China s Economic Development. An On-the-Ground View. September 2011

Transcription

1 China s Economic Development An On-the-Ground View September 2011

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3 Outline 1. The pressure on inflation 2. Tight environment for credit availability 3. Urbanization and infrastructure investment 4. Risks in the rest of the year 3

4 1. Inflation 7 China - Contributions to Inflation (y/y) Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 New Weights May 11 Aug 11 Food Housing Medical Other C PI 4

5 Water shortage 12,000 China - Fresh Water per C apita (c u. M. per capita) 10,000 8,000 6,000 4,000 2,000 0 W orld High Incom e C ountrie s Midd le Incom e C ountries Low Incom e C ountries C hina 5

6 Uneven Distribution of Water Resources Northern China: 20% of water resources, 47% of the population, 65% of the arable land. 1,800 1,600 C hina - W ater En dowm ent (c n. M. per c apit a) 1,400 1,200 1, No rthern P la ins No rth Ea ste rn R egion S o uthe rn R e gio n Wa ter Re so urce s Wa ter Us age 6

7 Uneven Distribution of Water Resources Beijing: 20mn residents, less than 100 cubic m a person cubic m of water a person: 2,000: int l standard; 1,000: red-line level; 500: severe lack of water; 300: disaster level. 7

8 Uneven Distribution of Water Resources Dujiangyan irrigation system: built over 2,000 years ago Before 1949: 133,000 ha Now: 2/3 of 1mn ha Future plan: 1mn ha The Min River in the area, usage is 70% of the flow international standard: less than 30%; Switzerland: less than 20% 8

9 Logistics Cost of a cabbage: RMB 3 retail; RMB1.8 for transport (60%) Reason: damage 25-30%; Advanced countries: 5%; US: 1-2% Freezer facilities: in need of investment By 2017, spending on food RMB 4.9tn Logistics investment: RMB 800bn 9

10 2. Tightening Credit Environment 2,000 China - New Lending (RMB, bn) 1,500 1, Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Medium and Long-term Short-term 10

11 2. Tightening Credit Environment Overall credit target: 8tn (8tn last year, 10tn 2009) H1 2011: Shanghai loan increase was 73.5% of 2010 H1 level H1 RMB loan increase 4.1tn, 450bn less YoY But entrusted loan increase 703bn, 383bn more YoY (120%) 11

12 SMEs Total: 50 mn Contributing 60% of IP; 57% sales Contributing 40% profits / taxes Only 10% of credit requirement is from banks Credit post GFC: only 20% to SMEs 12

13 SMEs Informal credit: 2-3% a month (uncompounded); 1-2% last 2 years In steel trade Personal loans: 30% Guarantee companies: 15-20% Banks: 7-8% Suicide of a female Fijian trader in Shanghai, Aug 12 13

14 SMEs Informal credit: 2-3% a month (un-compounded); 1-2% last 2 years 14

15 3. Urbanisation 20 China - Contribution to GDP Growth H1 C onsumption Investment Net Exports GDP, y/y 15

16 3. Urbanisation In the 12 th 5 year plan, the government intends to raise China s urbanization ratio from current 47% to 52% China - Population by Province Rural (mn) Urban (mn) Urban (%) National Average (%) GD HE SD SC JS HE HN AH HB ZJ GX YN JX LN HL GZ SN FJ SX CQ JL GS NM XJ SH BJ TJ HI NX QH XZ Percentage of Urban Population World Developed Countries China Forecast

17 Urbanisation Sewage treatment 73% by end 2009 Target for 2011: 80% Average of developed countries: 90% plan: investment of 450bn Between , there will be 63 urban subway lines under construction in 25 cities 17

18 Urbanisation Population: 1,339,724,852 (as of Nov 1, 2010) 18

19 Urbanisation Tier 1 cities: Beijing; Shanghai; Guangzhou; ShenZhen Tier 2 cities: 30+ provincial capitals Tier 3 cities: 280 mid-sized cities Tier 4 cities: 2,800 county-level cities Tier 1 cities account for 8% of population; 21% of GDP Tier 2 cities account for 60% of population; 55% of GDP 19

20 Regional Development: Henan Wheat production: ¼ of national total Grain production: 1/10 of national total #5 in terms of GDP (over 1 tn) H FAI: 711bn (30% YoY) #4 after Jiangsu (1,183bn), Shandong (1,086bn), and Liaoning (721bn). 20

21 The location China s Chicago Chongqing Economist Similarities: The location The water transportation The stage of development 21

22 Urbanisation Each year, about 400, ,000 farmers become urban citizens. Every year newly completed residential floor space: million square metres May 2003 June 2003 Oct

23 Regional Development: Liaoning 23

24 4. Risks to Watch Out in the Near Future The risk of inflation is much higher than the risk of economic slowdown. We forecast the economy to grow by 9.6% this year. Wage hikes will help boost consumption and tax cuts starting Sept 10 million public housing unit a mandatory requirement Investment in China s central and western region will remain strong Medium-term risk arising from the fiscal stimulus excesses has increased, which requires continued economic and financial sector reform. 24

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