axis 47
-80%
-50%
-20%
10%
40%
0
500
1,000
1,500
2,000
97 98 99 00 01 02 03 04 05 06 07 08 09 10 1112F
Exports Exports' Growth Rate (rhs)
China’s Annual Exports (USD bn, 1997-2012F)
-20%
0%
20%
40%
0
50
100
150
200
J A J O J A J O J A
Exports Exports' Monthly Growth Rate (rhs)
Source: China Statistical Yearbook; China Monthly Economic Indicators; The Beijing Axis Analysis
China’s Monthly Exports (USD bn, 2010-June 2012)
Although export growth has trended downward in response to weakening external demand, May 2012 figures bounced back to an all-time monthly high
China’s entry into the WTO
2010 2011 2012
The Beijing Axis 48
Half of China’s total exports are destined for the US, Hong Kong, Japan, South Korea and Germany. However, growth of exports to the EU, US and especially Japan have been sluggish amidst weak external demand
China’s Top Export Destinations (USD bn, 2011)
Note: Hong Kong is admittedly used as a gateway to the rest of the world.
Source: UN Comtrade; The Beijing Axis Analysis
Total Exports = USD 1,898 bn
Top exported commodities
• Automatic data processing machines and parts
• Garments and clothing accessories
• Textile yarn, fabrics and make-up articles
India
2.7%
Hong Kong
14.1%
Japan
7.8%
Germany
4.0%
US
17.1%
South Korea
4.4%
Netherlands
3.1%
UK
2.3% Russia
2.1%
Singapore
1.9%
325
268
148
83
76
59
51
44
39
36
US
Hong Kong
Japan
South Korea
Germany
Netherlands
India
UK
Russia
Singapore
1
2
3
4 5
6 8
7
9
10
The Beijing Axis 49
Manufactured goods, which have enjoyed the highest CAGR (‘01-11) among all of China’s exported commodities, now make up almost half of China’s exports, up from 36% in 2001 Composition of China’s Exports (USD bn, 2001-2012F)
Note: Composition is according to the SITC Classification System.
Source: MOFCOM; The Beijing Axis Analysis
95 127 188 268 352 456
577 673 590 780
902 935
87 101 126
156 194
238
297 336
300
378
459 442
44 53 69
101
129
175
220
263
185
249
320 309
0
400
800
1,200
1,600
2,000
01 02 03 04 05 06 07 08 09 10 11 12F
Others
Mineral Items
Foodstuffs
Chemicals and Related Products
Products Classified by Material
Miscellaneous Manufactured Articles
Machinery and Equipment
CAGR
13.4%
14.4%
14.7%
24.0%
22.0%
18.1%
25.3%
21.7% Total
The Beijing Axis 50
-30%
0%
30%
60%
0
50
100
150
200
J A J O J A J O J A
Imports Imports' Monthly Growth Rate (rhs)
-40%
-20%
0%
20%
40%
0
500
1,000
1,500
2,000
97 98 99 00 01 02 03 04 05 06 07 08 09 10 1112F
Imports Imports' Growth Rate (rhs)
China’s Annual Imports (USD bn, 1997-2012F)
Source: China Statistical Yearbook; China Monthly Economic Indicators; The Beijing Axis Analysis
China’s Monthly Imports (USD bn, 2010-June 2012)
Monthly imports regained their pre-crisis growth levels reaching an all-time high of USD 162 bn in May 2012. This figure is set to increase as China targets a 10% increase in imports in 2012
China’s entry into the WTO
2010 2011 2012
The Beijing Axis 51
In 2011, Japan, South Korea, Taiwan, the US and Germany were China’s top suppliers, accounting for 40% of China’s total imports
Top Countries of Origin for China’s Imports (USD bn, 2011)
Source: UN Comtrade; The Beijing Axis Analysis
Top imported commodities
• Electrical machinery, equipment and parts
• Mineral fuels, mineral oils and products of their distillation
• Nuclear reactors, boilers, machinery and mechanical appliances
Total Imports = USD 1,743 bn
195
163
125
123
93
83
62
52
49
40
Japan
South Korea
Taiwan
US
Germany
Australia
Malaysia
Brazil
Saudi Arabia
Russia
Taiwan
7.2%
Japan
11.2%
Germany
5.3% US
7.1%
South Korea
9.3%
Australia
4.7%
Malaysia
3.6%
Russia
2.3%
Saudi Arabia
2.8% Brazil
3.0%
1
2
3
4
5
6
7
8
9
10
The Beijing Axis 52
As a manufacturing powerhouse, China relies on a variety of imported products especially machinery, chemicals and increasingly minerals to power its economy Composition of China’s Imports (USD bn, 2001-2012F)
Note: SITC Classification System; Crude material: inedible, except fuels
Source: MOFCOM; The Beijing Axis Analysis
107 137 193 253 290 357 413 442 408 550 630 601 48
64 89
105 169
124
211
285 274
55 70
83 118
167 141
189
276 336
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
Others
Foodstuffs
Miscellaneous Manufactured Articles
Products Classified by Material
Chemicals and Related Products
Mineral Items
Crude Materials
Machinery and Equipment
CAGR
36.6%
19.2%
23.8%
13.6%
18.9%
28.7%
32.2%
19.4%
21.8% Total
The Beijing Axis 53
41% of China’s total trade is with the US, Japan, Hong Kong, South Korea and Taiwan. The US, China’s largest trading partner, accounted for USD 448 bn in 2011 China’s Largest Trading Partners (USD bn, 2011)
Source: UN Comtrade; The Beijing Axis Analysis
China’s total trade with the world = USD 3,642 bn
Total exports = USD 1,898 bn
Total imports = USD 1,743 bn
Hong Kong
7.8%
Japan
9.4%
Germany
4.6% US
12.3%
South Korea
6.7%
448
343
284
246
169
160
117
90
84
79
US
Japan
Hong Kong
S. Korea
Germany
Taiwan
Australia
Malaysia
Brazil
Russia
Taiwan
4.4%
Australia
3.2%
Brazil
2.3%
Russia
2.2%
Malaysia
2.5%
1 2
3
4 5
6
7
8
9
10
The Beijing Axis 54
China has a large trade surplus with both Hong Kong and the US. Meanwhile, its trade deficit is largely centered in the Asia-Pacific economies of South Korea, Australia and Japan China’s Trade Balance with its Five Largest Surplus and Deficit Regions (USD bn, 2011)
Source: UN Comtrade; The Beijing Axis Analysis
US
Hong Kong
South Korea
Japan
UK
Australia
Netherlands
Saudi Arabia
Hong Kong
US
Netherlands
UK
India
Saudi Arabia
Japan
Australia
South Korea
Taiwan
252
202
51
30
27
-35
-46
-49
-80 -90
China’s world trade surplus = USD 155 bn India
Taiwan
The Beijing Axis 55
-60
-40
-20
0
20
40
60
80
-30
-20
-10
0
10
20
30
40
J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A
Trade balance Exports, % change y-o-y (rhs) Imports, % change y-o-y (rhs)
China’s foreign trade is becoming more balanced. Import growth has consistently outpaced export growth since H2 2009, narrowing China’s surplus with the rest of the world
China’s Monthly Trade Balance (2005-June 2012)
Source: China Customs; The Beijing Axis Analysis
2010 2011 2012 2007 2008 2009 2005 2006
% USD bn
The Beijing Axis 56
0%
2%
4%
6%
8%
10%
97 99 01 03 05 07 09 11
Source: China Statistical Yearbook; China Monthly Economic Indicators; National Bureau of Statistics of China; The Beijing Axis Analysis
Share of Net Exports in Quarterly GDP (%, 2007-Q2 2012)
Fixed asset investment and total consumption are now the primary drivers of GDP growth, evidenced by net exports’ declining share of GDP. Policymakers are now emphasising a need to increase imports as a means of boosting domestic consumption Share of Net Exports in Annual GDP (%, 1997-2012F)
-2%
0%
2%
4%
6%
8%
10%
Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
The Beijing Axis 57
90% of China’s total international trade value is concentrated in ten provinces, largely a result of their access to world class port facilities along the coast
China’s Total Trade Value by Province (2011)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
Percentage of China’s total trade value:
Top 70 %
Next 20 % Next 10 %
Imports: USD 1,743 bn
Exports: USD 1,898 bn
Total Trade: USD 3,642 bn
Shandong
Shaanxi Henan
Hunan
Fujian Taiwan
Guangdong 25.1%
Guangxi
Guizhou
Yunnan
Heilongjiang
Jilin
Liaoning
Hebei
Jiangsu 14.8%
Shanghai 12.0%
Anhui
Zhejiang 8.5% Jiangxi
Tibet
Hubei
Inner Mongolia
Ningxia
Sichuan
Qinghai
Xinjiang
Gansu
Shanxi
Tianjin
Chongqing
Beijing 10.7%
Hainan
The Beijing Axis 58 The Beijing Axis 58
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 59
In 2011, China’s total fixed asset investment stood at USD 4.8 tn. Concern over further economic slowdown has led the government to accelerate new project approvals in the power, water and railways industries
Total Investment in Urban and Rural Areas (USD bn, 1997-2012F)
Source: China Statistical Yearbook; The Beijing Axis Analysis
232 272 287 317 362 429 553 713 917 1,171
1,545
2,133
2,855
3,572
4,681 4,782
69 71 74 81 87 97 118
138 167
209
261
347
452
543
141 144
0
1,000
2,000
3,000
4,000
5,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
Rural Areas Urban Areas
The Beijing Axis 60
0 100 200 300 400 500
ShandongJiangsuHenan
LiaoningGuangdong
HebeiSichuanZhejiang
AnhuiHubei
HunanInner Mongolia
JiangxiFujian
ShaanxiJilin
GuangxiHeilongjiang
ChongqingTianjinShanxi
YunnanBeijing
ShanghaiXinjiang
GansuGuizhouNingxiaHainan
QinghaiTibet
Fixed Asset Investment by Province (USD bn, 2011E)
Note: 2011 provincial breakdown of fixed asset investment will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
China’s fixed asset investment (FAI) continues to be primarily focused on the more developed coastal provinces. The top five provinces account for 35% of the total FAI
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Top five provinces
account for 35% of
total FAI
1
3
4
2
5
Jiangsu Henan
Shandong Liaoning
Guangdong
Top 5 Provinces by Investment in Fixed Assets (2011E)
Highlighted on map on right
The Beijing Axis 61
China’s manufacturing and real estate sectors attract the most fixed asset investment due to the country’s ongoing industrialisation and urbanisation
Fixed Asset Investment by Sector (USD bn, 2003-2011E)
Note: 2011 sector breakdown of fixed asset investment will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
178 237 324 428 585 816 1,035 1,311 1,491
159 202 238 308
427 582
724
960 1,091
245
366
445
506
195
291
367
418
158
212
232
264
111
135
163
185
380
530
637
724
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2003 2004 2005 2006 2007 2008 2009 2010 2011E
Others
Mining
Utilities
Environmental Protection and Public Facilities
Transport, Storage and Post
Real Estate
Manufacturing
CAGR
24.5%
33.5%
25.3%
31.9%
28.7%
29.3%
33.1%
29.6% Total
The Beijing Axis 62
China’s low manufacturing costs and large potential market have been key in attracting FDI inflows. China is now opening up more sectors of the economy to foreign investment, which is expected to offset slowing FDI inflows
FDI Inflow (USD bn, 1997-2012F)
Note: FDI = foreign direct investment
Source: IMF; MOFCOM; The Beijing Axis Analysis
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
0
20
40
60
80
100
120
140
160
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
FDI Inflow FDI Growth (rhs)
The Beijing Axis 63
In 2011, 88% of China’s FDI came from just six regions led by Hong Kong. Hong Kong remains a crucial gateway for other countries’ FDI into China as well as FDI from Chinese firms headquartered in the SAR¹
China’s FDI Inflow by Source Region² (USD bn, 2011)
Note: (1) SAR stands for Special Administrative Region
(2) 2011 data on China’s FDI Inflow includes these countries’ investing through Virgin Is., Cayman Is., Samoa, Mauritius and Barbados.
Source: MOFCOM; The Beijing Axis Analysis
77
7
6
6
3
3
2
1
1
1
Hong Kong
Taiwan
Japan
Singapore
US
South Korea
UK
Germany
France
Netherlands
1
7
4
3
8
6
5 9
2
10
US 2.6%
Hong Kong 66.4%
Japan 5.5%
South Korea
2.2% Taiwan 5.8%
France 0.7% Netherlands 0.7%
UK 1.4%
Germany 1%
Singapore
5.5%
USD bn
China’s total FDI inflow for 2011 amounted to USD 116 bn
The Beijing Axis 64
0 5,000 10,000 15,000 20,000 25,000
JiangsuGuangdong
ShanghaiZhejiangLiaoning
FujianShandong
BeijingTianjin
SichuanJiangxiHubeiHebei
HenanChongqing
HunanAnhui
GuangxiHainan
Inner MongoliaShanxi
JilinHeilongjiang
ShaanxiYunnanGansu
XinjiangGuizhouNingxiaQinghai
Tibet
FDI Inflow by Province (USD mn, 2011E)
Note: 2011 provincial breakdown of FDI inflows will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
Although China’s coastal provinces attract the majority of FDI inflows, China’s new FDI guidelines are encouraging foreign companies to invest in less-developed central and western regions
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
4
3
2
1
5
Shanghai
Liaoning
Jiangsu
Guangdong
Zhejiang
Top 5 provinces
account for 62% of
total FDI inflows
Highlighted on
map on right
Top 5 Provinces by FDI Inflow (2011E)
The Beijing Axis 65
China’s manufacturing sector receives the bulk of China’s FDI inflow. New FDI guidelines encourage foreign companies to invest in China’s high-end manufacturing, high-tech and service sectors
China’s FDI Inflow by Sector (USD bn, 2003-2011E)
Note: 2011 sector breakdown of FDI inflows will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The Beijing Axis Analysis
37 43 42 40 41
50 47 50 54
5 6 5 8
17
19 17
24 26
3 3 4 4
4
5 6
7 8
1
6 1 2
3
4 5
7
7
1
1 1 2
2
3 3
2
2
6
2 6 7
8
12 13
16
18
0
20
40
60
80
100
120
2003 2004 2005 2006 2007 2008 2009 2010 2011E
Others
Transport, Storage and Post
Wholesale and Retail Trades
Leasing and Business Services
Real Estate
Manufacturing
CAGR
14.7%
14.2%
28.8%
12.3%
24.3%
4.3%
10.2% Total
The Beijing Axis 66
China’s OFDI flow is expecting to steadily grow, driven by Chinese companies’ increasing need to access new markets, technology and resources. In 2011, China’s OFDI hit USD 65 bn
China’s OFDI Flow (USD bn, 1997-2011E)
Note: Official 2011 OFDI data will be available when MOFCOM releases the 2011 Statistical Bulletin of China’s OFDI in September; SAFE stands for the State Administration of Foreign Exchange
Source: IMF; MOFCOM; The Beijing Axis Analysis
-50%
0%
50%
100%
150%
0
20
40
60
80
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E
OFDI Flow OFDI Growth Rate (From 2003, rhs)
In 2005, SAFE* eased restrictions
on overseas investments made by
Chinese companies
Chinese companies increased
acquisition of overseas
depressed assets
The Beijing Axis 67
While China’s OFDI extends to all continents, international financial centres and tax havens such as Hong Kong, the Cayman Islands and BVI receive the bulk of OFDI stock China’s OFDI Flow by Destination (2010)
Note: Official 2011 OFDI data will be available when MOFCOM releases the 2011 Statistical Bulletin of China’s OFDI in September
Source: MOFCOM; The Beijing Axis Analysis
38.5
6.1
3.5
1.7
1.3
1.1
1.1
0.7
0.6
0.4
Hong Kong
Virgin Is.
Cayman Is.
Australia
US
Canada
Singapore
Thailand
Russia
Germany
USD bn
HK 56% 1 3
Cayman Islands
5.1%
2
British Virgin Islands
8.9.%
5 US 1.9%
Australia 2.5%
4
7 Singapore 1.6%
Russia 0.8% 9
Thailand 1.0%
8
10
6
Canada 1.7%
China’s total cumulative outward FDI flow for 2010 amounted to USD 69 bn
Germany 0.6%
China’s outward
FDI flow in 2011
was USD 65 bn
The Beijing Axis 68
0 500 1,000 1,500 2,000 2,500
ZhejiangShandong
JiangsuGuangdong
ShanghaiHainan
LiaoningHunanBeijingHubei
GansuTianjin
YunnanSichuan
AnhuiShaanxi
ChongqingHebeiFujian
XinjiangHenanJiangxi
JilinHeilongjiang
ShanxiGuangxi
Inner MongoliaGuizhouNingxia
TibetQinghai
China’s OFDI by Province (USD mn, 2011E)
Note: OFDI figures include non-financial OFDI and exclude investments made by central enterprises.
Source: MOFCOM; The Beijing Axis Analysis
In 2010, over half of China’s non-financial OFDI came from just six provinces, all located on the eastern coast. Zhejiang province, one of the forerunners of China’s ‘going out’ policy, registered the highest OFDI
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
2
5
1
Guangdong
Zhejiang
Shandong
4
6
Hainan
Jiangsu 3
Shanghai
Top 6 provinces’
OFDI accounts for
53%
Highlighted on
map on right
China’s OFDI by Province (2011E)
The Beijing Axis 69
China’s outward investments in leasing and business services*, transport and manufacturing grew substantially in 2010
China’s OFDI Flow by Sector (USD bn, 2004-2011E)
*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
1 5 5 6
22 20 30 29
4 2
14 9
9 8
1 7
7
6
7 6
9 4
6 13
6 5
1 4
3 2 6
5
2
2 2
5 4
2
3 4
7 7
0
10
20
30
40
50
60
70
80
2004 2005 2006 2007 2008 2009 2010 2011E
Others
Manufacturing
Transport, Storage and Post
Mining
Wholesale and Retail Trades
Finance
Leasing and Business Services
CAGR
51.1%
34.1%
38.6%
21.2%
42.6%
25.3%
87.4%
52.4% Total
The Beijing Axis 70 The Beijing Axis 70
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 71
92
96
100
104
108
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 H112
Consumer Price Index, Annual (1997-H1 2012)
Note: Preceding year = 100
Source: China Statistical Yearbook; China Monthly Economic Indicators; The Beijing Axis Analysis
Provinces with Highest and Lowest CPI (Jan-May 2012)
By the end of 2010, stemming inflation was a key concern of policymakers in the aftermath of the global financial crisis. Consumer inflation has since steadily fallen from its mid-2011 peak
Commodity and food
price pressures
Overheating and
overinvestment
Deflation and
overcapacity
Doubling of M2
money supply
4
Xinjiang
104.3
Qinghai
101.6
29
Hunan
102.9
5
31
Inner Mongolia
104.2
1
Guangxi
103.0
27
2
28
Chongqing
103.9
5 Hainan
103.9
Yunnan
104.3
Tibet
104.5
2
5
Sichuan
103.1
Ningxia
102.1
30
Shaanxi
103.9
Provinces with Lowest CPI
Provinces with Highest CPI
The Beijing Axis 72
92
96
100
104
108
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 H112
Producer Price Index, Annual (1997-H1 2012)
Note: Preceding year = 100
Source: China Statistical Yearbook; China Monthly Economic Indicators; Various; The Beijing Axis Analysis
Provinces with Highest and Lowest PPI (Jan-May 2012)
China’s PPI has seen fluctuations similar to the CPI, as depressed overseas market demand and sluggish domestic manufacturing activity have lowered PPI in 2012
4
31
4
28
3
Shaanxi
102.8
1
Heilongjiang
103.5
2 Guizhou
103.3
Inner Mongolia
103.0
Tianjin
96.4
29
Qinghai
98.0
30
Hebei
97.4 Jiangsu
97.8
Hainan
102.8 Provinces with Lowest PPI
Provinces with Highest PPI
27 Zhejiang
98.3
The Beijing Axis 73
0
5,000
10,000
15,000
20,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
Loans Deposits
Chinese bank deposits continue to rise faster than bank lending due to the fixed interest rate spread mandated by the PBOC. Total deposits reached USD 12.8 tn by the end of 2011, while loans amounted to USD 9 tn
Total Loans and Deposits (USD bn, 1997-2012F)
Source: China Statistical Yearbook; The Beijing Axis Analysis
The Beijing Axis 74
12,818
5,413
4,363
1,181 454 308 115
983 0%
20%
40%
60%
80%
100%
Tot
al D
epos
its
Hou
seho
lds
Bus
ines
ses
Gov
ernm
ent
Fis
cal D
epos
its
Agr
icul
tura
l
Tru
sts
Oth
er
Sources of Deposits (USD bn, 2011E)
1,252 1,444 1,722 2,027 2,269 3,136
3,824 4,487
5,413
876 1,023 1,174
1,420 1,824
2,269
3,183
3,617
4,363
0
2,000
4,000
6,000
8,000
10,000
12,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
E
Other Deposits
Trust Deposits
Agricultural Deposits
Fiscal Deposits
Deposits of Government Departments & Organisations
Company Deposits
Household Savings Deposits
Note: 2011 breakdown of bank deposits will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The People’s Bank of China; The Beijing Axis Analysis
Sources of Deposits (USD bn, 2003-2011E)
China’s high savings rate remains Chinese banks’ main source of funds. In 2011, household banking deposits accounted for 42% of total deposits, while company deposits accounted for 34%
42%
34%
The Beijing Axis 75
767 927 995 1,339 1,731 2,233
3,261 4,274
5,440
1,012 1,050 1,069 1,238
1,506
1,804
2,150
2,459
3,130
0
2,000
4,000
6,000
8,000
10,000
2003 2004 2005 2006 2007 2008 2009 2010 2011E
Medium & Long-term Loans Short-term Loans
Trust Loans Other Loans
9,022 5,440
3,130
116 336
0%
20%
40%
60%
80%
100%
TotalLoans
Medium &Long-term
Loans
Short-termLoans
TrustLoans
OtherLoans
Composition of New Loans (USD bn, 2011E)
Note: 2011 breakdown of bank loans will be available when the 2012 China Statistical Yearbook is released in September
Source: China Statistical Yearbook; The People’s Bank of China; The Beijing Axis Analysis
Composition of New Loans (USD bn, 2003-2011E)
In 2011, medium and long-term loans, a key measure of appetite for investment, made up 60% of total loans, up from 51% in 2008. However, recent bank’s reticence to lend may result in a slower pick up in domestic investment
60%
35%
The Beijing Axis 76
646 715 780 837 834 842 860 864 864 894 931
514 509 507 540 547 592 690 740 830
1,169 1,411
0
400
800
1,200
1,600
2,000
2,400
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Number of companies listed on the Shenzhen Stock Exchange
Number of companies listed on the Shanghai Stock Exchange
Nonetheless, the Shanghai and Shenzhen Stock Exchanges are the world’s sixth and seventh largest stock markets by market capitalisation respectively
Number of Listed Companies and Total Market Value of China’s Stock Exchanges (2001-2011)
Source: World Federation of Stock Exchanges; China Statistical Yearbook; China Monthly Economic Indicators; World Federation of Exchanges; The Beijing Axis Analysis
526 463 513 448 396 1,122 4,302 1,747 3,655 3,926 3,330 Total Market Value
(USD bn)
2007 stock
market bubble
The Beijing Axis 77
Shenzhen Stock Exchange Trading Volume and Composite Index (2001-2011)
Source: China Monthly Economic Indicators; Shanghai Stock Exchange; Shenzhen Stock Exchange; www.sina.com.cn; The Beijing Axis Analysis
Shanghai Stock Exchange Trading Volume and Composite Index (2001-2011)
After recovering from the global financial crisis in 2009, China’s stock markets have since declined as both domestic and overseas investors have become weary of lax corporate governance and dampened profit outlook
0
5,000
10,000
15,000
20,000
0
500
1,000
1,500
2,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
0
2,000
4,000
6,000
0
2,000
4,000
6,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Volume (lhs) SH Composite Index(rhs)
bn shares
Average
P/E Ratio 37.7 34.4 36.5 24.2 16.3 33.3 59.2 14.9 28.73 21.61 13.4
Total
Turnover
USD bn 274 205 252 320 235 725 4,017 2,597 6,469 5,893 3,682
Average
P/E Ratio 39.8 37.0 36.2 24.6 16.4 32.7 69.7 16.7 46.01 44.69 23.11
Total
Turnover
USD bn 188 133 136 192 152 410 2,040 1,248 2,909 3,360 2,095
bn shares
Volume (lhs)
SZSE Component Index (rhs)
The Beijing Axis 78
0
500
1,000
1,500
2,000
2,500
3,000
3,500
J A J O J A J O J A
0
500
1,000
1,500
2,000
2,500
3,000
3,500Market Value of Tradable SharesIndex (rhs)
Shanghai Stock Exchange Composite Index (2010-June 2012)
0
3,000
6,000
9,000
12,000
15,000
0
200
400
600
800
1,000
J A J O J A J O J A
Market Value of Tradable SharesIndex (rhs)
Source: China Monthly Economic Indicators; The Beijing Axis Analysis
Shenzhen Stock Exchange Component Index (2010-June 2012)
While China’s stock exchange indices remain highly volatile, the overall downward trend since the beginning of 2011 mirrors Chinese companies’ weaker domestic growth prospects
USD bn USD bn
2010 2011 2012 2010 2011 2012
The Beijing Axis 79
-10%
0%
10%
20%
30%
40%
50%
60%
70%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
Foreign Exchange Reserves Growth Rate
Foreign Exchange Reserves (USD bn, 1997-2012F)
Note: FX stands for foreign exchange
Source: China Statistical Yearbook; China Monthly Economic Indicators; The Beijing Axis Analysis
China holds the largest FX reserves in the world, although the pace of accumulation has slowed since 2008. In 2011, China’s foreign reserves reached USD 3.2 tn, fueled in part by a solid trade surplus and FDI inflows
Slowest growth since 2001, caused
by slowing of ‘hot money’ inflows
The Beijing Axis 80
China’s FX reserves reached an all-time high of USD 3.3 tn in February 2012. However, reserves are expected to peak in the mid-term as the country transforms itself from a major exporter of goods into a major exporter of capital
Foreign Exchange Reserves (USD bn, 2010-June 2012)
Source: China Monthly Economic Indicators; People’s Bank of China; The Beijing Axis Analysis
2010 2011 2012
USD bn %
0
5
10
15
20
25
30
35
0
500
1,000
1,500
2,000
2,500
3,000
3,500
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 J
Foreign Exchange Reserves Y-o-Y Growth Rate (rhs)
China’s foreign exchange reserves
experienced its first quarterly drop in
more than a decade in Q4-2011
The Beijing Axis 81
According to various estimates, the renminbi remains undervalued, relative to other currencies, by some 5 to 20 percent¹
Annual RMB Exchange Rate² (2001-H1 2012)
Note: (1) There are varying perceptions on the degree of undervaluation; however, most international and domestic observers agree the currency is undervalued
(2) index 2001 = 100
Source: PBOC; Various; The Beijing Axis Analysis
60
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 H1 2012
EUR AUD ZAR USD RUB JPY KRW
AUD
EUR
USD
ZAR KRW JPY
RUB Renminbi appreciating against world’s
major currencies thus far in 2012
The Beijing Axis 82
Since China resumed the floating exchange rate mechanism in June 2010, the RMB has appreciated by around 12% in real terms against the US dollar
RMB to USD Exchange Rate (100, 2010-June 2012)
Source: China Monthly Economic Indicators; US Treasury Department; The Beijing Axis Analysis
620
630
640
650
660
670
680
690
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
2010 2011 2012
In June 2010, China announced
that it will target the RMB against
a basket of currencies rather
than solely on the USD
In April 2012, China announced that
it will widen RMB’s daily trade limit
against the USD from 0.5% to 1%
The Beijing Axis 83 The Beijing Axis 83
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 84
China has the world’s largest population at 1.347 bn people, although its population growth rate has slowed to below 0.6%
China’s Population Indicators (mn, 1978-2011)
Source: IMF; CNBS; The Beijing Axis Analysis
0.0%
0.6%
1.2%
1.8%
0
500
1,000
1,500
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 10 11
Population Population Growth Rate
The Beijing Axis 85
China’s Annual Births (mn, 1980-2011)
Source: CNBS; The Beijing Axis Analysis
0%
6%
12%
18%
0
10
20
30
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 10 11
Birth Rate Natural Growth Rate
Children born during the boom of the mid-
1980’s are entering childbearing age
China has around 12 million births per year. Although Chinese born during the boom in the mid-1980s are now reaching childbearing age, China’s birth rate has declined significantly rising costs of living are discouraging young families from having more than one child
Rising costs of living are discouraging
young urban families from having
more than one child
The Beijing Axis 86
Faced with declining birth and death rates, China’s population is now rapidly ageing. Demographers are calling on China to amend its One Child Policy to prevent China from ‘growing old before getting rich’
Breakdown of China’s Population by Age (mn, 1998 vs 2011)
Source: CNBS; The Beijing Axis Analysis
26%
68%
7%
0-14 15-64 65 and over
17%
74%
9%
1998 (Total Population - 1.2 bn) 2011 (Total Population - 1.3 bn)
123 222 84
843
321
1,002
The Beijing Axis 87
China Provincial Population Breakdown by Urban and Rural Residences (mn, 2010)
Note: Urban and rural population data for some provinces are not available
Source: Chinese Census 2010; China Statistical Yearbook; The Beijing Axis Analysis
China’s most populous provinces are located in Eastern China while the least populous provinces are generally in Western China
0 20 40 60 80 100
Guangdong Shandong
Henan Sichuan Jiangsu
Hebei Hunan Anhui Hubei
Zhejiang Guangxi Yunnan Jiangxi
Liaoning Heilongjiang
Shaanxi Fujian
Shanxi Guizhou
Chongqing Jilin
Gansu Inner Mongolia
Shanghai Xinjiang
Beijing Tianjin Hainan Ningxia Qinghai
Tibet
Urban Population
Rural Population
Total Population
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
2
4
3 5
1
Henan
Hainan
Shandong
Guangdong
Jiangsu Sichuan
31
Tibet
30
Qinghai 29
Ningxia
28
27 Tianjin
Top 5
Bottom 5
Highlighted on
map on right
Most and Least Populated Provinces (2010)
Higher wages in more developed
areas attract migrant workers from
surrounding provinces
The Beijing Axis 88
Primary industry, 266
35%
Secondary industry, 225
30%
Tertiary industry, 273
36%
In 2011, employment in China’s tertiary industry overtook the primary industry for the first time. As China’s economy continues to develop, the tertiary industry will play an even more important role
Total Employed Persons by Sector (mn, 1978-2011)
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
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 10
Primary industry
Secondary industry
Tertiary industry
Although the primary sector makes
the least contribution to GDP, it
employs a large number of people
The Beijing Axis 89
Although the income levels of urban households are three-times that of rural households, this disparity is slowly narrowing. Rural income growth now outpaces urban income growth Annual Income of Urban and Rural Households Per Capita (USD, 1997-2011)
Note: (1) Annual disposable income of urban households and net income of rural households per capita
(2) Growth rates are calculated at current prices
Source: National Statistics Database; The Beijing Axis Analysis
622 655 707 759 829
931 1,024
1,138 1,281
1,475 1,813
2,271
2,518
2,826
3,381
252 261 267 272 286 299 317 355 397 450 545 672 755 875
1,081
0%
5%
10%
15%
20%
25%
30%
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 2010 2011
Urban Rural Urban Growth Rural Growth
The Beijing Axis 90
3,000 1,000 1,000 3,000 5,000 7,000
ShanghaiBeijing
ZhejiangTianjin
GuangdongJiangsu
FujianShandong
LiaoningInner Mongolia
ChongqingGuangxi
HunanAnhui
YunnanHubei
HainanHebei
ShaanxiHenanShanxi
SichuanJilin
NingxiaJiangxi
GuizhouTibet
HeilongjiangQinghaiXinjiang
Gansu
Urban
Rural
1 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Beijing and Shanghai, China’s political and cultural capitals, continue to lead the country in terms of wealth accumulation. Overall, income levels are skewed towards the more developed eastern coastal provinces
Income of Urban and Rural Households Per Capita by Province (USD, 2011)
Source: China Statistical Yearbook; The Beijing Axis Analysis
Zhejiang
Guangdong
Tianjin
Beijing
5
1
4
3
2
28 30
29
31
27
Gansu
Qinghai
Xinjiang
Top 5
Bottom 5
Highlighted on
map on right
Provinces with Highest and Lowest Urban Household Incomes (2011)
Shanghai Tibet
Heilongjiang
The Beijing Axis 91
While the downward trend of Engel’s coefficient¹ reflects a progressively higher standard of living, temporary increases in 2007, 2008 and 2011 underscore concerns over food price spikes China’s Urban and Rural Engel’s Coefficients (%, 1978-2011)
Note: 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
25
35
45
55
65
75
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Urban Areas Rural Areas
40.4
36.3
57.5
67.7
Temporary increases from high
levels of food inflation
Failed price reforms fueled
inflation, especially in urban
areas
The Beijing Axis 92
Income inequality in China is growing, as measured by the Gini Coefficient. Growing income equality, if left unchecked, can undermine social stability and future economic growth China’s Gini Coefficient (1978-2011)
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
0.30
0.51
0.00
0.10
0.20
0.30
0.40
0.50
0.60
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 10 11
China crossed the 0.40
recognised warning
level in 2000
0.50 signals
severe inequality
The Beijing Axis 93
China’s urban population outnumbered its rural population for the first time in 2011, marking an important milestone in China’s ongoing social and economic development
China’s Urbanisation Rate (%, 1978-2011)
Source: China Statistical Yearbook; Annual Report on Urban Development of China;The Beijing Axis Analysis
0
10
20
30
40
50
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 10 11
China’s urbanisation rate
exceeded 50% for the first time
The Beijing Axis 94 The Beijing Axis 94
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 95
Though affected by the global recession, China’s economy has shown greater resiliency than other major economies
GDP Growth Comparison (%, 2001-2012F)
Source: World Bank; IMF; The Beijing Axis Analysis
-10
-5
0
5
10
15
20
01 02 03 04 05 06 07 08 09 10 11 12F
Australia Brazil China India Japan Russia South Africa US EU
Over the past decade,
China’s growth has outpaced
those of large nations
China still experienced strong
economic growth despite the
global recession in 2009
The Beijing Axis 96
15.1
7.3
5.9
3.6 2.8 2.5 2.4 2.2 1.9 1.7 1.7 1.5 1.5 1.2 1.1 0.8 0.8 0.8 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4
0
2
4
6
8
10
US
A
Chi
na
Japa
n
Ger
man
y
Fra
nce
Bra
zil
UK
Italy
Rus
sia
Can
ada
Indi
a
Spa
in
Aus
tral
ia
Mex
ico
Kor
ea
Indo
nesi
a
Net
herla
nds
Tur
key
Sw
itzer
land
Sau
di A
rabi
a
Sw
eden
Pol
and
Bel
gium
Nor
way
Iran
Tai
wan
Arg
entin
a
Aus
tria
Sou
th A
fric
a
UA
E
% of World GDP
After growing 9.2% in 2011,
China’s GDP reached USD 7.3 tn
In 2011, China strengthened its position as the world’s second-largest economy, with GDP growing by 10.5% to reach USD 7.3 tn
GDP of Top 30 Economies (USD tn, 2011)
The US is the world’s largest
economy, reaching USD 15.1 tn in
2011
World GDP in 2011 totaled
roughly USD 70 tn
Source: IMF; The Beijing Axis Analysis
21.7 10.5 8.4 5.1 4.0 3.6 3.5 3.2 2.7 2.5 2.4 2.1 2.1 1.7 1.6 1.2 1.2 1.1 0.9 0.8 0.8 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.5
The Beijing Axis 97
Although China’s economy growth slowed to 9.2% in 2011, its growth still outpaced the rest of Asia and other major economies
Annual GDP Growth for Asia and Major Economies (% y-o-y, 2011)
Source: IMF; The Beijing Axis Analysis
9.2
7.2 6.5
5.9 5.1 5.0 4.9
4.0 3.7 3.6
1.7 1.6
0.7 0.1
-0.7 -2
0
2
4
6
8
10
Chi
na
Indi
a
Indo
nesi
a
Vie
tnam
Mal
aysi
a
Hon
g K
ong
Sin
gapo
re
Tai
wan
Phi
lippi
nes
Sou
th K
orea US
Eur
o A
rea
UK
Tha
iland
Japa
n
The Beijing Axis 98
Asian economies, led by China’s 8.1% y-o-y first quarter growth rate, have outpaced the world economy thus far in 2012
GDP Growth for Asia and Major Economies (% y-o-y, Q1-2012)
Source: China Statistical Yearbook; tradingeconomics.com; The Beijing Axis Analysis
8.1 6.4 6.3
5.3 4.9
4.7 4.3
4 2.8 2.7
2 1.6
0.8 0.4 0.4 0.3
0 -0.1
-2.2 -6.5
-10 -8 -6 -4 -2 0 2 4 6 8 10
ChinaPhilippinesIndonesia
IndiaRussia
MalaysiaAustraliaVietnam
South KoreaJapan
USSingapore
BrazilHong Kong
TaiwanThailand
UKEuro Area
PortugalGreece
The Beijing Axis 99
China’s provincial GDP figures are comparable to those of national economies in Europe, Asia, Africa and Latin America
China GDP by Province Compared with Similar World Economies (USD bn, 2011)
817 744
698 493
419 376
341 326
304 304 298
271 248
234 217
194 192
182 180 174 171
161 155
136 102
87 78
39 32 25
9
840 778
636 484
419 408
346 328 316 303
279 267
248 236
218 211
191 190 178 174 174 162
140 123
101 96
72 39 31 29
9
900 600 300 0 300 600 900
GuangdongJiangsuShandongZhejiangHenanHebeiLiaoningSichuanHunanHubeiShanghaiFujianBeijingAnhuiInner MongoliaHeilongjiangShaanxiGuangxiJiangxiTianjinShanxiJilinChongqingYunnanXinjiangGuizhouGansuHainanNingxiaQinghaiTibet
Netherlands Turkey Switzerland Norway Austria South Africa Thailand Colombia Venezuela Greece Malaysia Finland Chile Egypt Ireland Pakistan Algeria Romania Kazakhstan Qatar Peru New Zealand Hungary Vietnam Angola Slovak Oman Lebanon Ethiopia Jordan Chad
Source: China Statistical Yearbook; IMF; The Beijing Axis Analysis
The Beijing Axis 100
Since 1980, China’s annual GDP growth rate has always exceeded the world average. China’s average growth rate of 9.7% during this period outpaces the US growth rate of 2.7%
China vs. US, Annual GDP Growth (% y-o-y, 1980-2012F)
Source: IMF; The Beijing Axis Analysis
-4
0
4
8
12
16
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12F
China US World Average
The Beijing Axis 101
China’s sustained rapid economic growth over the past three decades has enabled it to surpass many other developed economies
GDP of Top Economies, excl. US (USD bn, 1990-2015F)
Note: Forecast GDP growth based on IMF Economic Outlook
Source: IMF; The Beijing Axis Analysis
China Rank 10 10 9 7 9 8 7 7 7 7 6 6 6 6 6 5 4 3 3 3 2 2 2 2 2 …1?
0
2,000
4,000
6,000
8,000
10,000
12,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F 13F 14F 15F
China
Japan
Germany
France
Brazil
UK
Russia
India
Indonesia
South Africa
2005: China
Surpassed
France
2007: China
surpassed
Germany
2006: China
surpassed UK
2010: China
surpassed
Japan
2000: China
surpassed
Italy
1996: China
surpassed
Brazil
1995: China
surpassed
Canada
2011
2
3
4
5
6
7
9
11
16
29
2015F
2
3
4
5
6
7
8
9
16
28
Rank
At current growth
rates, China is likely
to overtake the US
around 2025
The Beijing Axis 102
Despite the size of its economy, China’s GDP per capita remains low compared to other developed and developing countries. In 2011, China’s GDP per capita reached USD 5,414
Nominal GDP Per Capita (USD, 2011)
Source: IMF; National Bureau of Statistics of China; The Beijing Axis Analysis
USD 25,000 or more
USD 10,000-USD 25,000
USD 2,500-USD 10,000
Less than USD 2,500 or no data
The Beijing Axis 103
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
01 02 03 04 05 06 07 08 09 10 11
Australia Brazil China
India Japan Russia
South Africa US EU
GDP Per Capita Comparison of Selected Economies (USD, 2001-2011)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
01 02 03 04 05 06 07 08 09 10 11
Brazil China India
Russia South Africa
Source: IMF; World Bank; The Beijing Axis Analysis
On a per capita basis, China still has a long ways to go before it catches up with developed economies
In 2011, China’s
GDP per capita
reached USD 5,414
The Beijing Axis 104
0%
20%
40%
60%
80%
100%
US
Chi
na
Japa
n
Ger
man
y
Fra
nce
UK
Bra
zil
Italy
Rus
sia
Can
ada
Indi
a
Aus
tral
ia
Spa
in
Mex
ico
Sou
th K
orea
Indo
nesi
a
Tur
key
Net
herla
nds
Sau
di A
rabi
a
Sw
itzer
land
Sw
eden
Pol
and
Nor
way
Bel
gium Iran
Tai
wan
Arg
entin
a
Sou
th A
fric
a
Aus
tria
UA
E
Agriculture Industry Services
Unlike other large economies, China’s economy is still dominated by its secondary industry
Share of GDP by Industry (%, 2011)
Note: 2011 figures are estimates
Source: CIA World Factbook; UNCTAD; The Beijing Axis Analysis
GDP Rank 2011
Advancing the services
industry is an integral part of
the current 12th Five-Year Plan
The Beijing Axis 105
-20
0
20
40
60
80
100
120
US
A
Chi
na
Japa
n
Ger
man
y
Fra
nce
UK
Bra
zil
Italy
Rus
sia
Can
ada
Indi
a
Aus
tral
ia
Spa
in
Mex
ico
Kor
ea
Indo
nesi
a
Tur
key
Net
herla
nds
Sau
di A
rabi
a
Sw
itzer
land
Sw
eden
Pol
and
Nor
way
Bel
gium Iran
Tai
wan
Arg
entin
a
Sou
th A
fric
a
Aus
tria
UA
E
Net Exports Final Consumption Expenditure Gross Capital Formation
China remains dependent on gross capital formation for GDP growth. With gross capital formation at 54% of GDP in 2011, China’s investment/GDP ratio remains the highest in the world
Composition of GDP - Expenditure Approach (%, 2011)
Source: UNCTAD; China Statistical Yearbook; The Beijing Axis Analysis
The Beijing Axis 106 The Beijing Axis 106
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 107
(500)
0
500
1,000
1,500
2,000
2,500
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
In 2011, China was the world’s largest exporter with an exported total value of USD 1.9 tn, about 26% of its GDP
World’s Major Exporters (2011)
Note: To make international comparisons, this section utilises China’s export figure from the IMF instead of the one from MOFCOM
Source: IMF; UN Comtrade; The Beijing Axis Analysis
Exports (USD bn)
Export/GDP (%)
US
Italy Japan
Poland
UK
Hungary Ukraine
Indonesia
Malaysia
Finland
Brazil
Colombia
Belgium
Algeria
Canada
South Africa
China
Romania
S. Korea
Slovakia
Germany
Bubble Size: GDP=USD 1,000 bn
The Beijing Axis 108
China has widened its lead as the world’s largest exporter of electrical machinery. In 2011, China exported a total of USD 446 bn or 24.2% of the world’s total electrical machinery China’s Top 10 Export Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
0 100 200 300 400 500
ChinaHong Kong
USGermany
JapanSingapore
S. KoreaMexico
MalaysiaFrance
UKHungary
ItalyThailand
CzechPoland
BelgiumSlovakiaCanada
Switzerland
Total: USD 1,898 bn
Electrical machinery and equipment
Nuclear reactors, machinery and mechanical appliances
Articles of apparel and clothing accessories (knitted)
Articles of apparel and clothing accessories (not knitted)
Optical, photo, technical, medical, etc. apparatus
Furniture, lighting, signs, prefabricated buildings
Iron and steel
Vehicles other than railway, tramway
Plastics and articles thereof
Ships, boats and other floating structures
24.2%
10.6%
8.6%
8.1%
7.0%
6.5%
6.4%
3.8%
3.3%
2.6%
1.8%
1.8%
1.8%
1.7%
1.5%
1.1%
0.9%
0.9%
0.8%
0.8%
% of World Total
85
84
61
62
90
94
73
87
39
89
Other
23%
19%
3%
2%
34%
3%
3% 3%
4%
3%
2%
Top 20 Exporters of Electrical Machinery (USD bn, 2011)
The Beijing Axis 109
China’s Top 10 Export Commodities 2011 (HS Code)
Top 20 Exporters of Power Generation Equipment (USD bn, 2011)
China is the world’s largest exporter of power generation equipment. In 2011, China exported a total of USD 354 bn or 19.7% of the world’s power generation equipment
0 100 200 300 400
ChinaGermany
USJapan
ItalyUK
FranceHong Kong
S. KoreaSingapore
MexicoBelgiumThailand
Czech Rep.Canada
SwitzerlandMalaysia
PolandHungary
Brazil
19.7%
14.5%
11.4%
9.5%
5.8%
3.8%
3.7%
3.5%
3.3%
3.2%
2.7%
2.0%
1.9%
1.8%
1.8%
1.6%
1.4%
1.2%
1.1%
0.8%
% of World Total
Source: UN Comtrade; The Beijing Axis Analysis
Total: USD 1,898 bn
Electrical machinery and equipment
Nuclear reactors, machinery and mechanical appliances
Articles of apparel and clothing accessories (knitted)
Articles of apparel and clothing accessories (not knitted)
Optical, photo, technical, medical, etc. apparatus
Furniture, lighting, signs, prefabricated buildings
Iron and steel
Vehicles other than railway, tramway
Plastics and articles thereof
Ships, boats and other floating structures
85
84
61
62
90
94
73
87
39
89
Other
23%
19%
3%
2%
34%
3%
3% 3%
4%
3%
2%
The Beijing Axis 110
China’s Top 10 Export Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Exporters of Knitted Articles of Apparel (USD bn, 2011)
China is by far the world’s largest exporter of knitted articles of apparel and clothing accessories. In 2011, China exported a total of USD 80 bn or 51.1% of the world’s knitted apparel and clothing accessories
% of World Total
0 20 40 60 80
ChinaHong Kong
GermanyItaly
BelgiumFrance
IndonesiaUKUS
PakistanPortugal
Sri LankaThailand
MexicoPoland
PeruRomania
GuatemalaJordan
S. Korea
51.1%
7.9%
5.9%
5.2%
2.9%
2.7%
2.3%
1.8%
1.5%
1.4%
1.4%
1.4%
1.3%
1.1%
1.0%
0.9%
0.7%
0.6%
0.6%
0.6%
Total: USD 1,898 bn
Electrical machinery and equipment
Nuclear reactors, machinery and mechanical appliances
Articles of apparel and clothing accessories (knitted)
Articles of apparel and clothing accessories (not knitted)
Optical, photo, technical, medical, etc. apparatus
Furniture, lighting, signs, prefabricated buildings
Iron and steel
Vehicles other than railway, tramway
Plastics and articles thereof
Ships, boats and other floating structures
85
84
61
62
90
94
73
87
39
89
Other
23%
19%
3%
2%
34%
3%
3% 3%
4%
3%
2%
The Beijing Axis 111
China’s Top 10 Export Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Exporters of Non-knitted Articles of Apparel (USD bn, 2011)
China is the world’s largest exporter of non-knitted articles of apparel. In 2011, China exported a total of USD 63 bn or 43.1% of the world’s non-knitted articles of apparel
0 10 20 30 40 50 60 70
ChinaItaly
Hong KongGermany
FranceIndonesia
BelgiumUK
MexicoRomania
USPoland
Sri LankaPakistanPanamaThailandPortugalBulgaria
SwitzerlandCzech Rep.
43.1%
9.0%
7.4%
7.3%
4.0%
2.8%
2.7%
2.4%
1.9%
1.7%
1.5%
1.3%
1.3%
1.2%
0.9%
0.9%
0.8%
0.7%
0.7%
0.6%
% of World Total
Total: USD 1,898 bn
Electrical machinery and equipment
Nuclear reactors, machinery and mechanical appliances
Articles of apparel and clothing accessories (knitted)
Articles of apparel and clothing accessories (not knitted)
Optical, photo, technical, medical, etc. apparatus
Furniture, lighting, signs, prefabricated buildings
Iron and steel
Vehicles other than railway, tramway
Plastics and articles thereof
Ships, boats and other floating structures
85
84
61
62
90
94
73
87
39
89
Other
23%
19%
3%
2%
34%
3%
3% 3%
4%
3%
2%
The Beijing Axis 112
China’s Top 10 Export Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Exporters of Optical and Photographic Equipment (USD bn, 2011)
China is the third-largest exporter of optical and photographic equipment. In 2011, China exported over 13% of the world’s products in this category, indicating that the country is moving up the value chain
% of World Total
0 20 40 60 80
USGermany
ChinaJapan
S. KoreaFrance
UKSwitzerlandHong Kong
ItalySingapore
BelgiumIrelandMexico
MalaysiaCanada
IsraelHungaryThailandAustralia
17.2%
14.5%
13.2%
9.9%
8.0%
4.0%
3.9%
3.5%
3.3%
2.6%
2.6%
2.5%
2.4%
2.4%
1.3%
1.3%
0.9%
0.9%
0.8%
0.6%
Total: USD 1,898 bn
Electrical machinery and equipment
Nuclear reactors, machinery and mechanical appliances
Articles of apparel and clothing accessories (knitted)
Articles of apparel and clothing accessories (not knitted)
Optical, photo, technical, medical, etc. apparatus
Furniture, lighting, signs, prefabricated buildings
Iron and steel
Vehicles other than railway, tramway
Plastics and articles thereof
Ships, boats and other floating structures
85
84
61
62
90
94
73
87
39
89
Other
23%
19%
3%
2%
34%
3%
3% 3%
4%
3%
2%
The Beijing Axis 113
In 2011, China was the second-largest importer after the US, importing a total of USD 1,743 bn worth of goods, equivalent to about 24% of its GDP
World’s Major Importers (USD bn, 2011)
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
0
400
800
1,200
1,600
2,000
2,400
2,800
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Ukraine
US
Japan
China
Imports (USD bn)
Imports/GDP (%)
S. Korea
Malaysia
US
Brazil Poland
Bubble Size: GDP=USD 1,000 bn
UK
Italy Canada
South Africa
Romania
Belgium
Slovakia Hungary
Germany
Finland
Philippines
Israel
Indonesia
The Beijing Axis 114
China’s Top 10 Import Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Importers of Electrical Machinery (USD bn, 2011)
China is the world’s largest importer of electrical machinery and equipment. In 2011, China imported a total of USD 351 bn or 17.8% of the world’s electrical machinery and equipment
85
27
84
26
90
39
87
29
74
99
Other
0 50 100 150 200 250 300 350
ChinaUS
Hong KongGermany
JapanSingapore
MexicoKorea
FranceUK
MalaysiaCanada
ItalyThailand
RussiaBrazil
HungaryCzech Rep.
AustraliaBelgium
% of World Total
Total: USD 1,743 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillation
Nuclear reactors, machinery and mechanical appliances
Ores, slag and ash
Optical, photographic and cinematographic, equipment
Plastics and articles thereof
Vehicles other than railway, tramway
Organic chemicals
Copper and articles thereof
Commodities not elsewhere specified
17.8%
14.4%
10.4%
7.1%
4.7%
4.4%
3.9%
3.5%
3.0%
3.0%
2.6%
2.3%
2.3%
1.8%
1.6%
1.3%
1.3%
1.2%
1.2%
1.1%
21%
20%
16%
11%
9%
6%
4% 4%
3% 3%
4%
The Beijing Axis 115
0 100 200 300 400 500
USChinaJapanKorea
GermanySingapore
FranceItaly
UkraineBelgiumCanada
ThailandBrazil
IndonesiaAustralia
MexicoUkrainePoland
MalaysiaSouth Africa
China’s Top 10 Import Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Importers of Mineral Fuels (USD bn, 2011)
China is the world’s second-largest importer of mineral fuels. In 2011, China imported a total of USD 276 bn or 10.7% of the world’s mineral fuels
18.0%
10.7%
10.6%
6.7%
6.6%
4.6%
4.5%
4.3%
3.5%
3.0%
2.1%
1.7%
1.6%
1.6%
1.5%
1.4%
1.1%
1.0%
0.9%
0.8%
85
27
84
26
90
39
87
29
74
99
Other
Total: USD 1,743 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillation
Nuclear reactors, machinery and mechanical appliances
Ores, slag and ash
Optical, photographic and cinematographic, equipment
Plastics and articles thereof
Vehicles other than railway, tramway
Organic chemicals
Copper and articles thereof
Commodities not elsewhere specified
21%
20%
16%
11%
9%
6%
4% 4%
3% 3%
4%
% of World Total
The Beijing Axis 116
China’s Top 10 Import Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Importers of Power Generation Equipment (USD bn, 2011)
China is the world’s second-largest importer of power generation equipment. In 2011, China imported a total of USD 199 bn or 11.7% of the world’s power generation equipment
0 50 100 150 200 250 300
USChina
GermanyFrance
UKCanada
Hong KongJapan
MexicoRussia
S. KoreaSingapore
ItalyBelgiumAustralia
BrazilThailand
Czech Rep.Indonesia
Poland
17.3%
11.7%
9.0%
4.6%
4.4%
3.8%
3.8%
3.8%
3.2%
3.0%
2.9%
2.9%
2.6%
2.2%
2.0%
2.0%
1.7%
1.6%
1.5%
1.4%
85
27
84
26
90
39
87
29
74
99
Other
Total: USD 1,743 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillation
Nuclear reactors, machinery and mechanical appliances
Ores, slag and ash
Optical, photographic and cinematographic, equipment
Plastics and articles thereof
Vehicles other than railway, tramway
Organic chemicals
Copper and articles thereof
Commodities not elsewhere specified
21%
20%
16%
11%
9%
6%
4% 4%
3% 3%
4%
% of World Total
The Beijing Axis 117
China’s Top 10 Import Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Importers of Ores, Slag and Ash (USD bn, 2011)
China is the world’s largest importer of ores, slag and ash. In 2011, China imported a total of USD 150.7 bn or 55.8% of the world’s ores, slag and ash
0 20 40 60 80 100
ChinaJapan
S. KoreaGermanyBelgium
USUK
CanadaItaly
FranceFinland
BulgariaBrazil
BahrainChile
ArgentinaCzech Rep.
MalaysiaMexicoUkraine
55.8%
14.5%
7.9%
4.9%
1.7%
1.5%
1.5%
1.4%
1.3%
1.1%
1.0%
0.8%
0.6%
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
150.7
85
27
84
26
90
39
87
29
74
99
Other
Total: USD 1,743 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillation
Nuclear reactors, machinery and mechanical appliances
Ores, slag and ash
Optical, photographic and cinematographic, equipment
Plastics and articles thereof
Vehicles other than railway, tramway
Organic chemicals
Copper and articles thereof
Commodities not elsewhere specified
21%
20%
16%
11%
9%
6%
4% 4%
3% 3%
4%
% of World Total
The Beijing Axis 118
China’s Top 10 Import Commodities 2011 (HS Code)
Source: UN Comtrade; The Beijing Axis Analysis
Top 20 Importers of Optical and Photographic Equipment (USD bn, 2011)
China is the world’s largest importer of optical and photographic equipment. In 2011, China imported a total of USD 99 bn or 22.7% of the world’s optical and photographic equipment
0 20 40 60 80 100
ChinaUS
GermanyJapan
FranceKorea
UKHong Kong
CanadaItaly
BelgiumMexico
SingaporeAustralia
RussiaSwitzerland
BrazilPoland
MalaysiaThailand
22.7%
15.4%
8.4%
5.7%
4.4%
3.9%
3.7%
3.5%
2.9%
2.8%
2.6%
2.6%
2.1%
1.8%
1.7%
1.6%
1.4%
1.3%
1.2%
1.1%
85
27
84
26
90
39
87
29
74
99
Other
Total: USD 1,743 bn
Electrical machinery and equipment
Mineral fuels, mineral oils and products of their distillation
Nuclear reactors, machinery and mechanical appliances
Ores, slag and ash
Optical, photographic and cinematographic, equipment
Plastics and articles thereof
Vehicles other than railway, tramway
Organic chemicals
Copper and articles thereof
Commodities not elsewhere specified
21%
20%
16%
11%
9%
6%
4% 4%
3% 3%
4%
% of World Total
The Beijing Axis 119
-782.9
155.0
-31.3
221.9
-0.2
-162.3
29.8
-34.3
-129.6
-0.1
193.3
-69.3
11.3
-1.3
30.8 52.7
-71.6
26.1 27.2 12.7
-19.7
9.7
144.3
29.1 54.1
-5.7
14.8
-6.8
0.3
-42.1
-200
-150
-100
-50
0
50
100
150
200
US
Chi
na
Japa
n
Ger
man
y
Fra
nce
UK
Bra
zil
Italy
Indi
a*
Can
ada
Rus
sia
Spa
in*
Aus
tral
ia
Mex
ico
Kor
ea
Net
herla
nds
Tur
key
Indo
nesi
a
Sw
itzer
land
Bel
gium
Pol
and
Sw
eden
*
Sau
di A
rabi
a*
Iran
*
Nor
way
*
Aus
tria
*
Arg
entin
a
Sou
th A
fric
a
Tha
iland
Den
mar
k*
Trade Balance of the World’s Major Economies (USD bn, 2011)
*Note: Trade balance from these countries are for 2010
Source: UN Comtrade; The Beijing Axis Analysis
China’s foreign trade is becoming more balanced, as China’s 2011 trade surplus narrowed to USD 155 bn, or roughly half its 2008 surplus
The Beijing Axis 120 The Beijing Axis 120
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 121
0 50 100 150 200 250
USFranceJapan
GermanyHong Kong
ChinaRussia
ItalyCanadaNorwaySwedenVirgin Is.
IrelandUK
AustraliaNetherlands
SpainDenmark
SwitzerlandLuxembourg
397
0 50 100 150 200
USJapan
UKFrance
Hong KongBelgium
SwitzerlandRussiaChina
Virgin Is.Germany
CanadaItaly
SpainNetherlands
AustriaSweden
SingaporeDenmarkS. Korea
Note: To make international comparisons, this section utilises China’s FDI and OFDI figures from the WIR 2012 instead of figures from MOFCOM
Source: WIR; The Beijing Axis Analysis
329
0 50 100 150 200
USGermany
FranceHong Kong
ChinaSwitzerland
JapanRussia
CanadaBelgium
NetherlandsSwedenAustralia
SpainItaly
Virgin Is.Singapore
S. KoreaLuxembourg
Ireland
In 2011, China ranked 9th overall and second among all developing economies in OFDI, with total outbound investment reaching USD 65 bn
In 2011, China’s ranking
slipped to 9th overall, as the
Euro debt crisis discouraged
overseas investments
In 2010, China
ranked 5th In 2009, China
ranked 6th
Top 20 World FDI Outflows (USD bn, 2009-2011)
The Beijing Axis 122
0 50 100 150 200 250
USChina
BelgiumHong Kong
BrazilSingapore
UKVirgin Is.
RussiaAustrliaFrance
CanadaGermany
IndiaSpain
ItalyMexico
IndonesiaLuxembourg
Chile
Top 20 World FDI Inflows (USD bn, 2011)
Source: WIR 2012; The Beijing Axis Analysis
Top 20 World FDI Outflows (USD bn, 2011)
China’s FDI inflows outweigh its FDI outflows. In 2011, China ranked second in the world in for FDI inflow with USD 124 bn, while it ranked only ninth for OFDI with USD 65 bn
397 0 100 200 300
USJapan
UKFrance
Hong KongBelgium
SwitzerlndRussiaChina
Virgin Is.Germany
CanadaItaly
SpainNetherlands
AustriaSweden
SingaporeDenmarkS. Korea
China ranked 2nd
China ranked 9th
The Beijing Axis 123
Top 20 World FDI Inward Stock (USD bn, 2011)
Source: WIR 2012; The Beijing Axis Analysis
Top 20 World FDI Outward Stock (USD bn, 2011)
China ranked 7th overall and 2nd in Asia for FDI stock with USD 712 bn in 2011. For OFDI, it ranked 15th with USD 366 bn
0 1,000 2,000 3,000 4,000 5,000
USUK
GermanyFrance
Hong KongSwitzerland
JapanBelgium
NetherlandsCanada
SpainItaly
Virgin Is.Australia
ChinaRussia
SwedenSingapore
IrelandDenmark
0 1,000 2,000 3,000 4,000
USUK
Hong KongFrance
BelgiumGermany
ChinaBrazilSpain
CanadaNetherlandsSwitzerland
SingaporeAustralia
RussiaSweden
ItalyMexico
Virgin Is.Ireland
China ranked 7th
China ranked 15th
The Beijing Axis 124
60
40
20
0
20
40
60
US
Chi
na
Japa
n
Ger
man
y
Fra
nce
Bra
zil
UK
Italy
Rus
sia
Can
ada
Indi
a
Spa
in
Aus
tral
ia
Mex
ico
S. K
orea
Indo
nesi
a
Net
herla
nds
Tur
key
Sw
itzer
land
Sau
di A
rabi
a
Inflow Outflow
China’s inflows and outflows as a percentage of GFCF remain relatively small. From 2010 to 2011, China’s FDI inflows and outflows both decreased
Top 20 GDP Countries’ FDI Inflow/Outflow as a Percentage of Gross Fixed Capital Formation (%, 2011)
Note: GFCF = Gross fixed capital formation
Source: WIR 2012; The Beijing Axis Analysis
3% -16% 28% -21% 19% 4% 1% 194% -5% 54% 44% -29% 2% -18% -48% 15% -270% 39% -101% -41%
17% -26% 84% -54% 5% -107% 158% 34% 0% 13% 24% -5% 37% -43% -17% 145% -49% 33% -11% -12%
Growth 2010-2011
Growth 2010-2011
The Beijing Axis 125
200
150
100
50
0
50
100
150
US
Chi
na
Japa
n
Ger
man
y
Fra
nce
Bra
zil
UK
Italy
Rus
sia
Can
ada
Indi
a
Spa
in
Aus
tral
ia
Mex
ico
S. K
orea
Indo
nesi
a
Net
herla
nds
Tur
key
Sw
itzer
land
Sau
di A
rabi
a
Inward Stock Outward Stock
China’s inflows and outflows as a percentage of GDP also remain relatively small when compared to other large economies. Both inward and outward FDI stock remained stagnant from 2010 to 2011
Top 20 GDP Countries’ FDI Inward/Outward Stock as a Percentage of GDP (%, 2011)
Source: WIR 2012; The Beijing Axis Analysis
Growth 2010-2011
Growth 2010-2011
-1% -2% -2% -6% -15% -14% -3% -6% -25% -8% -13% -8% -16% -18% -5.7% -6% -8% -29% -14% -14%
-9% 0% 8% -8% -20% -7% 0% -2% -21% -5% 2% -8% -20% -4% 4% 359% -9% 5% -12% -12%
The Beijing Axis 126
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 2012; The Beijing Axis Analysis
Value of Cross-Border M&A ‘Net Sales’ for World’s Top 20 Countries (USD bn, 2011)
China now ranks 5th overall in cross-border M&A ‘net purchases.’ Increasingly competitive Chinese companies are becoming attractive targets for foreign investors with China ranking 14th overall in ‘net sales’
0 50 100 150
US
UK
Australia
Canada
Russia
France
Switzerland
Spain
Brazil
Netherlands
Italy
Germany
India
China
Poland
Luxembourg
Norway
Denmark
Sweden
Turkey
0 50 100 150
USJapan
UKCanada
ChinaFrance
NetherlandsSwitzerland
SpainHong Kong
IsraelKazakhstan
BelgiumSingapore
AustraliaIndia
JerseyUnited Arab Emirates
BrazilNew Zealand
China ranks 5th
China ranks 14th
Value of Cross-Border M&A ‘Net Purchases’ for World’s Top 20 Countries (USD bn, 2011)
The Beijing Axis 127
Sovereign wealth funds are playing an ever greater role in overseas investment. China is home to four of the world’s largest sovereign wealth funds
Top 30 Principal Sovereign Wealth Funds (2012)
Note: We provide a breakdown in the next slide
Source: WIR 2012; The Beijing Axis Analysis
<USD 100 bn
>USD 500 bn
USD 300 bn – USD 500 bn
USD 100 bn – USD 300 bn
China
1. State Administration of
Foreign Exchange (SAFE)
2. China Investment
Corporation (CIC)
3. Hong Kong Monetary
Authority (HKMA)-
Exchange Fund
4. National Social Security
Fund
The Beijing Axis 128
Four Chinese sovereign wealth funds rank among the top 15 in the world in terms of assets under management. The combined assets under management by these four funds currently stands at around USD 1.4 tn
*Note: As of July 2012
Source: SWF Institute; The Beijing Axis Analysis
Names and Locations of World’s Top 30 Sovereign Wealth Funds (2012) Rank Economy Fund Assets under management* (USD bn)
1 United Arab Emirates Abu Dhabi Investment Authority (ADIA) 627
2 Norway Government Pension Fund-Global (GPF-G) 593
3 China SAFE Investment Company 568
4 Saudi Arabia Saudi Arabia Monetary Authority foreign holdings 533
5 China China Investment Corporation 440
6 Kuwait Kuwait Investment Authority (KIA) 296
7 China – Hong Kong Hong Kong Monetary Authority Investment Portfolio 293
8 Singapore Government of Singapore Investment Corporation 248
9 Singapore Temasek Holdings 158
10 Russia National Welfare Fund 150
11 China National Social Security Fund 135
12 Qatar Qatar Investment Authority 100
13 Australia Australian Future Fund 80
14 United Arab Emirates Investment Corporation of Dubai 70
15 UAE – Abu Dhabi International Petroleum Investment Company 65
16 Libya Libyan Investment Authority 65
17 Kazakhstan Kazakhstan National Fund 58
18 Algeria Revenue Regulation Fund 57
19 UAE – Abu Dhabi Mubadala Development Company 48
20 South Korea Korea Investment Corporation 43
21 US – Alaska Alaska Permanent Fund 40
22 Malaysia Khazanah Nasional 37
23 Azerbaijan State Oil Fund 30
24 Ireland National Pensions Reserve Fund 30
25 Brunei Brunei Investment Agency 30
26 France Strategic Investment Fund 28
27 US – Texas Texas Permanent School Fund 24
28 Iran Oil Stabilisation Fund 23
29 New Zealand New Zealand Superannuation Fund 16
30 Canada Alberta’s Heritage Fund 15
The Beijing Axis 129 The Beijing Axis 129
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 130
In 2011, China had the world’s largest current account balance at USD 281 bn, followed by Saudi Arabia (USD 151 bn) and Germany (USD 149 bn)
Current Account Balance for Select Countries (USD bn, 2011)
Source: CIA World Factbook; The Beijing Axis Analysis
Top 5 current account surpluses
Top 5 current account deficits
US
-600 bn
Russia
91 bn
Japan
123 bn
China
281 bn Turkey
-72 bn
Italy
-78 bn
Germany
149 bn
UK
-67 bn
Saudi
Arabia
151 bn
France
-74 bn
The Beijing Axis 131
China, the world’s largest holder of foreign exchange reserves, possesses more than triple the FX reserves of the next largest holder, Japan. Asian countries dominate the top 15 Top 30 Largest Holders of Foreign Exchange and Gold Reserves (USD bn, 2011E)
Note: Estimates are as of 31 December 2011
Source: CIA World Factbook; The Beijing Axis Analysis
0
400
800
1,200
1,600
2,000
Chi
na
Japa
n
Sau
di A
rabi
a
Rus
sia
Tai
wan
Bra
zil
Indi
a
S.K
orea HK
Sw
itzer
land
Sin
gapo
re
Ger
man
y
Alg
eria
Tha
iland
Fra
nce
Italy
Mex
ico
Indo
nesi
a
US
Mal
aysi
a
Pol
and
Iran
Tur
key
Den
mar
k
UK
Isra
el
Phi
lippi
nes
Liby
a
Can
ada
UA
E
3,236
Asia
The Beijing Axis 132
In 2011, China’s external debt of around USD 700 bn accounted for less than 1% of the world’s total external debt
Top 30 Economies with Largest External Debt (USD bn, Q2-2011)
Note: (1) As of Q3-2011
(2) As of Q4-2011
Source: CIA World Factbook; The Beijing Axis Analysis
0
4,000
8,000
12,000
16,000
EU
US
UK
Fra
nce
Ger
man
y
Japa
n
Italy
Net
herla
nds
Spa
in
Irel
and¹
Luxe
mbo
urg
Bel
gium
Aus
tral
ia²
Sw
itzer
land
Can
ada
Sw
eden
Hon
g K
ong
Aus
tria
Chi
na¹
Nor
way
Den
mar
k
Gre
ece
Fin
land
²
Por
tuga
l
Rus
sia¹
Bra
zil²
S. K
orea
²
Tur
key²
Pol
and²
Indi
a²
16,080
The external debt of the
EU was USD 16,080 bn
At the end of Q3 2011,
China’s external debt
amounted to USD 697 bn
The Beijing Axis 133
As of July 2012, China’s discount rate stood at 6%, which is lower than that of other large developing economies
Note: (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.
(2) The central bank discount rate is updated to the latest available month in 2012.
Source: IMF; Various; The Beijing Axis Analysis
Central Bank Discount Rate1 of Select Economies (%, 20122)
0
5
10
15
20
Ken
ya
Vie
tnam
Bra
zil
Rus
sia
Indi
a
Chi
na
Indo
nesi
a
Tur
key
Col
ombi
a
Sou
th A
fric
a
Chi
le
Mex
ico
Aus
tral
ia
S. K
orea
Can
ada
EU
UK
US
Japa
n
6%
High rate countries
Medium rate
countries
Low rate countries
The Beijing Axis 134
0
20
40
60
Mad
agas
car
Bra
zil
Kyr
gyzs
tan
Par
agua
y
Gam
bia
Mon
golia
Tan
zani
a
Bur
undi
Arg
entin
a
Bul
garia
Cro
atia
Hun
gary
Sou
th A
fric
a
Rus
sia
Nam
ibia
Alg
eria
Aus
tral
ia
Chi
na
New
Zea
land
Cze
ch R
epub
lic
Bru
nei
Sin
gapo
re
Italy
Isra
el
Bah
amas
Sw
itzer
land
Net
herla
nds
Japa
n
UK
As of April 2012, China’s prime lending rate was 6.56%, which is comparable to that of its Asia-Pacific neighbors Australia and New Zealand
Note: (1) Prime lending rate is a short-term interest rate quoted by a commercial bank 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 prices.
(2) All lending rates are updated to the latest available monthly data in 2012. For February: Madagascar, Namibia; for March: Burundi, Brunei, Israel, Switzerland; for May: South Africa, Algeria, Australia,
Bahamas, Singapore, UK, Mongolia; all other countries are updated as of April.
Source: Various; The Beijing Axis Analysis
… …
High rate countries
Medium rate countries
Low rate countries 6.56
Commercial Bank Prime Lending Rate1 of Select Economies (%, 20122)
The Beijing Axis 135 The Beijing Axis 135
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
- Selected Macroeconomic Indicators
- Domestic Consumption and Foreign Trade
- Domestic and Foreign Investment
- Financial Indicators
- Social Indicators
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 136
China is the most populous country in the world with 1.3 billion people. A cultural preference for male heirs has left China with one of the highest male-to-female ratios in the world, alongside UAE, Saudi Arabia and India Population of Top 30 Economies by GDP (mn, 2012)
Source: IMF; CIA World Factbook; The Beijing Axis Analysis
USChinaJapan
GermanyFrance
BrazilUnited Kingdom
ItalyRussia
CanadaIndia
SpainAustralia
MexicoS. Korea
IndonesiaNetherlands
TurkeySwitzerland
Saudi ArabiaSwedenPoland
BelgiumNorway
IranTaiwan
ArgentinaAustria
South AfricaUnited Arab Emirates
GDP rank 2011 Total
97 106 94 97 96 98 99 93 85 98
108 97
100 96
100 100
98 102
97 121 98 94 96 98
103 101 97 95 99
219
652 691
579 626
Ratio
Male/female
314 1,343
127 81 66
206 63 61
138 34
1,205 47 22
115 49
248 17 80
8 27 9
38 10 5
79 23 42
8 49 5
Female Male
The Beijing Axis 137
0
5
10
15
20
25
30
35
0 5 10 15 20 25 30
While China currently has a demographic makeup that is highly favourable, its productive age population (15-64) is forecasted to shrink around 2015 due to a rapidly ageing population
Child and Elderly Population for Selected Countries (2012F)
Source: UN Population Division; The Beijing Axis Analysis
% Population under 15
% Population aged 65+
India
Saudi Arabia
Poland S. Korea
US
Canada
Norway
Belgium
Argentina
France
Russia
Austria
China Sweden
United Arab Emirates Iran
Taiwan
A bubble this size represents a
population of 10,000
Japan
Germany Italy Switzerland Spain
UK
Netherland
Australia
Turkey Brazil
Mexico
South Africa
The Beijing Axis 138
86 78 74
51
80 85 68
77 81 87 73
31
83 78 68
83 70
97 85
44 61
74 79 82 68 61
87
62 71
92
14 22 26
49
20 15 32
23 19 13 27
69
17 22 32
17 30
3 15
56 39
26 21 18 32 39
13
38 29
8
US
*
Japa
n*
Ger
man
y
Chi
na*
UK
Fra
nce
Italy
Spa
in
Can
ada
Bra
zil
Rus
sia
Indi
a*
S. K
orea
Mex
ico
Aus
tria
Net
herla
nds
Tur
key
Bel
gium
Sw
eden
Indo
nesi
a
Pol
and
Sw
itzer
land
Nor
way
S. A
rabi
a
Aus
tria
Gre
ece
Den
mar
k
S. A
fric
a
Iran
Arg
entin
a
Urban Rural
China’s urbanisation surpassed 50% for the first time in 2011. China, along with India, has the fastest urbanisation rate among large economies
Urban and Rural Population of Selected Economies (%, 2010)
*Note: Urbanisation figures from these countries have been updated to 2011
Source: CIA World Factbook; World Bank; The Beijing Axis Analysis
Annual rate of urbanisation change (%, 2010-2015F)
0
100
Urban 1.2 0.2 0.0 2.3 0.7 1.0 0.5 1.0 1.1 1.1 -0.2 2.4 0.6 1.2 0.6 0.8 1.7 0.4 0.6 1.7 -0.1 0.5 1.2 2.2 0.6 0.6 0.4 1.2 1.9 1.1
The Beijing Axis 139
10080604020020406080100
USChinaJapan
GermanyFrance
BrazilUK
ItalyRussia
CanadaIndia
SpainAustralia
MexicoS. Korea
IndonesiaNetherlands
TurkeySwitzerland
S. ArabiaSwedenPoland
BelgiumNorway
IranTaiwan
ArgentinaAustriaGreece
UAEDenmark
Male Female
While the average life expectancy for both males and females in China is higher than in other large developing economies, it still lags behind more developed economies
Life Expectancy (years, 2012)
Source: IMF; The Beijing Axis Analysis
GDP Rank 2011
The Beijing Axis 140
China’s economic activity rate is comparatively larger than those of major developed economies. China has the second-highest female economic activity rate among the world’s top economies
Adult (15 and older) Economic Activity Rate (%, 2010)
Source: UN Statistics Division; The Beijing Axis Analysis
10080604020020406080100
USChinaJapan
GermanyFrance
BrazilUK
ItalyRussia
CanadaIndia
SpainAustralia
MexicoS. Korea
IndonesiaNetherlands
TurkeySwitzerland
S. ArabiaSwedenPoland
BelgiumNorway
IranArgentina
AustriaGreece
UAEDenmark
Male FemaleGDP Rank 2011
Total 63.7 74.2 60.4 59.6 56.4 69.9 61.9 48.3 62.7 66.6 55.6 59.3 65.5 61.7 60.3 67.4 64.8 49.5 67.8 50.0 63.7 55.9 54.0 65.8 44.3 60.5 60.6 54.5 79.1 64.6
The Beijing Axis 141 The Beijing Axis 141
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 142
Conclusions
Source: The Beijing Axis Analysis
Indicators Conclusions
Selected Macroeconomic Data
The ongoing European debt crisis and slower-than-expected recovery of the US economy is prompting China to take measures aimed at turning
around a six-quarter slowdown in economic growth. China’s economy expanded by 7.8% in the first half of 2012, down from 9.2% in 2011. For the
year, GDP is forecasted to grow by around 8%, the lowest in a decade. With growth yet to rebound amidst a slowing world economy, speculation
abounds as to whether China’s economy is headed for a ‘soft’ or ‘hard’ landing. Meanwhile, the Chinese government is steering economic growth
to become more reliant on domestic consumption as part of its long term goal of rebalancing the economy.
Trade China's trade surplus fell to USD 155 bn in 2011 and has been steadily declining over the past three years. This trend is likely to continue as the economies of key export markets such as the US and Europe continue to grapple with high debt levels. A rising Chinese RMB against the USD is expected to further contribute to this decline by making Chinese exports more expensive and foreign imports more affordable. Furthermore, as Chinese manufacturers move up the value chain, the complexity and subsequent value of China’s exports will continue to increase.
Investment China’s total fixed asset investment reached USD 4.8 tn in 2011. Most of this investment is disproportionally allocated to already developed coastal provinces that are highly urbanised, fueling massive real estate speculation in many of China’s largest cities. While policymakers were previously preoccupied with curbing inflation largely a result of rising food prices, attention has now shifted into boosting growth with inflation cooling below the government’s official target in H1 2012. A slowing Chinese economy and weak global recovery is coercing the Chinese government to promote reasonable investment growth into urban infrastructure projects and opening the private sector to investment in state-dominated industries. Meanwhile, Chinese companies continues to search for strategic acquisitions overseas to gain access to resources and technological know-how.
Financial A high national saving’s rate and decades of trade surpluses have resulted in China having a massive financial sector with excessive liquidity. With
this much liquidity, Chinese banks have naturally been seeking overseas expansion and are actively looking for more OFDI opportunities.
Furthermore, there is political pressure for China’s state-owned banks to accelerate their pace of internationalisation, particularly in developing
countries that are attracting significant Chinese investment. China is now also the world’s second-largest equity market and is continuing with
reform to upgrade its financial markets to match the status of China’s role in the world economy.
Social While the One Child Policy achieved its goal of controlling China’s population growth, it also had negative unintended consequences such as a
skewed male-to-female ratio and a rapidly ageing population. Since the late 1980s, China’s birth rate has been in steady decline, leaving the
possibility that the population will ‘grow old before getting rich’. Meanwhile, continued mass migration to more-developed coastal provinces has
resulted in China’s urbanisation rate exceeding 50% for the first time in 2011.
The Beijing Axis 143
Implications
Source: The Beijing Axis Analysis
Indicators Implications
Selected Macroeconomic Data
China's 30 years of uninterrupted growth is unprecedented. While some sort of correction can be expected in the near future, how the government
responds remains far more important than preventing such an economic slowdown. Central planners will most likely take actions to ensure that
Chinese economic growth stabilises to between 7% to 8% annually for the coming years, which should erase fears of a ‘hard’ landing and keep
China on its path towards becoming the world’s largest economy by 2025. In addition, shifting the focus of economic growth to domestic demand
will provide foreign companies with more opportunities to target Chinese consumers.
Trade With the US and Europe mired in debt and an economic slowdown, China is looking towards other developing markets such as Latin America and Africa to make up for the loss of export sales to developed economies, with the developing world accounting for an ever larger share of China’s trade in recent years. As China rebalances its trade structure, expect more Chinese companies to have a stronger presence in these markets. The renminbi’s appreciation, coupled with China’s insatiable need for imported commodities, will open up additional opportunities to foreign companies.
Investment China seems to be following the US and European playbook of relying on government expenditure to stave off an economic slowdown. In 2009, China released a USD 600 bn stimulus package that was heavily focused on construction and infrastructure projects. Although the stimulus achieved the desired effect of maintaining China’s economic growth in double digits, it asserted strong inflationary pressures on the rest of the economy, especially in the real estate sector. This time around, China is reluctant to launch a massive stimulus package; instead central planners have opted to quicken the approval of previously planned major infrastructure projects, which is expected to benefit companies engaged in the mining, construction and heavy machinery sectors in the second half of 2012.
Financial Although China's four biggest banks are among the world's top 10 banks measured by market capitalisation, they have yet to match the capabilities and reach of their international peers. The relative lack of international experience of Chinese banks means that opportunities exist for foreign banks to cooperate with them in their expansion into overseas markets. The plans for the Shanghai Stock Exchange to allow foreign firms to list will be a significant step in internationalising China’s equity market, and will enable foreign companies to directly access China’s huge pool of excess liquidity to raise capital.
Social With mass urbanisation and the high cost associated with living in cities acting as a natural deterrent to having more than one child, speculation
has grown as to whether China will amend the policy in the near future. Accordingly, various service sectors such as healthcare are poised to surge
to accommodate China’s fast-changing population structure.
The Beijing Axis 144 The Beijing Axis 144
Agenda
1. Foreword
2. What’s New: China Moves Towards Growth Moderation and Sustainability
3. China Economic Indicators
4. International Comparison
5. Conclusions and Implications
6. About The Beijing Axis
The Beijing Axis 145
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