Download 2009 China Business Outlook

2009 China Business Outlook
January 29, 2009
by Andrew M. Pan
China’s Market
Under Global Economic Slowdown
-Opportunities and Challenges
Outline
• China Under Global Economic
Slowdown
• Opportunities
- Central Government Stimulus Package
- Opportunities by Industry Sectors
• Challenges
• Prediction
2
China Under
Global Economic Slowdown
• GDP growth statistics
China's GDP growth (2000-2009)
• 9% in 2008
• 2008 Quarters
15%
12%
–
–
–
–
9%
6%
3%
0%
0 01 02 03 04 05 06 07 08 09
0
20 20 20 20 20 20 20 20 20 20
10.6% (Q1)
10.1% (Q2)
9.0% (Q3)
6.8% (Q4)
• 2009 target: 8%
3
Source: National Bureau of Statistics of China
China Under
Global Economic Slowdown
• Export/import decline
• Factories close
• Unemployment increase
• Registered unemployed labor in cities
• Raised 2009 target to 4.6%, the highest
since 1980
• Foreign direct investment decline
• FDI flows weakened, with a 5.7% decline in
Dec. 2008
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China Under
Global Economic Slowdown
• Foreign exchange reserves
Foreign reserves (US$ billion)
fluctuation, capital outflow?
2000
1600
1200
800
400
0
• Oct. 2008, foreign
exchange reserves fell
below US $1,890
billion
• 1st month by month
decline since 2003
4 04 05 05 06 06 07 07 08
8 08
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China Under
Global Economic Slowdown
• Stock market
• Housing market
• Auto market
Index
Shanghai SSE Composite Index
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2000 2001 2002 2003 2004 2005 2006 2007 Sep- 2008
07
Year
6
Opportunities:
China’s Stimulus Package
• 4 trillion RMB ($586 billion USD) stimulus package
for government investment in infrastructure, tax
deductions and subsidies, to stimulate domestic
spending
• Announced Nov. 9, 2008, projects and spending
already started in 2008
• 2 years, 10 major areas:
• Finance, housing, rural infrastructure, transportation,
industry, health and education, disaster rebuilding,
environmental protection, technological innovation, and
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tax reform
Opportunities:
China’s Stimulus Package
• Value Added Tax (VAT) reform
• RMB 120 billion tax reduction from January 1st, 2009
• Export VAT refund rate increase to help exporters
• Applicable to 3,770 goods
• Spending already began in the last quarter of
2008, government aims to create jobs now
8
Opportunities:
Industry Sectors
• Finance
•
•
•
•
•
Removing lending quota on commercial banks
Increasing the lending scale
Credit support to M&A
Credit support to rural areas
Credit support to small and medium enterprises
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Opportunities:
Industry Sectors
• Housing
• Tax reduction to boost real estate market
• Affordable and low-rent housing
• Expanding the pilot program to rebuild rural
housing
• Increasing senior housing
10
Opportunities:
Industry Sectors
• Rural infrastructure/modernization
•
•
•
•
Improving countryside roads and power grids
Methane to replace coal and wood
Ensuring drinking water safety
Expediting the North-South water diversion project
and country-wide reservoirs
• Rural Home Appliance Subsidies Program
11
Opportunities:
Industry Sectors
• Transportation
• Building more airports in the western areas
• Expanding highway system
• Building more dedicated passenger rail links and
coal routes
12
Opportunities:
Industry Sectors
• Automobile
• Tax reduction for purchasing economic cars less
than 1.6L
• Subsidies to farmers for purchasing light trucks
and minivans
• RMB 10 billion fund to subsidize auto industry
technological innovation and new energy vehicles
• Encouraging M&A and brand name development
to tap overseas market
• Expanding auto financing
13
Opportunities:
Industry Sectors
• Telecom
• Long awaited 3G licenses issued to China Mobile
(TD-SCDMA), China Telecom (CDMA2000) and
China Unicom (WCDMA)
• Will spend RMB 170 billion in 2009, and 400 billion
by 2011 on 3G network
• Could lead to US $290 billion in private-sector
investment by 2011
• Target: 50 million subscribers by 2011, covering all
cities and bigger townships
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Opportunities:
Industry Sectors
• Health and Education
•
•
•
•
•
Improving health and medical systems in rural areas
Restructuring the healthcare system
Building more joint-venture hospitals
Expanding health insurance, especially to rural areas
Developing cultural and educational sectors in rural
areas
• Building more schools in rural western and central
areas
15
Opportunities:
Industry Sectors
• Energy and environment
• Technology upgrade of coal-burning power plants to
reduce pollution
• Encouraging investment in renewable energy such
as nuclear, wind, solar, and biomass
• Encouraging energy conservation, and improving
energy efficiency
• Clean Development Mechanism (CDM) projects –
greenhouse gases reduction projects
• Waste management
• Eco-city plan
16
Opportunities:
Industry Sectors
• Other opportunities
•
•
•
•
•
•
Luxury goods and brands
Fashion
Hotels and hospitality
E-commerce
Media and advertising
Professional services
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Challenges
• Consumer Skepticism
Shanghai - Cate gorie s Re duce d Spe nding On
Of the 20% of Groce ry Shoppe rs that have
re duce d s pe nding in Shanghai - 57% of this
group plan have re duce d s pe nding on Snack s ,
De s s e rts and Candy
• 60% of middle class
consumers in key
Chinese cities have
cut their spending, or
plan to this year
• Their major concern
is unemployment
0%
15% 30% 45% 60% 75%
Snack s & De s s e rts & Candy
Milk & Dairy
Me at & Poultry
Eggs
Hous hold Goods
Pe rs onal Care Products
Canne d Foods
Condim e nts & Oils
Wine
Source: DDMA China Household Grocery Spending - 2009
18
Challenges
• Global economic slowdown lasting can cause China’s
economic growth sluggish and market (most sectors)
downsize dramatically
• GDP growth rate lowering than 8% may cause high
unemployment, and further cause social instability
• Boosting domestic consumption may cause imports down
• Trade protectionism by the new administration?
• Trade and other disputes between U.S. and China
• Banking trouble again: Non-performing loans rising?
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Prediction
• China – First to Recover?
• Premier Wen Jiabao said yesterday he saw some signs of
recovery in Dec. 2008
• China aims to be the first to recover
• Start to recover in the 2nd half of 2009, and gain full steam in
2011
• Sectors to Recover First
• Real estate, infrastructure, steel and other construction
materials, telecom, home appliance, retail, and energy
• Transformation of Growth Pattern
• Now: excess consumption of natural resources; environmental
pollution; too much investment; insufficient domestic
consumption
• Aim: more sustainable and steady growth with a better skilled
work force and technological innovation; boost domestic
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consumption
Contact
North American Representative Office of
Shenzhen, P.R. China (NAROS)
Andrew Pan
Chief Representative & Managing Director
350 S. Figueroa Street, Suite 288
Los Angeles, CA 90071
Tel: (213) 628-9888
Fax: (213) 628-8383
[email protected]
www.shenzhenoffice.org
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