China in 2010 Constance L. Hunter Chief Economist chunter@aladdincapital.com June 2010
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Overview
• China’s economic weight is growing and along with it the linkages to the global economy are increasing •
China is still a centrally directed economy
•
China’s trade with the rest of the world is becoming two-way
•
Can China’s policies impact the rest of the world?
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China’s Recent Economic History
• Slower GDP is still above 9% per year
• Compared to 2000 at 7% , China is now 13% of global GDP • China’s stimulus helped the global economy in 2009
• Recent wage increases (30% at Foxconn) bode well for domestic demand • Will China export inflation or deflation to the global economy? • If China has economic problems will they spread to the world?
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China’s Recent Economic History
China: Key Economic Measures
(1)
2006 GDP (SA Real) CPI (SAS) Industrial Production
2007
2008
2009
2010*
11.7%
13.0%
9.0%
9.4%
10.8%
1.8%
4.8%
6.0%
-0.7%
2.5%
14.7%
17.4%
5.7%
18.5%
22.0%
*Estimates (1) Source: Bloomberg, IMF Data - GDP Based on PPP Valuation of GDP Current Dollar.
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China’s Recent Economic History
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China’s Recent Economic History China GDP (Real, constant, chained GDP) China Required Reserve Ratio China CPI y/y% 14
75
12
50
10
25
8
0
6
-25 00 01 02 03 04 Sources: CNBSH, PBC/CM /Haver
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06
07
08
09
10
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China’s economic weight is growing and along with it the linkages to the global economy are increasing
China in the World
(1)
2000
2007
2008
2009
2010*
2015*
China (% of World GDP)
7%
11%
11%
13%
13%
17%
CE Europe (% of World GDP)
3%
4%
4%
4%
3%
3%
Euro Area (% of World GDP)
18%
16%
16%
15%
15%
13%
United States (% of World GDP)
24%
21%
21%
20%
20%
18%
*Estimates (1) Source: Bloomberg, IMF Data - GDP Based on PPP Valuation of GDP Current Dollar.
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China is still a centrally directed economy Command Economics VS Market Economics
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China is still a centrally directed economy
China: Investment in Fixed Assets {cumulative} NSA, 100 Mil.Yuan
200000
200000
160000
160000
120000
120000
80000
80000
40000
40000
0
0 99 00 01 02 03 04 05 06 07 Source: China National Bureau of Statistics /Haver Analytics
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09
9
China’s trade with the rest of the world is becoming two-way
Export Composition (Past 12 Months) Food and Live Animals, 3% Others, 3%
Import Composition (Past 12 Months)
Chemicals & Related Products, 5%
Misc. Manufactured Articles, 8%
Others, 3%
Crude Material, Inedible, Except Fuel, 15%
Manufactured Goods, 15%
Misc. Mfg. Articles, 24%
Mineral Fuels, Lubricants & Material, 13%
Machinery & Transport Equipment, 50%
Machinery and Transport Equipment, 40%
Chemicals & Related Products, 11%
Manufactured Goods, 10%
Source: UBS, June 7, 2010
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China’s trade with the rest of the world is becoming two-way China’s Imports fell in 08 but have more than recovered
CN: Imports: EU USD Mn 15000
15000
12500
12500
10000
10000
7500
7500
5000
5000
2500
2500
0
0 99 00 01 02 03 04 05 06 07 08 Source: China General Administration of Customs/SAFE /Haver Analytics
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China’s trade with the rest of the world is becoming two-way While China’s exports to Europe have recovered only somewhat
CN: Exports: EU USD Mn 30000
30000
25000
25000
20000
20000
15000
15000
10000
10000
5000
5000
0
0 99 00 01 02 03 04 05 06 07 08 Source: China General Administration of Customs/SAFE /Haver Analytics
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China’s trade with the rest of the world is becoming two-way Mineral Product exports to Europe are still at 2005 levels
CN: Exports hs: EU: Mineral Products {MP} USD Mn 500
500
400
400
300
300
200
200
100
100
0
0 99 00 01 02 03 04 05 06 07 08 Source: China General Administration of Customs/SAFE /Haver Analytics
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China’s trade with the rest of the world is becoming two-way While China’s imports from Europe are
CN: Imports hs: EU: Mineral Products {MP} USD Mn 240
240
200
200
160
160
120
120
80
80
40
40
0
0 99 00 01 02 03 04 05 06 07 08 Source: China General Administration of Customs/SAFE /Haver Analytics
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Conclusion
• China is the only country left with fire power • China’s weight in global economy will continue to increase • Policy mistakes are quite possible
• Will the China model prove most successful? For controlling growth rates it is possible, but for total quality of life and quality of products we think not •
Watch the reserve requirements, Industrial Production, Sales from GOME, Parkson and other retailers
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