China s GDP slows out of double-digit growth

Transcription

1 China s GDP slows out of double-digit growth Percent change, annual Source: International Monetary Fund.

2 China s growth forecasts slows among Asian countries Percent change in real GDP Percent change, annual South Korea Thailand Hong Kong SAR 214 Forecast Malaysia Indonesia India China Source: International Monetary Fund.

3 Consumption low in China compared to developing countries Final consumption expenditure Percent of GDP China Malaysia Russian Federation India Mexico South Africa Brazil Philippines Source: The World Bank.

4 China s GDP per capita growth is still on top Percent change, annual 2 15 China 1 5 Thailand Malaysia -5 Japan United States Source: The World Bank.

5 China s government expenditures and revenue Percent change, annual 35 3 Revenue Expenditure Source: Quandl.

6 Energy use outstrips domestic production Percent change, annual 15 1 Use 5 Production Imports (percent of energy use) Source: The World Bank.

7 China continues to increase total savings Gross savings per GDP Percent of GDP 6 5 China 4 3 Japan 2 1 United States Source: The World Bank.

8 China s inward and outward foreign investment flows Percent of GDP Inflows 2 1 Outflows Source: The World Bank.

9 China's foreign direct investment net inflows Percent of GDP Source: The World Bank.

10 China moves away from agriculture into services Percent of GDP 1 Agriculture Industry Services Source: The World Bank.

11 Migration from China s rural areas to urban Share of population Percent 1 Urban Population Rural Population Source: The World Bank.

12 All of China s tech exports are growing Tech exports from China to the world US$ billions 7 6 HiTech LoTech 2 1 MHTech MLTech Source: STAN bilateral trade database. Notes: MLTech, and MHTech refer to Medium Low and Medium High Tech.

13 U.S. patents issued to China increase Patents 7, 6, 5, 4, 3, 2, 1, Source: U.S. Patent and Trademark Office.

14 Chinese internet users and internet penetration Millions Number of internet users (left) Internet penetration (right) Percent Sources: China Internet Network Information Center, 33 rd Statistical Report on Internet Development in China.

15 Mobile internet is a main facilitator of internet access Millions Number of mobile internet users (left) Mobile internet users to total internet users Percent Sources: China Internet Network Information Center, 33 rd Statistical Report on Internet Development in China.

16 China s internet users outnumber the entire U.S. population China internet users: 618 million U.S. population: 318 million Source: China Internet Network Information Center, 33 rd Statistical Report on Internet Development in China, U.S. Census Bureau.

17 China s e-commerce is dominated by large marketplaces Percent Marketplace Independent merchants China U.S. Sources: iresearch, emarketer, McKinsey.

18 Enterprises that carry out online sales in key industries Percent Manufacturing Wholesale and retail Overall IT, computers, software Construction Transportation, storage, postal Leasing and commercial service Resident service and other services Real estate Sources: China Internet Network Information Center, 33 rd Statistical Report on Internet Development in China.

19 China was already the second-largest e-tailing market in 211 US$ billions Source: Euromonitor, Forrester, iresearch, EIU, McKinsey.

20 Composition of China s e-commerce market Market share as of 213 B2B: large enterprises 26% B2B: SMEs 52% Online shopping 19% Online travel 2% O2O 1% Source: iresearch.

21 213 global box office All films US$ billion U.S./Canada International $32.6 $34.7 $35.9 $29.4 $ (64%) (66%) (69%) (69%) (7%) Rank Country Money spent on all films (US$ billions) 1 China $3.6 2 Japan $2.4 3 U.K. $1.7 4 France $1.6 5 India $1.5 6 South Korea $1.4 7 Russia $1.4 8 Germany $1.3 9 Australia $1.1 1 Mexico $.9 Source: Motion Picture Association of America.

22 VC and PE investment in China s healthcare industry US$ billions Amount of investment (left) Number of deals (right) Count Source: Zero2ipo.

23 Premier s NPC Lianghui speech and 214 targets Key targets GDP growth ~7.5% ~7.5% CPI inflation ~3.5% ~3.5% Household income growth In line with real GDP growth In line with real GDP growth Job creation >1 million >9 million Balance of payment Basically balanced Further improvement Budget deficit CNY 1.35 trillion (central govt 95 billion, local govt 4 billion), ~2.1% of GDP CNY 1.2 trillion (central govt 85 billion, local govt 35 billion), ~ 2% of GDP M2 growth ~13% ~13% Sources: Standard Chartered, Milken Institute.

24 Premier s NPC Lianghui speech and 214 targets Key targets Credit growth Maintain appropriate growth, reasonably increase total social financing Maintain appropriate growth, reasonably increase total social financing Farmland area 1.8 billion mu red line 1.8 billion mu red line Social housing Start 7 million new units; renovate 2.6 million houses in rural areas Complete 4.7 million units and start 6.3 million new units in cities; continue renovation in rural areas Sources: Standard Chartered, Milken Institute.

25 Premier s NPC Lianghui speech and 214 targets Key targets Fiscal policy stance Proactive fiscal policy (limited detail provided in the speech) Proactive fiscal policy: 1. Maintain stable growth, advance reforms, improve peoples livelihood 2. Expand VAT coverage, reduce tax burden 3. Restrict general expenses 4. Support social housing, infrastructure, and social projects 5. Better manage local government debt; properly deal with financing for existing investment projects and debt repayment. Sources: Standard Chartered, Milken Institute.

26 Premier s NPC Lianghui speech and 214 targets Key targets Monetary policy stance Prudent monetary policy: 1. Balanced demand and supply, stable financial environment 2. Perfect macro-prudential framework, appropriate growth in M2 and credit 3. Enhance coordination with fiscal, industrial, and investment policies 4. Fine-tune policy to ensure stable economic growth Prudent monetary policy: 1. Perfect macro-prudential framework, appropriate growth in M2 and credit 2. Support agricultural SMEs, new strategic industries, and key national projects 3. Prevent systematic or regional financial crisis, improve supervision and sustainability Sources: Standard Chartered, Milken Institute.

27 China healthcare expenditures shift from private to public Percent of GDP 4 3 Private Public Source: The World Bank.

28 Difference between a clear and smoggy day in Beijing Source: The Atlantic, China Air Daily.

29 Third Plenum decisions Social reform One Child Policy Reform through Labor System If one parent is an only child, a couple can now have two kids Dismantling a form of imprisonment without trial Source: Milken Institute.

30 Third Plenum decisions Ministry of Finance mandates Oversee open and transparent budgets Create local government debt-management framework Sort out transfer system Reform VAT and resource taxes Accelerate property tax legislation Source: Milken Institute.

31 Third Plenum decisions Financial sector reforms Accelerated interest rate liberalization Further opening up of capital account Privately held banks Greater freedom for companies to issue foreign debt Source: Milken Institute.

32 Biggest gains and losses in total wealth Change in total wealth, US$ trillions U.S. China Germany U.K. Mexico India Russia Brazil Japan Sources: Davies, Lluberas, Shorrocks, Credit Suisse. Note: Net worth or wealth is defined as the value of financial assets plus real assets (principally housing) owned by households, less their debts.

33 Wealth growth rates Since 2 Percent, China India Latin America Africa World Asia Source: Davies, Lluberas, Shorrocks, Credit Suisse. Note: Net worth or wealth is defined as the value of financial assets plus real assets (principally housing) owned by households, less their debts.

34 China s wealth distribution relative to the world Percent China World <US$ 1, US$ 1,-1, US$ 1, - 1m >US$ 1m Source: Davies, Lluberas, Shorrocks, Credit Suisse. Note: Net worth or wealth is defined as the value of financial assets plus real assets (principally housing) owned by households, less their debts.

35 China s composition of wealth per adult Composition of wealth per adult, US$ 25, 2, 15, 1, 5, -5, Financial Real Debts Net worth Source: Davies, Lluberas, Shorrocks, Credit Suisse. Note: Net worth or wealth is defined as the value of financial assets plus real assets (principally housing) owned by households, less their debts.

36 China s wealth per adult over time US$ billions 25, Wealth per adult 2, 15, 1, Wealth per adult at constant exchange rate 5, Source: Davies, Lluberas, Shorrocks, Credit Suisse. Note: Net worth or wealth is defined as the value of financial assets plus real assets (principally housing) owned by households, less their debts.

37 The population is aging Age dependency ratio, old India Brazil China 212 World Asia Pacific Russia U.S. China 225 U.K. Euro area Japan Source: World Bank. Note: The old age dependency ratio is the ratio of the elderly to the workforce. All countries are 212.

38 China share of elderly will increase rapidly Share of population 65+ Percent U.S. China India Source: World Bank.

39 China s aging population mirrors problem throughout Asia Population, millions 1, & over Source: United Nations.

40 China and India will make waves in the global middle class Share of global middle-class consumption, 2-25 Source: OECD.

41 China and U.S. current account balances converge Current account balance, percent of GDP U.S. China Sources: World Bank, BEA, SAFE.

42 China s external imbalance is getting worse Current account, percent of GDP Source: CEIC.

43 China PMI manufacturing falls to an 8-month low Markit PMI composite Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Sources: Markit, Bloomberg.

44 China s debt is on the rise RMB trillions 6 5 Non-bank debt 4 3 Bank loans Source: Bloomberg. Note: Non-bank debt refers to Entrusted loans, trust loans, bank acceptance, and corporate bond financing.

45 NPL to total loans ratio has not gone up yet RMB trillions Total loans Non-performing loans, percent of total Sources: Economist, Bloomberg.

46 China relies on increasing domestic credit to support growth Percent of GDP Domestic credit to private sector Current account balance Source: World Bank.

47 Shenzhen outperforms Shanghai index Index, 1=1/1/ Small caps (Shenzhen Index) Large caps (Shanghai Index) Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Source: Bloomberg.

48 Emerging market equity index performance Index, 1=1/1/ South Africa 11 India 15 Russia China 8 Emerging Markets 75 Brazil 7 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Source: Bloomberg.

49 Cost of offshore CNY borrowing market decreases 3 year Dim Sum bond yield Percent Source: Bloomberg. Note: 3-year bonds have historically seen the most issuance.

50 Total social financing stock breakdown Percent of total social financing outstanding, 213 Corporate bonds 8% BADs 6% Public equity 3% Trust loans 4% Entrusted loans 7% Bank FX loans 5% Bank loans 67% Sources: CEIC, Standard Chartered Research. Note: BADs are defined as bankers accepted drafts.

51 Chinese acquisitions of U.S. companies US$ billions Volume (left) Deal count (right) Count Source: Bloomberg.

52 Chinese Yuan onshore-offshore funding costs converge Percent Onshore CNY Offshore CNY 6.1 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Source: Bloomberg.

53 Dim sum bond issuance By country US$ trillions Other HK CN Source: Bloomberg.

54 Financial issuers have dominated the dim sum bond market Issuance, US$ billions Other sectors Financials Q2 211 Q3 211 Q4 211 Q1 212 Q2 212 Q3 212 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Source: Bloomberg.

55 RMB tumbled to lowest levels in a year 1 CNY to USD Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Source: Bloomberg.

56 RMB internationalization US$ billions Volume of cross-border RMB trade settlement (left) Percent of total foreign trade Share of PRC s RMB trade settlement (right) Source: Eichengreen (213).

57 The bulk of Chinese lending goes to real estate Top 1 industries US$ billions Loan tranche size (left) Percent Market share (right) Utilities Real Estate M&M Industrial Transport. Financial Chemicals Gov't Airlines Railroad 1 5 Source: Bloomberg. Note: Loans from ICBC, Bank of China, BoAg, BoCom, China Construction Bank, China Merchants, Minsheng, Everbright, and Citic. Gov t refers to regional and local government, while M&M stands for metals and mining.

58 China s biggest maturing loans concentrated in real estate Percent of total expiring loans Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Q4 215 Source: Bloomberg.

59 Importance of China s property market to wider economy Property market, percent of each category GDP Fixed asset investment Outstanding loans New loans Government revenues Source: Nomura.

60 Non-loan credit extension has accelerated substantially China, moving 12-month average RMB billions Social financing Alternative financing RMB loans Sources: PBOC, Datastream.

61 Banks wealth management products continue to rise Assets under management CNY billions WMP Deposits Q3 21 Q1 211 Q3 211 Q1 212 Q3 212 Q1 213 Q3 213 Sources: CEIC, Standard Chartered.

62 Where trust funds go Assets under management Infrastructure 26% Industry 3% Other 13% Real estate 9% Financial institutions 11% Stock market 11% Sources: CEIC, Standard Chartered Research.