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On February 19, 2010, the Junior Hong Kong Canada Business Association McGill (JHKCBA McGill) brings in Mr. Alain-Marie Carron, Director at Secor-Taktik, to discuss the current global economic imbalance. As China leads the world out of recession, her western colleagues face challenges on the road to recovery, namely the drainage of capital that is moving eastward. In light of this, McGill students and Mr. Carron address the 8 implications of Chinese growth on western economies and the opportunities available for students entering the work force.
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8 areas where Chinese development disturbs the West
CHINA : «OUR ECONOMY, YOUR PROBLEM»
Alain-Marie CarronSECORFebruary 19th 2010
vendredi 19 février 2010
«THE DOLLAR IS OUR CURRENCY,
BUT YOUR PROBLEM»
1971: Nixon’s Secretary of the Treasury, John Connally tells European to get lost
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LIU MINGKANG, HEAD OF CHINA
BANKING REGULATORY COMMISSION
«(USA) is boosting speculative investment in stock an property markets and will pose new, real and insurmontable risks to the
global recovery»
Source : FT 15/11/2009
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TENSIONS WITH THE WEST
Copenhague : China played its card, rejects verifiable climate control measures
USA/Europe want a stronger Yuan and won’t get it (for now)
US Congress approved arms sales to Taiwan
Google leaves/stays in China
China sells US Treasury bonds
Washington drops the moon, Beijing wants to catch it
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BOOMING ECONOMY
2009 : Chinese buy 13,6 billion cars: + 46% vs 2008
CNOOC (oil) raises production by 7%, exploration by 30%
CSG sells 6millions motocyles (world #1), +30% output
China Rail: profits +50%
China Diamonds : world #2
Overseas construction revenue: from $11 b in 2002, to $57 b in 2008
Dalian
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CHINA VS WORLD
1.Growth
2.Yuan
3.Exports
4.Buying the world
5.R&D-Education
6.Rush for Resources
7.ChinAfrica
8.Politics
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1 - GROWTH
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WEALTH CREATION
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RETURN OF THE WAVE
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HOUSEHOLD CONSUMPTION
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+ SERVICES & HOUSING
Source : Kenneth Curtis, Themes Investment Management : «The shift to Asia accelerates»
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INVESTING IN A DOWNTURN
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2 - THE YUAN
Undervalued Yuan boosts exports
Money received from exports
goes back to USA
feeds sovereign fund
useful to buy & invest in primary resources abroad
Exports keep production running, overcapacity manageable and employement at a suitable level
Don’t forget : for a typical product manufactured in China less than 20% of the final profit margin is captured by chinese manufacturers
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3 - EXPORTS: CHINA # 1
0 375 750 1 125 1 5002003200420052006200720082009
Germany China
Source: OMC,FT
2009 Germany : 1,121.3b US$China : 1,201,7bn US$
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4 - BUYING THE WORLD
2009 : outbound FDI exceed inbound FDI for the first time, reaching 150 billion US$
2008 : China’s overseas investment nearly doubled compared to 2007, reaching 51.1 billions US$
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ROOM FOR MANOEUVERING
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REASONS TO MOVE
Having «national champions» that are world size players
Sustaining growth of local companies through international market
Selling productions of overcapacity sectors
Moving up the value chain : producing more cheap goods abroad, more sophisticated ones inland
Buying intangibles still scarce in China : intellectual property, intangible brand value, human resources with global operating talents
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THE GROCERY LIST
Volvo would go to Geely, SAAB could have gone to BAIC...
Piraeus harbour is managed by a Chinese company
China would have liked to bail out Greece from its debt...
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5 - R&D -EDUCATION
China as a center for R&D
R&D spending has been growing about 17% annually for the past 12 years
2007 : multinational corporations have 1,160 R&D centers in China
China’s goal si to spend 2,5% of GDP on R&D.
2005 : China spent 1,4% o, USA 2,6% , Japan 3,2%
Education
China produces around 300 000 engineers yearly vs 70 000 in USA
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6 - RUSH FOR RESOURCES
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ENERGY HUNGRY INDUSTRIES
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7 - CHINAFRICA
Bilateral Chinese-African trade rose from $6.5 billions in 1999 to $106.8 billions in 2008
Second only to US ($116 billions)
China has bilateral agreement with 48 african countries, loan agreement with 22
Congo : 90% of the state of Katanga minerals were exported to China, owner of 60 of the 75 processing plants
Source : China’s African Challenges, Sarah Raine
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CHINESE-AFRICAN TRADE
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MORE OIL FROM AFRICA
46%45%
9%
Africa Middle East Others
25%
47%
28%China
oil importS
1995 2005
Le Monde 3.02.2007
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8 - POLITICS«This circumstance has
engendered what maybe the ultimate paradox, namely that
Westerners, who have done more than any other people to
create the modern world, are in certain respects the least
capable of comprehending it»
Paul A. Cohen, Discovering History in China
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