View
5
Download
0
Category
Preview:
Citation preview
© 2016 IHS
IHS ECONOMICS & COUNTRY RISK
IHS Financial Seminar The Road to Growth Dealing with China’s Overcapacity:
A Five-Year Outlook
19 April 2016 | Tuesday | Hong Kong
© 2015 IHS
Presentation
ihs.com
IHS
China’s Economic Transition: Separating Fact
from Fiction
China Regional Service
Brian JACKSON, Senior Economist, +86(0)10 65334515, Brian.Jackson@ihs.com
April 2016
ECONOMICS
© 2016 IHS
Restructuring during China’s economic
slowdown
3
China’s Economic Transition: Separating Fact from Fiction
© 2016 IHS
Slowing growth concentrated in China’s traditional
industrial and construction sectors
4
China’s Economic Transition: Separating Fact from Fiction
-1
1
3
5
7
9
11
13
2008 2011 2014
Services Industry and construction Agriculture
Chinese economic growth by sector, non-cumulative
Source: IHS
Co
ntr
ibu
tio
n t
o r
eal G
DP
gro
wth
,
perc
en
tag
e p
oin
ts
© 2016 IHS
© 2016 IHS
Industrial sector output and profit growth mismatch
reveals distortions in state-led industries
5
-20
-10
0
10
20
30
40
50
60
2007 2010 2013 2016
Utilities Light manufacturing
Heavy manufacturing Mining
Total growth
China industrial profits growth, nominal
Source: IHS © 2016 IHS
Perc
en
tag
e p
oin
t co
ntr
ibu
tio
n
China’s Economic Transition: Separating Fact from Fiction
0
1
2
3
4
5
6
7
8
2007 2010 2013 2016
Construction Utilities
Light manufacturing Heavy manufacturing
Mining
Contributions to Chinese GDP growth
Source: IHS © 2016 IHS
Perc
en
tag
e p
oin
t co
ntr
ibu
tio
n
© 2016 IHS
Investment in underperforming traditional sectors
slowed markedly since 2011
6
China’s Economic Transition: Separating Fact from Fiction
0
10
20
30
40
50
60
70
-2
0
2
4
6
8
10
12
14
16
18
2004 2007 2010 2013 2016
Construction Utilities Light manufacturing Heavy manufacturing Mining Secondary sector share of FAI growth
China fixed-asset investment growth
Source: IHS © 2016 IHS
Perc
en
tag
e p
oin
t co
ntr
ibu
tio
n
Sh
are
© 2016 IHS
Year on year growth returns for real estate activity,
levels data less encouraging to upstream suppliers
7
China’s Economic Transition: Separating Fact from Fiction
-40
-20
0
20
40
60
80
2009 2012 2015
Completions Under construction Starts Sold
Residential floor space indicators
Source: NBS Notes: floor space under construction is for all floor space; residential acounts for about 90%.
Perc
en
t ch
an
ge y
ear
ag
o
© 2016 IHS
0
2000
4000
6000
8000
10000
12000
14000
2009 2012 2015
Completed Sold Starts
China's residential floor space activity, levels
Source: IHS © 2016 IHS
10,0
00 S
qu
are
mete
rs, 12M
MA
© 2016 IHS
China’s service sector relatively stable, but not immune
to slowdown and restructuring
8
China’s Economic Transition: Separating Fact from Fiction
0
1
2
3
4
5
6
7
2007 2010 2013 2016
Other services Real estate Finance Accommodation, catering Wholesale, retail Transport, storage, post
Contributions to Chinese GDP growth
Source: IHS © 2016 IHS
Perc
en
en
tag
e p
oin
t co
ntr
ibu
tio
ns
© 2016 IHS
Slowing service sector investment is primarily due to
real estate sector correction
9
China’s Economic Transition: Separating Fact from Fiction
0
10
20
30
40
50
60
70
80
-5
0
5
10
15
20
25
2004 2007 2010 2013 2016
Other services Real estate Finance
Accommodation, catering Wholesale, retail Transport, storage, post
Tertiary sector share of FAI growth
China fixed-asset investment growth
Source: IHS © 2016 IHS
Perc
en
tag
e p
oin
t co
ntr
ibu
tio
n
Sh
are
© 2016 IHS
Reform during China’s economic slowdown
10
China’s Economic Transition: Separating Fact from Fiction
© 2016 IHS
Reform priority 1: supply side correction
2020 capacity reduction targets:
• Steel: cut 150-200 million tonnes,
consolidate ownership from 300
to 5 conglomerates by 2025
• Cement: cut 200 million tonnes
• Glass: cut 200 million cases
• Coal mining: cut 700 million
tonnes
CNY 100 billion fund established
for unemployment during 2016-17
alone, 1.8 million steel and coal
sector layoffs confirmed, rumors
that layoffs will reach 6 million
11
China’s Economic Transition: Separating Fact from Fiction
0
1
2
3
4
5
2003 2005 2007 2009 2011 2013 2015
Cement Glass Pig iron Crude steel
China heavy industrial output volume
Source: IHS © 2016 IHS
2002=
1, 12M
MA
© 2016 IHS
Reform priority 2: SOE reform
Ownership reform
• Competitive SOEs – state takes
a absolute minority ownership,
exit from SASAC system
• Public SOEs – state maintains a
relative majority
• Strategic/“functional” SOEs –
state maintains absolute majority
Managerial reform
• Professionalize management,
increase authority of board,
increase linkage between
salaries and profitability
12
-
5
10
15
20
25
30
35
Agriculture Industry Services
Functional Public Competitive
China state assets by classification, sector
Source: SASAC, NBS, IHS
CN
Y t
rillio
n
© 2016 IHS
China’s Economic Transition: Separating Fact from Fiction
© 2016 IHS
Reform priority 3: market entry
• Reduce barriers to market entry
for private domestic investors
• 2014 – Company Law Reform
• 2013-? – central government
campaign to reduce approval
bottlenecks in Beijing, canceling or
delegating to local authorities
• 2015-17 – transparency campaign
at local government level
• Increase foreign investment
access
• 2015 – revised FDI catalog
• 2014-20 – bilateral trade and
investment agreements
13
-20
-10
0
10
20
30
40
50
60
2007 2010 2013 2016
Services Industry and construction Agriculture
China foreign direct investment growth
Source: IHS © 2016 IHS
Perc
en
tag
e p
oin
t co
ntr
ibu
tio
n
China’s Economic Transition: Separating Fact from Fiction
© 2016 IHS
China’s 13th Five Year Plan an admission of a weaker
growth outlook, shift towards new but small sectors
Growth targets 2016-20 (2011-15
actual):
• Real GDP: 6.5% (7.8%)
• Labor productivity: 6.6% (7.5%)
• Services share: 56% (50.5%)
Implied targets:
• Nominal GDP: 6.5% (10.6%)
• Nominal services: 8.7% (13.6%)
• Services share of growth: 70%
(60%)
14
China’s Economic Transition: Separating Fact from Fiction
0
5
10
15
20
25
30
2007 2010 2013 2016 2019
Primary Secondary Tertiary
Growth under China's 13th Five Year Plan
Source: IHS © 2016 IHS
Year
on
year
no
min
al g
row
th
© 2016 IHS
China economic outlook
15
China’s Economic Transition: Separating Fact from Fiction
© 2016 IHS
China economic outlook
16
China’s Economic Transition: Separating Fact from Fiction
-4
-2
0
2
4
6
8
10
12
14
16
18
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Services Non-manufacturing industry Manufacturing Agriculture
Contributions to China's real GDP growth
Source: IHS
© 2016 IHS
Sources
• IHS Country Intelligence • IHS China Regional Service
China’s
Economic
Transition:
Separating
Fact from
Fiction
17
© 2016 IHS
Q & A
18
China’s Economic Transition: Separating Fact from Fiction
IHSTM
COPYRIGHT NOTICE AND DISCLAIMER © 2016 IHS. For internal use of IHS clients only.
No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content
reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable, but its accuracy and completeness are not warranted, nor are the
opinions and analyses that are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular,
please note that no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various risks and uncertainties, actual events
and results may differ materially from forecasts and statements of belief noted herein. This report is not to be construed as legal or financial advice, and use of or reliance on any information in this publication is entirely at client’s own risk. IHS and the
IHS logo are trademarks of IHS.
IHS Customer Care:
Americas: +1 800 IHS CARE (+1 800 447 2273); CustomerCare@ihs.com
Europe, Middle East, and Africa: +44 (0) 1344 328 300; Customer.Support@ihs.com
Asia and the Pacific Rim: +604 291 3600; SupportAPAC@ihs.com
Thank You
Recommended