China in the Global Economy: The last ten years and the next Ted H. Chu Chief Economist General Motors Company May 12, 2010 GIC Annual Monetary & Trade Conference
Ted Chu, China Next Decade 5‐12‐2010
1
Government & Policy Intensified anti corruption activities
Hu Jintao elected President
Violent protests in Lhasa, Tibet
Google to end censorship in China
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
“Population & Family Planning Law”
2
Agreement with Russia over border conflicts
China celebrates 60 years of communism
Economy Launched Grain Subsidy Policy Government announces a $586 billion stimulus
China becomes a member of the WTO
China becomes largest automobile market in the world
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Launched West Development Policies
3
Terminated Agriculture Tax
Millions of migrant workers lose their jobs due to global financial crisis
New gas pipeline opened between Turkmenistan & China
Culture, Education & Science Chinese scientists publish Indica genome sequence The Hanyu Pinyin alphabet
Four million people have to be resettled within the next 1015 years in the Three Gorges Dam area
Shanghai Expo
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Beijing is awarded the 2008 Olympics
4
Three Gorges Dam project begins
Beijing 2008 Olympics The Chinese inaugural edition of “Rolling Stone”
Environment Earthquake in Qinghai province. 2,000 deaths, 12,000 injured, 100,000 homeless
Earthquake strikes Sichuan province. Death toll reaches 69,000
Water supply of Harbin City is polluted by local plant
2005
2006 China surpasses the United States in carbon dioxide emissions
5
2007
2008
2009
2010
China surpasses the United States as the world’s largest producer of household garbage
Health
First cases of SARS
WHO predicts , around 50 million Chinese children will die prematurely from tobacco use related disease
China’s MoH 10th case of Avian Flu
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
SARS Quarantines
6
UN estimates 1 million Chinese are infected with HIV
Joint UN Program, MoH & WHO, on HIV/AIDS (UNAIDS) publish a report on AIDS.
Tainted Milk China has 90 million diabetics
Technology Government consolidates internet regulations
1st manned spacecraft into orbit
China reaches 94 million internet users China reaches 103 million internet users, 45.6 million computer hosts and 677,500 web sites
China celebrates fist domestically produced passenger jet
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
China reaches 210 million internet users
FirstÂever fiber optic network connection across Russian Chinese border (internet) CERNET2 China’s high speed network connecting 25 Universities 7
China is the malware capital of the world
Military China intensifies modernization of People’s Liberation Army China launches communication satellite
Government deploys troops to protect Three Gorges Dam from terrorist attacks
China shoots down old weather satellite, demonstrates ability to destroy spy satellites
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
China launches GPS satellite
Stateowned Galileo Industries begins cooperation with EU’s Galileo navigation system China launches third navigation satellite
8
China’s military budget increases by nearly 18%
China’s plans to increase military budget another 18%
Future Milestones
Monetary policy changes?
2010 2011
Housing market? Property taxes?
2012
2013
New Government
9
Labor force peaking
2014
2015
2016
Environmental Protection Laws?
Population aging
2017
2018
2019 2020
Population disproportionally male
GDP per Capita (PPP in 2009$) 35,000
Japan (1960-1990)
25,000
20,000
Russia
15,000
Brazil 10,000
China 5,000
0
India Source: Conference Board Total Economy Database
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
GDP per Capita (PPP in 2009$)
30,000
1998 GM China Market Study: Urbanization Projections 50
40
35
30
25
China Indonesia Thailand India Malaysia
20
15
Ted Chu, China Next Decade 5‐12‐2010
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
10
1979
Percent Urban Population in China
45
11
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1,400
1980
1979
1978
Population (in Millions)
China: Population
1,600
Population (in 10,000s)
Urban
1,200
Rural
1,000
800
600
400
200
0
13
50
2009
80
2008
90
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Percent (%) of Total Population
Urban Population as a Percent (%) of Total Population
100
Brazil Russia
70
60
China
40
India
30
20
10
0
14
China: Population 250
229 197
200
180
150
100
50
0 2000
2005
P.R. China: Total Population Aged 15-19 (millions)
2010
2015
P.R. China: Total Population Aged 20-24 (millions)
2020
Higher Education Students 35,000
China
30,000
In Thousands
25,000
20,000
U.S.
15,000
India Russia
10,000
Germany/France/UK Brazil
5,000
Japan 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source:Â Euromonitor
1998 GM China Market Study: Urban Household Income 8
urban 1998 2005 2010
6
5
4
3
2
1
above 12
11
5
4
3
2
0 1.5
number of households at each income level (millions)
7
annual household income (thousand US$ at market exchange rate)
Ted Chu, China Next Decade 5‐12‐2010
17
1998 GM China Market Study: Rapid income growth led to continuous upgrades & fast saturation of electric & white goods 1970s
1980s
1990s
2000s (proj.)
B&W TV
color TV
large scn TV
home Ent. Ctr
cable TV
Internet /Web
motorcycle
family car cellular phone
radio
stereo radio/tape
bicycle sewing machine
washing machine
telephone
watch
electric fan
air conditioner
refrigerator
kitchen equip.
PC fitness equipment
Urban per capita income in mid-decade (PPP, 1995 U S$) 411 690 1566 3690 18
Industry (000 units)
Vehicle Sales in Major Markets
20,000 18,000
China
16,000
W.E. 14,000
12,000
USA 10,000 8,000 6,000
Japan Brazil India Russia
4,000
2,000
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0
Source: GM Corporate Planning 19
American & Chinese Spending Patterns 100% 90% 80%
9%
Other
10%
5%
Leisure
7%
10%
Transport
70% 15%
60%
25%
9%
Household Items
8%
11% 14%
50%
13%
Leisure Transport Health Care
11%
11%
13%
3% 2% 7%
Household Items
5%
Housing
13%
Clothing
9%
Food
39%
Housing
17%
40%
22%
Other
3% 3% 7%
13%
Health Care
4%
12%
15% Clothing
30%
5% 10%
52% 19%
20% 31%
Food
23%
10%
4% 9%
0% 1940's - U.S.
1970's - U.S.
2000's - U.S.
1990's - China
2000's - China
9000 8000 7000
Oil Consumption (thou barrels daily)
Brazil Russian Federation India China
6000 5000
4000 3000 2000
1000 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
0
21
China: Exports and Imports as a Share of GDP 40.0%
Exports
35.0%
Imports
Share of GDP (%)
30.0% 25.0%
20.0%
EX + IM as % of GDP China* US Japan India Russia Brazil Euro Zone
15.0% 10.0% 5.0%
2000 40 20 18 20 53 19 60
2009 57 19 22 33 36 21 56
22
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0.0%
China: Intl Liquidity: Total Reserves Minus Gold 3,000
2,416
2,000
1,500
1,000
Japan Euro Zone
500
Russia Taiwan
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
Billions of US$ (NSA,EOP)
2,500
Every Decade has Winners 1400
Gold
Energy Commodities
NASDAQ
Nikkei 225
1200
Shanghai Stocks Five U.S. City Home Price Index
1000
800
What's Next?
600
400
200
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0 Sources: Gold: London Gold Bullion Market; Nikkei 225,NASDAQ and Dow Jones Shanghai: WSJ/Haver Analytics; Energy Commodities: S&P GSCI Energy Commodities Nearby Index/Haver Analytics; 5 U.S. City Home Price Index: Average of Case Shiller Index/Haver Analytics for Miami, Las Vegas, Los Angeles, San Diego, and San Francisco
Ted Chu, China Next Decade 5‐12‐2010
24
25
10-Jan-10
10-Jul-09
1,000
10-Jan-09
10-Jul-08
10-Jan-08
10-Jul-07
10-Jan-07
10-Jul-06
10-Jan-06
10-Jul-05
10-Jan-05
10-Jul-04
10-Jan-04
10-Jul-03
10-Jan-03
10-Jul-02
10-Jan-02
10-Jul-01
10-Jan-01
10-Jul-00
10-Jan-00
10-Jul-99
10-Jan-99
10-Jul-98
10-Jan-98
10-Jul-97
10-Jan-97
Stock Market Index (January 1997=100)
BRIC Stock Market Performance
1,200
Russia Brazil
800
600
400
India
200
China
0
China: The Next Decade Can be sustained • Income growth • Urbanization • Higher education • Military power expansion • Climbing the value chain
Cannot be sustained • Rate of labor force growth • Share of trade in GDP • Foreign reserve accumulation • Environmental deterioration • Widening of income disparity
What China needs: (1) social and geopolitical stability, (2) further structural reforms, (3) psychological maturity
Ted Chu, China Next Decade 5‐12‐2010
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