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

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slide1
A forward look at the developing

Chinese economy

Dimitri de Boer

disclaimer
Disclaimer

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

overview
Overview
  • Economic Developments
  • Social Developments
  • Problems for Doing Business
  • Forecasts and Expectations
  • ChinaChem 2004
slide4
Distances between Shanghai-Guangzhou vs. London-Madrid

Beijing

London

Nanjing

ca 1050 km

Shanghai

ca 1200 km

Madrid

Guangzhou

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

1979 2002

Real GDP (billion $) 180 1,250

Real GDP per capita 185 1,000

US GDP (billion $) 10,500

US GDP per capita 37,000

Source: The World Bank 2002 World Development Report

gdp growth limited inflation
GDP Growth, limited Inflation

Source: 2003 Statistical Yearbook of China

structure of the economy
Structure of the Economy

Source: 2003 Statistical Yearbook of China

credit expansion
Credit Expansion

2002 2003

Credit (trillion RMB) 0.9 1.9

Will it go bust?

  • Credit and debit cards:
    • Total sum of bank card transactions has increased by approximately 76% per year
    • Number of retailers who accept cards has increased by about 51% per year
    • Average person still prefers cash

Source: Access Asia ‘Credit and Debit Cards in China: Market Analysis’

non performing loans
Chinese government

US$218bn

US$680bn

Standard and Poor’s

???

Real number

Non-Performing Loans

2002

slide15
Challenges
  • More Regulations that focus on foreign
  • business
  • More competition
  • More imports

Opportunities

  • Short-term (1-2 years)
  • TRIMS
    • Tariffs
    • Service sector
  • Mid-term (3-4 years)
  • Distribution and trading rights
    • Tariffs and NTBs
  • Long-term (5 and more years)
    • Business environment

“Grey” areas that WTO does not really cover

  • The limits of partner choice and “national treatment”
  • Licensing and Technical Standards
  • Environmental Laws that focus on imports

WTO Accession Opportunities and Challenges

social developments
Social Developments
  • Emerging Middle Class
  • Urbanization
  • Huge Workforce, Rising Unemployment
  • Virtually Unlimited Labor – Lack of Talent
  • Gaps in Culture, Attitudes and Values
  • Hot Markets: Cars, Houses, Communication
  • Threats: Energy (Oil), Water, Environment
urbanization
Urbanization
  • Still over 600million people in rural China
  • An estimated 100million urban workers come from rural areas
huge workforce unemployment
Huge Workforce, Unemployment
  • An estimated total of 50 million laid-off public sector workers
  • Every year an estimated 10 million new laborers enter the job market
  • Official unemployment rate 4.7%*
unlimited labor lack of talent
Unlimited Labor - Lack of Talent
  • Qualified higher and middle management is hard to find
  • % of GDP spent on education about half of the US and Europe
  • 2.8 million college and university graduates this year (up 25%)
  • Poor flow of information in job market, lack of trust

Source: China Ministry of Personnel

gaps in culture attitudes and values
Gaps in Culture, Attitudes and Values
  • The government has gone into business
  • Differences between every city and region, generations, education etc.
  • Low quality, safety and health standards in production
hot markets
Hot Markets
  • Cars
  • Houses
  • Communication
internet use
Internet Use

Source: CNNIC Statistical Survey Report on Internet Development in China

mobile phone use
Mobile Phone Use
  • Largest market in the world since end of 2001

2003 2004

Mobile phone users 260m310m

Source: China Ministry of Information Industry

threats energy oil water environment26
Threats: Energy (Oil), Water, Environment
  • Water: Increasing Demand, Diminishing Supplies
    • 400 out of the 600 1st and 2nd tier cities in China already face water shortages
    • Renewable water sources will decrease by 30% per capita by 2030
    • Pollution of surface water in rural areas poses threat to health

Source: China Ministry of Water, 2004

threats energy oil water environment27
Threats: Energy (Oil), Water, Environment
  • Desertification and urbanization leading to reduction of arable land
  • Frequent flooding
  • Chinese cities and seas amongst the most polluted in the world
problems for doing business
Problems for Doing Business
  • Legal environment
  • Law enforcement
  • JV Disputes
  • Corruption
  • Government Relations
  • Intellectual Property Rights, Patents
  • Distribution Difficulties
slide29
Main Cities to Cover

North

Shenyang Dalian Tianjin Qingdao Beijing Xian

East

Nanjing Hangzhou Ningbo

Shanghai Wuxi Suzhou

Wuhan

South

Shenzhen Guangzhou

Dongguan Zhuhai

Chengdu Qongqing

Kunming

Shenyang

Dalian

Dalian

Beijing

Xian

Tianjin

Qingdao

Shanghai

Nanjing

Shanghai

Wuhan

Wuxi

Hangzhou

Ningbo

Chengdu

Qongqing

Guilin

Shenzhen

Dongguan

Shantou

Zhuhai

Hongkong

Distribution Difficulties

forecasts and expectations
Forecasts and Expectations
  • Some fear of inflation this year
  • Privatization, M&A, Consolidation
  • Labor prices will stay cheap for a long time
  • Improvements in Business Environment
realistic expectations of growth
Realistic Expectations of Growth
  • China’s goal is to quadruple GDP by 2020
  • This amounts to an 8.3% annual increase
  • If achieved, per capita GDP will be about $4000 by 2020
conclusion
Conclusion
  • Huge opportunities
  • Know your market and environment
  • Expect hot competition
  • Expect many things to improve
chinachem 2004
ChinaChem 2004
  • See China Chemical Industries for 400 Euros, everything covered
    • 40 European SMEs and more than 60 selected Chinese SMEs
    • November 12 – 15
    • Sponsored by EU Asia Invest
chinachem 200435
ChinaChem 2004
  • Flights reimbursed
  • 3 days accommodation and meals
  • 1 page company intro
  • Several practical seminars
  • Comprehensive printed and online catalogue
  • Pre-arranged individual business meetings
emphasis of cooperation
Emphasis of Cooperation
  • Trade both ways, outsourcing, dealership
  • Technical and know-how cooperation
objectives
Objectives
  • Promoting SME business cooperation between the EU and China
  • Enhancing safety, health and environmental performance in China
  • Strengthening the position of EU companies in China
who may attend
Who may attend?
  • Must be from the EU
  • Must be SME
  • Must be in Chemical Industries
  • Must indicate desired cooperation with Chinese counterparts

Register at:

www.chinachem.org

organizers and sponsors
Organizers and Sponsors

Sponsored by:

  • European Union Asia Invest II

Organized by:

  • Merchants Promotion Bureau of Dongying

Co-Organized by:

  • Chemical Industries Association
  • UNIDO ITPO-China
  • VCI, Federchimica, VNCI
  • China Fine Chemicals Association
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