prospects for the chinese economy eu trade commissioners shanghai december 16, 2008 mary boyd
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Prospects for the Chinese economy EU Trade Commissioners Shanghai December 16, 2008 Mary Boyd Director, Shanghai Corporate Network Economist Intelligence Unit [email protected]. US: 2009 slower than 2008. Contributions to US qoq growth; percentage points. - PowerPoint PPT PresentationTRANSCRIPT
Prospects for the Chinese economy
EU Trade Commissioners ShanghaiDecember 16, 2008
Mary BoydDirector, Shanghai Corporate NetworkEconomist Intelligence [email protected]
US: 2009 slower than 2008
-1
-0.5
0
0.5
1
1.5
2000
2001
2002
2003
2004
2005
2006
2007
E
2008
F
2009
F
2010
F
-2-1012345678
Private consumption Residential investment Net trade GDP (RHS)
Contributions to US qoq growth; percentage points. GDP growth is % change qoq, annualised.
China: reality starts to bite•Slower exports•Credit squeeze•Labour issues•Inflation worries so…
•Easing the brakes•Buying one’s way out of trouble
Real GDP growth, %
5.06.07.08.09.0
10.011.012.013.0
2001 2002 2003 2004 2005 2006 2007 2008 2009
China: 2008/9—lower growth, high risks
GDP growth of 9.8% in 2008 (11.9% in 2007)7.5% in 2009
• Spillover effect from global recession• Global credit contraction, China’s credit
quota• Inflation = 6.4% yearly forecast• Fiscal burden• Natural disasters
Cooling measures: stable macroeconomic deceleration was Beijing’s goal - but it is now going for growth
reduce investment in overheated sectors
stimulate domestic consumption levels use fiscal transfers, fixed asset investments to redress balance between rich and poor areas (policy)
…while managing economic transition and maintaining stability Olympic year• Industrial upgrade• Global downgrade
Exports sputter, and there’s worse to come
EU US Hong KongJapan ASEAN Other
8.3%
8.3%
17.5%
20.6%
China’s H1 exports by destination
13.6%
Real GDP growth 2008 2009
EU 1.1 -.0.3
US 1.4 -0.4
Japan 0.3 -0.2
Major headaches
•Collapsing stock market
•Knock-on effect of world financial turmoil
•Will consumer spending hold up?
Shanghai Stock Exchange Composite index
15002000250030003500400045005000
China ¥ = US $
• slower US growth will have selective impact on China
• rate of RMB appreciation has picked up, to 9.7% in 2008.
• ¥6.42:US$1 by end-2010
• but still no one-off move
Power shortages
•Masses of new generating capacity
•Pricing policies a major factor in shortages
•2002 = 824 kg. oil per head•2008 = 1,405 kg. oil per head
•2002 = 1,271 kwh per head•2008 = 2,471 kwh per head
Wage pressures•Pro-union push by ACFTU
•Embryonic “collective bargaining”
•More litigious work force
•Demographic pressures
•Importing of cheaper labour
EHS outlook: old problems, new protocols
•New inspection protocols, confidence-building measures
•Major trading partners enlisted for new (harmonized) standards
The agribusiness approach•Land tenure issues, rural livelihoods
•Food safety concerns
•Food security concerns
Real estate market factors•Fallout in local property markets, transactions and prices are down
•Consolidation in property sector
•Local municipalities try to keep their markets afloat
•Relief for mortgage holders?
A housing bubble?
Floor Space of Buildings under Construction and Completed by Region 2007
0
50
100
150
200
250
300
Mlil
ion
sq.m
Under Construction
Completed
Labour unrest
• Taxi strikes • Skills shortages
• Paying the price of industrial upgrades
• Moving back home
No more fast lane
Government to the rescue
•Export rebate tax adjustments
•Credit relaxed for SMEs
•Stimulus package
•…But watch the 3 Rs:
Regulations, Raw materials, Renminbi
The stimulus package?
The rise of the welfare state should underpin greater consumption
The 17th CCP Congress: “Harmonious society” policies take effect • Education• Health• Poverty stipends• Subsidized housing• Rapid growth of 2nd and 3rd tier cities and beyond• But saving culture unlikely to be lost overnight
Global reliance on Chinese consumers
•Asset bubble had fed conspicuous consumption
•Will buying habits persist in hard times?
Empty lots
On-line consumption
Consumer resilience?
Top 10 Retail Cities in China 2007
0 5,000 10,000 15,000 20,000 25,000
Guangzhou
Wuxi*
Beijing
Shenzhen
Shanghai
Suzhou*
Hangzhou*
Nanjing
Ningbo*
Wuhan*
Retail per head (RMB)
* Based on household registration
Asset shifting
Rural markets on the move
•“万村千乡市场工程” rural retail policy push
•Revolution in rural finance
•Hypermarkets, supermarkets, mini markets, convenience stores, gas stations expand the rural footprint
