China Macro

7/30/2019 China Macro

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China

Robyn MeredithThe Elephant and the Dragon

Prof. Peter NavarroComing Wars of China

Mr. Eamonn FingletonIn the Jaws of the Dragon

Web Sources


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Macro IndicatorsAs of 2012, second largest GDP $ 7.47

trillion ($ 11.32 trillion on PPP basis)

Annual GDP growth of 10.5 % between2001 and 2010

Chinas growth in 2007 -2011 equal to

growth of G7 countries combined

Inward FDI $ 106 billion in 2010


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Macro Indicators (Continued) 29th in Global Competitive Index but 135th in

the Index of Economic Freedom

14% of population below the poverty line of $1 a day, down from 64 % in 1979.

Number of US $ billionaire second largest inthe world at 271

Largest consumer of energy. 70 % from coal.


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Macro Indicators (Continued) One child policy ten million coerced

abortions and ten million sterilizations a year.In absence of the policy, population would be

400 million more today. Highways: 1989 169 miles; 2004 21,500

miles; 2010 (projected) 40,000 miles, 2020(projected) 55,000 miles (equaling US

highway system) [India 3,355 miles, 1,600under construction, 3,700 miles planned] Shanghai 15 skyscrapers in 1979; 2006

3,780 skyscrapers (more than Chicago and LAcombined)


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ChinaWorlds Factory Exports more in a day than did in a year

in 1979

Export of 1.9 trillion in 2010 is four anda half times 430 billion in 2003

Exports more than EU, US

75 % of global new toys

A third of global footwear exports


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Behind Macro Indicators

Chinas trade surplus with the world in 2011 $

280 billion against 32 billion in 2004 Chinas trade surplus with America in 2008 - $

266 billion ($ 83 billion in 2001)

Made in China for America

EU trade deficit with China in 2006 - $ 92billion

Exporters are Western companies and/ortheir China partners. Only 4 out of 20 top

exporters in 2005 were Chinese companies


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The China Price and WMPL Low wages, high quality work done by disciplined,

nonunion workers (reserve army of unemployed)

Minimal worker health and safety regulations Lax environmental regulations and enforcement

Catalytic role of foreign direct investment

Highly efficient form of industrial organizationnetwork

clustering (Adam Smiths division oflabour at best.Network in Guangdong Province for toys)


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PaintPlastic

Parts

Injection

Molds

Electronic

Components

Springs

Screws

Nuts

Radio

Control

Products

Synthetic

Hair

Soft

Fillings

Fabric

Trimmings

Paper

Packaging

Label

Printing

TOYS


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The China Price and WMP (cont) Elaborate government sanctioned

system of counterfeiting and piracy

Undervalued currency

Massive subsidy to target industries

Protectionist trade barriers


11/25

Chinas surplus reflects

savings Surplus of nearly $ 3.3 trillion. Has made US

vulnerable.

China follows mercantilist policies. Exportsare encouraged, imports discouraged.

Chinese save over 40 % of GDP.

Authoritarian regime is able to havecontrolled and targeted monetary and fiscalpolicy.


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How does China Save Demographic compulsions in absence of

safety net for the aged Forced savings through controlled pricing Limited availability of consumer credit Limits on individual movements domestic

and international High tariffs on imports Smaller living space. Wealthy spending on diamonds, jewelry and

art


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Piracy Wars counterfeiting industry accounted for 8% of

China's GDP

Conniving local authorities whose revenuedepend on local pirates

Central government looks the other waybecause action would mean closure and

increased unemployment. Mao belief that property is communal and any

technology is the property of the masses.


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Piracy Wars (cont) Fake product for almost anything from baby

food to shampoo, from auto parts to toilet

seats, from hard drives to make up andperfumes

Pharmacy products snake oil distributedthrough word wide web.

Highly profitable venture. No R & D; nomarketing cost, advantage of economies ofscale fake of several companies.

Lax legal system


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Pollution War Home to 20 out of 30 most polluted cities. Two third of large 100 cities (population above a

million) fail to meet WHO air-quality standards.

World leader in sulfur-dioxide emissions. Largest carbon dioxide emitter. Surpassed USA. Main culprit for acid rain in Japan and Korea. 400,000 die pre-matured deaths due to pollution

related diseases. Over cultivation, overgrazing. Lax controls and implementation


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Blood for Oil Wars

Growing oil thirst. Consumes 9.4 mn bbl a day Second largest consumer of petroleum products.

Imports 40 % and projected to reach 60 % by 2020

High energy security concerns leads to befriendingrogue states. Development support and arms againstoil. Even Veto support. Iran, Sudan. Genocidesupport to Sudan in Darfur

Chinese connivance leads to European support to

rogue states. Corruption and looting in Angola


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Imperialist War and Weapons ofMass Construction

China wars for minerals and raw materials

Heavy industry leadership or model.

Overtaken US and Japan in steel production. Largest buyer of copper, second largest of

iron ore, third largest for alumina.

Top customer for Thai rubber, Burmese teak,

Chilean and Philippine copper, cobalt fromCongo. Many other industrial material likelimestone, phosphate rock

Aid and construction against mining rights


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Imperialist War and Weapons ofMass Construction (cont)

China presence through out Africa.Erecting dams, roads, supermarkets,

stadium, palaces. China destroys local industry

African countries in increasing debt of

China Latin American tango Links with Chile,

Bolivia, Argentina, Brazil, Venezuela andCuba


19/25

Opium War

China produces annually 100,000 metric tons ofacetic anhydride to transfer poppies of GoldenTriangle (Burma, Laos and Thailand) into pure China

white. Also conversion of poppies from Golden Crescent

(Pakistan, Afghanistan and Iran)

Second largest producer of potassium permanganatewhich turns coca leaves in cocaine.

China active trader and transporter and has improvedthe old Opium Route in Central Asia.

China chief Ecstasy (MDMA) logistic support provider

China banking system is the launderer for Chinas

criminal syndicate.


20/25

Damnable Dams and Water Wars

85,000 dams and counting

Dying and dried up rivers

Three Gorges symbol of Chinese dam-happy strategy

30,000 dams in critical conditionthreatening over 400 cities and 150million people. 3,484 dams collapsedbetween 1954 2003.


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Damnable Dams and Water Wars(cont)

Massive destruction and displacement Damning Mekong river and starving down

stream Burma, Thailand, Lao, Cambodia andVietnam. Potential for starvation and war.

70% rivers polluted. Half of Chinaspopulation gets contaminated water. Highincidence of stomach and liver cancer.

Rivers, industrial waste dumping grounds Massive fertilizer and pesticide runoff Politically dangerous water scarcity and

excessive ground water extraction


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What can go wrong for China?

Socio-political environment at home andglobally

Economic environment


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Socio-political environment

The youth exposed to global media may seekgreater political freedom, transparency and

democratic processes Mounting social discontent with increasing

individual and regional inequality may bringabout destabilizing social movements.

Human right may become a global issueforcing destabilizing change in China.


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Economic environment

Inflation is a major threat. Rise in globalcommodity prices and fuel may put pressureon cost and prices.

Inflation may result in appreciation of Yuanwhich will deprive China of its competitiveenvironment.

A rapid depreciation of US Dollar will have

similar effect. A conservative backlash in the West may lead

to raised tariff and hurt exports.


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Huggable Panda

or

Hungry Dragon

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China Macro