Country Report
China
April 2012
Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom
Economist Intelligence Unit
The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide.
The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group.
London Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8500 E-mail: [email protected]
New York Economist Intelligence Unit The Economist Group 750 Third Avenue 5th Floor New York, NY 10017, US Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: [email protected]
Hong Kong Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: [email protected]
Geneva Economist Intelligence Unit Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: [email protected]
This report can be accessed electronically as soon as it is published by visiting store.eiu.com or by contacting a local sales representative.
The whole report may be viewed in PDF format, or can be navigated section-by-section by using the HTML links. In addition, the full archive of previous reports can be accessed in HTML or PDF format, and our search engine can be used to find content of interest quickly. Our automatic alerting service will send a notification via e-mail when new reports become available.
Copyright © 2012 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, by photocopy, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited.
All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.
ISSN 1473-897X
Symbols for tables �0 or 0.0� means nil or negligible; �n/a� means not available; ��� means not applicable
Printed and distributed by IntypeLibra, Units 3/4, Elm Grove Industrial Estate, Wimbledon, SW19 4HE.
China 1
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
China
Executive summary 3 Highlights
Outlook for 2012-16 4 Political outlook 6 Economic policy outlook 7 Economic forecast
Monthly review: April 2012 12 The political scene 14 Economic policy 16 Economic performance
Data and charts 18 Annual data and forecast 19 Quarterly data 20 Monthly data 22 Annual trends charts 23 Quarterly trends charts 24 Monthly trends charts 25 Comparative economic indicators
Country snapshot 26 Basic data 27 Political structure
Editors: Duncan Innes-Ker (editor); Anjalika Bardalai (consulting editor)
Editorial closing date: March 20th 2012
All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: To request the latest schedule, e-mail [email protected]
2 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
AFGH
AN
.
AFGH
AN
.
TAJI
KIST
AN
CHO
NG
QIN
GCH
ON
GQ
ING
CHO
NG
QIN
GCH
ON
GQ
ING
CHO
NG
QIN
G
IND
IA
IND
IA
BH
UTA
NB
HU
TAN
BH
UTA
N
MYA
NM
AR
(BU
RM
A)
LA
OSV
IETN
AM
NO
RTH
KO
RE
A
TAIW
AN
SO
UTH
KO
RE
AJA
PA
N
BA
NG
LA
DE
SH
BA
NG
LA
DE
SH
BA
NG
LA
DE
SH
KYR
GYZ
RE
P.
RU
SS
IAN
FE
DE
RA
TIO
N
MO
NG
OL
IA
KA
ZA
KH
STA
N
PAKISTAN
NEP
AL
Yell
owSe
a
Sou
th C
hin
aSe
a
Gu
lf o
fTo
nki
ng
East
Ch
ina
Sea PA
CIFI
CO
CEA
N
Ba
y o
f B
enga
l
Sea
of
Jap
an
(Ea
st S
ea)
XIN
JIA
NG
QIN
GH
AI
INN
ER
MO
NG
OL
IA
HE
ILO
NG
JIA
NG
HE
ILO
NG
JIA
NG
HE
ILO
NG
JIA
NG
JIL
INJI
LIN
JIL
IN
LIA
ON
ING
LIA
ON
ING
LIA
ON
ING
NIN
GX
IAN
ING
XIA
NIN
GX
IA
SH
AA
NX
IS
HA
AN
XI
SH
AA
NX
I
SH
AN
XI
SH
AN
XI
SH
AN
XI
HE
BE
IH
EB
EI
HE
BE
I
GA
NS
U
XIZ
AN
G(T
IBE
T)
SIC
HU
AN
YU
NN
AN
YU
NN
AN
YU
NN
AN
GU
IZH
OU
GU
IZH
OU
GU
IZH
OU G
UA
NG
XI
GU
AN
GX
IG
UA
NG
XIHU
NA
NH
UN
AN
HU
NA
N
JIA
NG
XI
JIA
NG
XI
JIA
NG
XI
HU
BE
IH
UB
EI
HU
BE
I
HE
NA
NH
EN
AN
HE
NA
N
AN
HU
I
JIA
NG
SJI
AN
GS
JIA
NG
SU
ZH
EJI
AN
GZ
HE
JIA
NG
ZH
EJI
AN
G
SH
AN
DO
NG
SH
AN
DO
NG
SH
AN
DO
NG
FUJI
AN
FUJI
AN
FUJI
AN
GU
AN
GD
ON
GG
UA
NG
DO
NG
GU
AN
GD
ON
G
HA
INA
N
Hon
g K
ong
Xia
nX
ian
Xia
n
Shen
yan
gSh
enya
ng
Shen
yan
g
Har
bin
Har
bin
Har
bin
Tian
jin
Zhen
gzh
ouZh
engz
hou
Zhen
gzh
ou Nan
jin
gN
anji
ng
Nan
jin
g
Wu
han
Wu
han
Wu
han
Chon
gqin
gCh
ongq
ing
Chon
gqin
g
Gu
angz
hou
Gu
angz
hou
Gu
angz
hou
Shan
ghai
Zhan
jian
g
Hai
kou
Lhas
aLh
asa
Lhas
a
Ku
nm
ing
Ku
nm
ing
Ku
nm
ing
Liu
pan
shu
iLi
up
ansh
ui
Liu
pan
shu
i
Lesh
anLe
shan
Lesh
an
Chen
gdu
Chen
gdu
Chen
gdu
Nan
nin
gN
ann
ing
Nan
nin
g
Dal
iD
ali
Dal
i
Du
kou
Du
kou
Du
kou
Liu
zho
uLi
uzh
ou
Liu
zho
u
Yuli
nYu
lin
Yuli
n
Xia
men
Mac
au
Gu
iyan
gG
uiy
ang
Gu
iyan
g
Jian
gli
ng
Jian
gli
ng
Jian
gli
ng
Hu
ain
anH
uai
nan
Hu
ain
an
Nan
pi
Nan
pi
Nan
pin
g
Chan
gsh
aCh
ang
sha
Chan
gsh
a
Sh
ijia
zhu
ang
Sh
ijia
zhu
ang
Sh
ijia
zhu
ang
Nan
chan
gN
anch
ang
Nan
chan
gWu
hu
Wu
hu
Wu
hu
Lan
zho
uLa
nzh
ou
Lan
zho
uX
inin
gX
inin
gX
inin
g
Tian
shu
iTi
ansh
ui
Tian
shu
i Wan
xian
Wan
xian
Wan
xian
Chan
gd
eCh
ang
de
Chan
gd
e
Xia
ng
fan
Xia
ng
fan
Xia
ng
fan
Xin
yan
gX
inya
ng
Xin
yan
gM
ian
yan
gM
ian
yan
gM
ian
yan
g
Kas
hg
arK
ash
gar
Kas
hg
ar
Ask
u
Yin
ing
Ko
rla
Ko
rla
Ko
rla
Uru
mq
i
Yin
chu
anYi
nch
uan
Yin
chu
an
Yan
anYa
nan
Yan
an
Taiy
uan
Taiy
uan
Taiy
uan
Luo
yan
gLu
oya
ng
Luo
yan
g
Bao
tou
Bao
tou
Bao
tou
Dat
on
gD
ato
ng
Dat
on
g
Ho
hh
ot
Zhan
gji
ako
uZh
ang
jiak
ou
Zhan
gji
ako
u
Go
lmu
d
Yan
tai
Dal
ian
Fush
un
Fush
un
Fush
un
An
An
sA
nsh
anD
and
on
g
Tan
Tan
Tan
gsh
an
Hai
lar
Hai
lar
Hai
lar
Jiam
usi
Jixi
Jixi
Jixi
Jili
nJi
lin
Jili
n
Chif
eng
Chif
eng
Chif
eng
Xil
inh
ot
Ton
gli
aoTo
ng
liao
Ton
gli
ao
Yich
un
Yich
un
Yich
un
Jin
anJi
nan
Jin
an
Han
gzh
ou
Han
gzh
ou
Han
gzh
ouW
uxi
Wu
xiW
uxi
Zib
oZi
bo
Zib
o
Qiq
ihar
Qiq
ihar
Qiq
ihar
Man
zho
ul
Man
zho
uli
Man
zho
uli
Yan
jiYa
nji
Yan
jiCh
ang
chu
nCh
ang
chu
nCh
ang
chu
n
Qin
gd
ao
Lian
yun
gan
g
Fuzh
ou
Sh
aog
uan
Sh
aog
uan
Sh
aog
uan
Gan
zho
uG
anzh
ou
Gan
zho
u
Wen
zho
u
Nin
gb
o
Hen
gya
ng
Hen
gya
ng
Hen
gya
ng
BEI
JIN
GB
EIJI
NG
BEI
JIN
G
CHIN
ACH
INA
CHIN
A
Yan
gtz
eR
.Ya
ng
tze
R.
Lancang R. (Mekong R.)
Lancang R. (Mekong R.)
Yellow R.
0 k
m2
50
50
075
01,
00
0
0 m
iles
25
05
00
© T
he
Eco
no
mis
t In
tell
igen
ce U
nit
Lim
ited
20
12
Mai
n r
ailw
ay
Mai
n r
oad
Inte
rnat
ion
al b
ou
nd
ary
Pro
vin
ce b
ou
nd
ary
Mai
n a
irp
ort
Cap
ital
Maj
or
tow
n
Oth
er t
ow
n
China 3
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Executive summary
Highlights
April 2012
• The handover of power to a younger generation of leaders in 2012-13 will slow reform during that period, but the new administration is likely to try to make its mark on economic and political policy in 2014-16.
• A variety of grievances mean that protests will continue to be common in rural China. But they are likely to remain localised, rather than developing into wider movements that potentially threaten national political stability.
• Economic expansion will moderate to an average of 8.1% a year in 2012-16 as net exports subtract from GDP growth. Private consumption will contribute 42% of real GDP growth in the period, up from 29.5% in 2007-11.
• Strong GDP data for the fourth quarter of 2011 support the Economist Intelligence Unit's view that China's economy will avoid a hard landing in 2012. We forecast that the economy will expand by 8.3% this year.
• The liberalisation of China's capital account will proceed steadily. A growing number of quotas will be granted to foreign institutions to facilitate invest-ment in local securities and bond markets.
• The government has revised the country's criminal code. Although including some welcome changes, the amendments also sanction long periods of arbitrary detention by the security forces.
• The Chinese Communist Party secretary in Chongqing, Bo Xilai, was removed from his position in March. He is the most senior politician to be purged since Shanghai's party secretary, Chen Liangyu, in 2006.
• Ethnic unrest has continued in the province of Xinjiang and in areas dominated by the Tibetan minority. Around 20 people died in a clash in the provincial town of Yecheng in February.
• The premier, Wen Jiabao, targeted 7.5% GDP growth for 2012, lower than the goal of 8% in 2011, in his address to the National People's Congress (the annual session of the legislature) in March. The inflation target was 4%.
• A report produced by an influential Chinese think-tank, the Development Research Centre, and the World Bank called for reforms to the state-owned sector. It also called for more labour mobility.
• Sheng Songcheng, the head of the central bank's Survey and Statistics office, also called for economic reform in a report advocating a ten-year schedule of incremental reforms to open the capital account.
• Official estimates show that China has an estimated 25.1trn cu metres of shale-gas reserves. Annual output could reach 6bn cu metres by 2015.
Outlook for 2012-16
Monthly review
4 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Outlook for 2012-16 Political outlook
The Chinese Communist Party (CCP) will continue to dominate the political scene in the forecast period. Despite discontent among the public over corrup-tion and the privileges of the CCP elite, there is little appetite for regime change. Most Chinese citizens have seen their standards of living rise sharply in recent times and expect further improvements in the next five years. The CCP retains the strong support of the military and benefits from a sophisticated internal security network.
Although regime change looks unlikely, factional rivalries within the party are intensifying in the run-up to the CCP congress in late 2012, which will see a new generation of politicians promoted to the party leadership. These rivalries were evident in the fall of Bo Xilai, Chongqing's maverick party secretary, after the March session of the National People's Congress (NPC, China's legislature). Despite the current conservative line towards dissent, there is a chance that political reform will edge forwards once a new set of leaders is in place after 2012. The longer such reform is delayed, the greater the likelihood that a bout of economic turbulence could destabilise the country politically.
Meanwhile, political tensions will continue to be generated by a number of social problems, including graduate unemployment, poor working conditions, environmental pollution, late payment of wages and benefits, illegal eviction from homes and land, official corruption, cost-of-living issues and abuse of power by state officials. The resolution of a high-profile dispute in the town of Wukan, in Guangdong province, demonstrated how some authorities have developed a more nuanced approach to social unrest, including elements of persuasion and co-option in addition to repression. A protest leader in Wukan was promoted to the position of village party secretary, marking a departure from the usual government strategy of punishing those seen as directing dissent.
Improved access to modern technology means that the rural population is better organised, but disputes in the countryside will remain localised. There is little potential for such protests to develop into wider movements that might threaten national political stability in 2012-16. Unrest in urban areas could pose a greater threat. The CCP suppresses non-governmental organisations that might co-ordinate or channel social discontent, and it is tightening control over the media. Yet in an economic or political crisis it is possible that anti-government forces could suddenly coalesce in a way that would be hard to control without bloodshed. The nascent force of labour activism, especially in high-skill industries such as vehicle production, looks set to prove troublesome.
Separatist movements will remain weak, but ethnic unrest will occasionally erupt in the ethnic-minority regions of Tibet and Xinjiang, and related incidents of terrorist violence elsewhere in China are possible. Large-scale violence, leading to numerous deaths, broke out in Tibet in 2008 and Xinjiang in 2009. Both regions are likely to see further small-scale incidents�there have, for
Political stability
China 5
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
example, been numerous self-immolations among the Tibetan community in recent months. There is a small risk that separatism in Xinjiang will escalate into a full-blown insurgency owing to the proximity of the province to sepa-ratist and Islamist groups in Central Asia. The Tibetan separatist movement could also grow more violent when the exiled Tibetan spiritual leader, the Dalai Lama, dies. The Chinese government continues to take a harsh approach to curbing separatist and ethnic unrest. It is also increasing development spending in Xinjiang and Tibet in an attempt to pacify these regions by improving economic opportunities, although this tactic has failed in the past.
Since China's current leadership, headed by the president, Hu Jintao, and the premier, Wen Jiabao, came to power a collective-style government has emerged. New members were "elected" to the leaderships of both the CCP and the government in 2007-08. The next reconfiguration will begin in late 2012, when Mr Hu and Mr Wen will prepare to retire and the CCP's 18th congress will select a new party leadership. This will be followed by the installation of a new state leadership in early 2013. The vice-president, Xi Jinping, is heir-apparent to Mr Hu, while the current executive vice-premier, Li Keqiang, who is regarded as being Mr Hu�s favourite among the rising generation of cadres, looks set to succeed Mr Wen. Rumours that Mr Xi's and Mr Li's promotions are still open to question are likely to prove unfounded, as much effort has gone into grooming them for the highest positions. However, the composition of the rest of the top tier of the future leadership is less certain�as Mr Bo's unexpected fall has proved. The group of potential candidates appears less ideologically cohesive than the current government, and factional struggles are likely in 2012-16 as the new leaders seek to establish their independence and as they compete among themselves for control of the political agenda. Neither Mr Hu nor his successor is likely to countenance a meaningful opening up of the electoral process, but discussions about the possibility of increasing intra-party democracy may resume after 2012.
Since 2008-09 China has adopted a more forceful position on the international stage over a range of issues, such as global warming and territorial claims over the South China Sea. Its greater assertiveness means that further confrontation is likely in 2012-16. The country's military and diplomatic confrontations with its neighbours will encourage them to look to the US for political support. China will be a crucial participant in global negotiations on a range of economic and diplomatic issues, but it is highly sensitive to perceived slights, interference in its internal affairs and what it characterises as attempts to curb its rise. Its ability to deal effectively with other major powers is hampered by the weak influence within China of the Ministry of Foreign Affairs.
China�s claim on Taiwan will remain a foreign policy priority, but military escalation of the dispute looks unlikely, as economic ties with Taiwan have deepened and China has adopted a less aggressive posture towards the island. The status quo looks set to endure following the re-election in January 2012 of Taiwan's president, Ma Ying-jeou, who has overseen the recent improvement in the island's relations with China. North Korea is a potential flashpoint, particularly in the context of the uncertainty generated by the death of its
International relations
Election watch
6 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
leader, Kim Jong-il. China's support for North Korea has been criticised in the past, but the international community will look to China to use whatever influence it has to nudge the new North Korean regime towards reform. China�s expanding international interests have been highlighted by increased activity in fields such as peacekeeping and anti-piracy patrols. This trend is likely to continue, but military intervention by China to defend its interests in territory that it does not claim as its own still looks unlikely in 2012-16. The greatest source of Chinese influence on the global stage will be the desire of foreign governments and companies to tap China's vast market and also to attract Chinese investment.
Economic policy outlook
As inflation concerns ease, the authorities will have greater room in 2012 to ease policy in order to support the economy, but monetary policy is unlikely to be loosened greatly, as the government is still concerned about the after-effects of the last stimulus effort in 2009-10. Addressing the risks posed by the related surge in local government debt and off-balance-sheet lending will be a priority. Interest rates are unlikely to be cut in 2012 unless there is a deterioration in the external environment beyond that currently forecast by the Economist Intelligence Unit. Similarly, although there will be calls from local governments for measures restraining the property market to be rolled back, given that the real estate sector is vital to local authorities' revenue this will not happen until the central government is content that prices have fallen sufficiently.
Although exports are no longer as important to China as they once were, rebalancing the economy away from its dependence on investment will be a key goal. Economic growth will nevertheless continue to rely on unsustainably high rates of investment even as consumption is boosted. The government will look to moderate increasing social inequality. China raised its official rural poverty threshold in late 2011, thereby more than quadrupling the number of residents eligible for income support. Redistributive tax reforms further to those announced in 2011 could be enacted in 2012-16. Officials will support workers' efforts to secure substantial pay increases, but state welfare services will remain underdeveloped, despite growth in spending on health, education, pensions and poverty alleviation.
China recorded an estimated budget deficit equivalent to 1.1% of GDP in 2011, although this does not include a large amount of off-budget expenditure. The deficit will average around 1.6% of GDP in 2012-16, with wider deficits early in the forecast period, partly owing to the use of higher public spending to support slowing economic growth. Expenditure on education, healthcare and other forms of social welfare will continue to see faster growth than other areas of public spending. At central government level, revenue growth will remain strong as the domestic economy continues to expand rapidly.
The government's financial position is not as healthy as the headline figures suggest. The extent of off-budget expenditure, including military spending, is hard to quantify�and some of it is being brought back on-budget, inflating revenue and expenditure expansion. The quality of figures relating to local
Policy trends
Fiscal policy
China 7
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
government finances is poor. Local authorities' fiscal positions deteriorated as borrowing to fund stimulus programmes increased in 2008-10. The debt burden of the investment platforms that local governments created to channel this expenditure will probably grow in 2012-16 as interest rates rise, and many loans seem to be being rolled over rather than repaid. Local authorities' finances will also suffer as their revenue from land sales falls in the forecast period, particularly in 2012. An even greater problem is the central government's large contingent liabilities, which include the cost of pension provision and potential future losses by state-owned banks.
The People�s Bank of China (PBC, the central bank) raised interest rates several times between October 2010 and July 2011, but has shifted towards a policy more supportive of growth since late 2011. As a result, it is not likely to raise rates until late 2012, when inflation concerns will re-emerge as a priority. In the meantime, the PBC will move to boost domestic liquidity levels, notably through reducing bank reserve requirements (which were lowered again in February 2012), open-market operations and guidance to the state-owned banking sector on credit issuance. It will also step up efforts to deepen the domestic bond market in order to reduce companies' dependence on banks when raising capital, although this policy may face political opposition from other parts of government. In the latter part of the forecast period the PBC will push for interest rates to be assigned a greater role in place of quantitative tools. But a sharp rise in rates could challenge China's investment-driven economic growth model, and the shift is therefore likely to be gradual.
Economic forecast
2011 2012 2013 2014 2015 2016
Economic growth (%) US GDP 1.7 1.8 2.0 2.2 2.3 2.3
OECD GDP 1.8 1.1 1.8 2.1 2.2 2.2
World GDP 2.6 2.1 2.7 2.9 3.1 3.0
World trade 5.8 4.0 5.6 6.2 6.5 6.5
Inflation indicators (% unless otherwise indicated) US CPI 3.1 2.1 2.2 2.1 2.2 2.2
OECD CPI 2.8 2.1 2.2 2.2 2.2 2.3
Manufactures (measured in US$) 6.8 -0.7 0.4 1.5 1.8 1.9
Oil (Brent; US$/b) 111.0 110.0 103.6 108.3 104.0 110.0
Non-oil commodities (measured in US$) 26.3 -12.2 -1.9 -3.6 3.4 2.8
Financial variables US$ 3-month commercial paper
rate (av; %) 0.2 0.2 0.2 0.3 1.2 2.6
¥ 3-month money market rate (av; %) 0.2 0.1 0.2 0.9 1.3 1.5
¥:US$ (av) 79.8 77.3 80.5 81.0 82.0 83.0
Rmb:US$ (av) 6.46 6.28 6.18 6.09 5.98 5.87
Tight credit policies succeeded in cooling real economic growth to 9.2% in 2011. Strong GDP data for the fourth quarter of 2011 support our view that China's economy will avoid a hard landing in 2012, when we expect the economy to expand by 8.3%. Although demand for Chinese exports in the EU (which is
Monetary policy
International assumptions
Economic growth
8 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
expected to enter recession in 2012) and the US will weaken, strong local income growth will support private consumption. The government will also loosen credit policies and enact fiscal stimulus measures to support economic growth in 2012, but the scale of the boost provided will be small.
In 2013-16 GDP growth will slow to an average of 8.1% a year. The rate of economic expansion in 2013 will be slightly higher as the policy relaxation of 2012 pushes up investment, but in general investment growth will moderate as higher input costs and rising interest rates make property and infrastructure development more costly. A rapid rate of job creation and rising wages should ensure strong growth in private consumption, while the ongoing development of social services will support increases in state expenditure. As domestic demand expands rapidly, import growth will outpace export expansion, with the consequence that net exports will subtract from GDP growth throughout 2012-16. Export expansion will nevertheless remain impressive, largely owing to emerging-market demand, despite the negative impact on overseas sales of a strengthening renminbi and rising costs in China.
Despite the generally optimistic outlook, there is a risk that China could suffer a sharp slowdown in growth in the next five years. The frothy local housing market and excessively high levels of investment are the most likely sources of economic turbulence. The government�s capacity to counteract economic crises is strong, but its ability to do so without aggravating the imbalances that already threaten the economy is uncertain.
Economic growth % 2011a 2012b 2013 b 2014 b 2015b 2016b
GDP 9.2c 8.3 8.5 8.0 8.0 7.9
Private consumption 9.0 9.2 10.2 10.0 9.5 9.4
Government consumption 9.8 12.5 8.9 9.1 9.4 9.0
Gross fixed investment 10.1 8.5 9.4 8.8 8.6 8.2
Exports of goods & services 10.1 7.6 9.7 8.9 8.7 8.2
Imports of goods & services 10.9 9.7 12.2 11.3 11.0 10.2
Domestic demand 9.5 9.2 9.5 9.0 9.0 8.8
Agriculture 4.5c 3.0 2.8 2.9 3.1 2.6
Industry 10.6c 8.5 8.8 8.4 8.0 7.8
Services 8.9c 9.1 9.2 8.5 8.9 9.1
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
Consumer price inflation averaged 5.5% in 2011, despite the government's efforts to curb money supply growth in order to bring inflation closer to its 4% target. Inflation will decelerate to 3.7% on average 2012, as the delayed impact of the past monetary tightening feeds through and global commodity costs moderate. However, in the remainder of the forecast period strong liquidity growth, booming demand and increasing input costs will apply upward infla-tionary pressure. A sustained rise in salaries will also push up manufacturing costs, and this may prompt manufacturers to increase prices. Soaring wages will have a particularly strong impact on prices for labour-intensive agricultural products. We expect consumer price inflation to average 4.3% a year in 2013-16.
Inflation
China 9
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
The risks to our inflation forecast remain largely on the upside. Food prices account for a large share of the consumer price index basket in China and are on a long-term upward trend owing to rising input costs, but they could increase by more than currently forecast. Local agricultural prices are vulnerable to changes in global oil costs (as agriculture is fuel-intensive) and the vagaries of the weather. Fears of a deterioration in the Middle East's political stability linked to events in Iran could force up global oil prices, affecting food and transport costs in China.
Producer price inflation will decelerate sharply in 2012, but it will be subject to upward forces in 2013-16 as a result of sustained domestic demand and policy-driven increases in state-mandated prices for fuel and utilities. Producer prices are nevertheless likely to rise by a modest 4.1% a year on average in the forecast period as the growing international supply of raw materials and food restrains increases in global commodity prices. There is a danger that speculative asset-price bubbles, notably in property or equity markets, could emerge in 2012-16. The risk is aggravated by low or negative real interest rates on deposits, which could encourage savers to put their money into other saving and investment vehicles.
China's current-account and trade surpluses are both forecast to fall to modest levels as a proportion of GDP in the forecast period, and so the country will be in a strong position to resist external pressure to allow a faster rate of currency appreciation. Indeed, with the currency now probably close to market-driven levels, more volatility in the value of the renminbi is likely in 2012-16, including periodic bouts of depreciation. We now believe that, owing to higher produc-tivity growth in China than in the US, the renminbi will strengthen against the US dollar by an average of 1.9% a year in 2012-16, down from 2.7% a year in our last forecast. The shift partly reflects the strength of the US currency in the outlook period; the renminbi will appreciate more swiftly against the euro and the yen. A faster rate of inflation in China than in OECD markets will also help to rebalance the real exchange rate.
China's current-account surplus was equivalent to an estimated 2.9% of GDP in 2011, well below the peak of 10.1% reached in 2007. The surplus is expected to continue to shrink in the forecast period, falling to 0.2% of GDP in 2016. Although merchandise exports are forecast to rise by 11.6% a year on average in 2012-16, this will be well below the rate of expansion recorded in 2002-07, which averaged 29%. A large proportion of China's imports consists of compo-nents that are assembled domestically before being shipped overseas again, and the country's imports and exports therefore tend to expand at similar rates. However, a growing proportion of merchandise imports are used to make goods that are consumed domestically, and, at an average of 13.5% a year, import growth will outpace export expansion in 2012-16. As a result, the trade surplus will fall to around US$162.8bn in 2016.
The services deficit will widen considerably in 2012-16, largely reflecting a surge in overseas travel by Chinese tourists. The economy�s growing sophistication will see demand for imports of professional services increase rapidly, although exports of services will also grow, reflecting the rising earnings of Chinese companies working on infrastructure projects abroad. The current transfers
External sector
Exchange rates
10 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
account will remain in surplus in 2012-16, owing to the high level of remittances from overseas Chinese. As China tries to make the renminbi an international currency, controls on capital flows into and out of China are likely to be significantly relaxed in 2012-16. More quotas under the qualified foreign institutional investor (QFII) scheme will be granted than in the past as the government looks to deepen the local securities and bond markets.
Forecast summary (% unless otherwise indicated)
2011a 2012b 2013 b 2014 b 2015b 2016b
Real GDP growth 9.2 8.3 8.5 8.0 8.0 7.9
Industrial production growth 13.9 11.8 12.1 11.7 11.3 11.1
Gross agricultural production growth 4.5 3.0 2.8 2.9 3.1 2.6
Unemployment rate (av) 6.5c 6.4 6.6 7.0 6.5 6.1
Consumer price inflation (av) 5.5 3.7 5.1 4.2 3.9 4.1
Consumer price inflation (end-period) 4.1 4.2 4.4 4.2 3.9 4.1
Short-term interbank rate (end-period) 6.6c 6.8 7.3 7.6 7.6 7.7
Government balance (% of GDP) -1.1c -1.8 -2.0 -1.7 -1.4 -1.3
Exports of goods fob (US$ bn) 1,903.6 2,057.8 2,306.5 2,593.6 2,935.5 3,286.3
Imports of goods fob (US$ bn) 1,659.8 1,832.0 2,101.4 2,393.6 2,758.2 3,123.5
Current-account balance (US$ bn) 201.1 169.0 144.6 97.5 60.0 34.2
Current-account balance (% of GDP) 2.9c 2.1 1.5 0.9 0.5 0.2
External debt (end-period; US$ bn) 657.3c 724.9 824.0 935.3 1,077.1 1,213.3
Exchange rate Rmb:US$ (av) 6.46 6.28 6.18 6.09 5.98 5.87
Exchange rate Rmb:US$ (end-period) 6.30 6.26 6.13 6.05 5.91 5.67
Exchange rate Rmb:¥100 (av) 8.10 8.13 7.68 7.52 7.29 7.08
Exchange rate Rmb:� (end-period) 8.31 7.79 7.54 7.51 7.42 7.14
a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.
China 11
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Quarterly forecasts
2011 2012 2013
1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr
GDP
% change, quarter on quarter 2.5 2.3 1.9 1.7 1.7 2.2 2.5 2.5 1.9 1.7 1.8 2.0
% change, year on year 9.7 9.5 9.1 8.9 7.8 7.7 8.3 9.2 9.4 8.9 8.1 7.6
Consumer prices
% change, quarter on quarter 2.0 0.5 0.8 0.5 2.0 0.0 1.1 0.9 3.0 0.7 0.4 0.4
% change, year on year 5.1 5.7 6.0 3.8 3.8 3.3 3.7 4.1 5.0 5.8 5.0 4.5
Producer prices
% change, quarter on quarter 2.3 3.0 0.4 -2.5 -0.6 2.4 2.9 1.9 1.4 0.6 0.1 0.1
% change, year on year 7.0 6.9 7.1 3.1 0.3 -0.3 2.2 6.8 8.9 7.0 4.1 2.3
Exchange rate Rmb:US$
Average 6.58 6.50 6.42 6.34 6.31 6.30 6.25 6.26 6.23 6.20 6.15 6.13
End-period 6.56 6.47 6.36 6.30 6.31 6.28 6.25 6.26 6.21 6.17 6.14 6.13
Interest rates (%; av)
Money market rate 4.6 5.0 5.8 5.7 5.2 4.7 4.7 4.8 4.8 4.9 5.0 5.3
12 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Monthly review: April 2012
The political scene
The annual session of the National People�s Congress (NPC, China's legislature) in March was the last before the process of handing power over to a younger generation of leaders begins in late 2012. Meetings of the full legislature provide an opportunity to debate a number of issues, even though the top leadership of the Chinese Communist Party (CCP) tends to make the final decisions on legislation, which is then rubber-stamped by the NPC.
One of the biggest debates this year was that relating to a revision to the Criminal Procedure Law. The initial drafts of the law raised concerns that the changes could codify existing practices that enable harassment and abuse of dissidents. The final version of the measure does indeed allow suspects to be placed under a form of administrative detention, termed "residential surveillance", for six-month periods at secret locations. However, revisions now mean that, in most cases, the families of those held must be notified within 24 hours and suspects must have access to a lawyer within 48 hours. The new law's requirements remain far from the norms prevailing in most Western countries; for example, there is still no requirement that lawyers be present at police interrogations. Restrictions on the treatment of suspects also remain looser for cases involving national security�a broad and ill-defined term.
There are nevertheless positive aspects to the new legislation. It requires interrogations to be recorded when severe penalties (such as execution or long prison sentences) are likely. Measures to exclude torture and illegally obtained evidence are included, and the right of defence lawyers to call and cross-examine witnesses is strengthened. Much of this is welcome, but in practice the police often disregard legal constraints on their behaviour, and there are few options open to those who wish to complain about such abuses.
The reform of the criminal code came as the government announced in March that Bo Xilai had been removed as party secretary of Chongqing municipality, to be replaced by a national vice-premier, Zhang Dejiang. Mr Bo's political future had been under threat since his right-hand man, Wang Lijun, was detained in February in a corruption probe. Mr Wang was formerly the police chief in Chongqing and championed Mr Bo's campaign against criminal gangs in the municipality. However, he had been accused of riding rough-shod over due legal process during this drive.
Mr Bo's dismissal is a blow to the political agenda that he represented, in terms of both substance and style. Mr Bo has spent the past few years fostering a "red revival" in Chongqing, including public-morality campaigns reminiscent of the Cultural Revolution of the late 1960s and early 1970s. Yet frictions had arisen with other senior leaders who were put off by Mr Bo's abrasive personality, his attempts to boost his authority within the party through populist campaigning among the wider public (in a system where closed-door, consensus-based decision-making is preferred) and his tendency towards flashy self-promotion.
Legal reforms are introduced
The CCP chief in Chongqing is deposed
China 13
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Mr Zhang is a much more traditional politician. His time as party secretary of Guangdong province in 2002-07 was characterised by a number of missteps, including the covering-up of the severe acute respiratory syndrome (SARS) epidemic. Educated in economics in North Korea, Mr Zhang is also notorious for his hard line on media censorship. Although there is much in Mr Bo's policies that can be criticised, his open and dynamic approach was genuinely popular among the public, and he had a tremendously positive impact on Chongqing's business environment. As uncertainty about the implications of his fall swirls, much of the momentum that he imparted to the municipality's economy�one of the fastest-growing in the country�may well be lost.
In February, ahead of the NPC, the government published a circular on reform of the household registration (hukou) system. This system currently makes it difficult for migrant rural labourers to gain permanent residence and access to social services in China's cities. The document suggests that population move-ments to large cities, such as the capital, Beijing, will still be controlled, but that migrants will now find it easier to register in smaller cities. In medium-sized cities, they will be able to register for residence permits after working for three years and paying social-security insurance for one year.
The new regulations do not amount to the full abolition of the hukou system, as they allow cities to draw up their own rules based on their economic circumstances. However, the document marks a significant step in the process of matching the registration system to social realities. The new regulations reiterate that farmers should not be forced to give up their land rights, and that migrant workers should have access to some social services in cities. They also indicate that regulations restricting migrant workers� access to education, employment and training should be adjusted.
Unrest in China�s ethnic-minority regions has continued in recent months. In Xinjiang, home to the Uighur ethnic group, around 20 people died in a clash in the town of Yecheng in February. Uighur sources abroad suggested that at least seven of the victims were policemen, indicating that an attack on the police may have been intended, but Chinese authorities claim that the attack targeted civilians. Seven of the perpetrators were killed, and two arrested. The CCP secretary of Xinjiang, Zhang Chunxian, blamed the incident on "the infiltration of three overseas forces of separatists, extremists and terrorists".
In Tibetan areas, protests against Chinese rule have recently taken the form of acts of self-immolation, three of which were reported in March in the Aba region of Sichuan province. In January it was reported that the police had opened fire on Tibetan protesters in parts of both Sichuan and Qinghai provinces. In addition to the self-immolations, in February it was reported that a young Tibetan had died after causing an explosion in a government building in a rural part of Sichuan province. In a development that may be linked to these incidents, in March a US-based non-governmental organisation, Human Rights Watch, noted that China had announced in early 2012 that government or CCP officials would be stationed in all Tibetan monasteries. The organisation claims that this overturns the nominal self-government system by which such monasteries have previously been run.
Hukou reforms are promoted
Ethnic unrest continues
14 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Economic policy
China's premier, Wen Jiabao, delivered a report to the NPC in March outlining the government's major economic goals for 2012. These included a real GDP growth target of 7.5%, moving nearer the forecast of average annual expansion of 7% that had previously been outlined in the 12th five-year plan (2011-15). Officials projected that inflation would average around 4% this year. On cue, year-on-year consumer price inflation slowed to 3.2% in February, from 4.5% in January. Job creation was also emphasised by Mr Wen in his report, which set a target of the creation of 9m new urban jobs in 2012. The total volume of imports and exports is projected to rise by around 10% this year, while the broad money supply (M2) will increase by 14%. The goals for M2 and GDP growth are slightly lower than in 2011, when they stood at 16% and 8% respectively, suggesting that government policy will remain slightly tighter in 2012 than it was last year.
Traditionally the government sets conservative revenue and expenditure targets, with excess revenue being spent on priority areas, such as healthcare and education. Central spending on education last year, for example, at Rmb324.9bn (US$52bn) was 109.6% of the budgeted level, thanks to higher than expected fiscal inflows. The bulk of spending occurs at local government level, however. Local expenditure on education rose by 27.8% to Rmb1.5trn (US$240bn) in 2011. Other big items of local-level spending included social security and employment (up by 22.6% last year, to Rmb1.1trn), health (up by 33.1% to Rmb629.6bn), agriculture (up by 22.4% to Rmb947.3bn) and transport (up by 78.6% to Rmb714.1bn).
Government spending on education and healthcare (Rmb bn)
Sources: Ministry of Finance; Haver Analytics.
0
200
400
600
800
1,000
1,200
1,400HealthcareEducation
100908070605042003
Education, health, social security and social housing are again set to be the main beneficiaries of higher public spending in 2012. Defence spending is to be increased by 11.4%, to Rmb650.3bn, but many experts believe that this sub-stantially underestimates expenditure in areas such as armaments procurement. The fiscal deficit in 2012 is forecast to reach Rmb800bn, including a Rmb550bn central deficit and Rmb250bn in local government debt issuance. The target might look ambitious, given slowing economic growth and the weak state of local government finances amid a decline in fiscal earnings from land sales.
Growth targets are lowered as the economy slows
China 15
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
However, Rmb263.8bn of above-budget revenue from last year was added to this year's fiscal inflow, and this will ease the task of reaching the goal. China's local authorities had debts of Rmb10.7trn at end-2010, following the 2008-10 debt-financed stimulus spending splurge, but Mr Wen said in March this year that their outstanding debts had risen by just Rmb300m in 2011.
Following weak credit growth in January and February, the People's Bank of China (PBC, the central bank) has continued its gradual relaxation of monetary policy. In late February the reserve requirement ratio for banks was cut for the second time since November 2011, lowering the ratio to 20.5% for large banks. In March the PBC raised target loan-to-deposit ratios for the Industrial and Commercial Bank of China and China Construction Bank, two of China's biggest banks. The move took the respective ratios for the two institutions to 63% and 70%, from 62% and 68% in 2011. It comes amid recognition that one of the main constraints on higher lending by Chinese banks is the conservative prudential ratios that they find themselves bumping up against.
In February, ahead of the NPC, two important proposals for economic reform were published, in what looked like an effort to influence debate not just at the congress but also in the months ahead of China's leadership transition later this year. One report was backed by the PBC, the Development Research Centre (a think-tank under the State Council, China's cabinet) and the World Bank. It was reportedly commissioned with support from Li Keqiang, who may play an important role in determining economic policy if he becomes premier in 2013 as expected.
The report warned that China risks becoming caught in a middle-income trap, buffeted by inflation and instability, unless it intensifies economic reforms in a number of fields. It called for a number of changes, including moves to strengthen farmers' land rights and improve labour mobility, that are relatively uncontroversial and fit well within existing government policies. However, the document also controversially advocated changes to address the role of state-owned enterprises (SOEs). It called for SOEs to be taken over by new, independent bodies that would hand over dividends to the state budget and gradually reduce the extent of state ownership. This represents a challenge to the State-owned Assets Supervision and Administration Commission (SASAC), which manages central-level SOEs but for political and administrative reasons lacks the authority to do so effectively.
Another pre-NPC call for economic reform was voiced by Sheng Songcheng, the head of the PBC's Survey and Statistics Department, in a report advocating a ten-year schedule of incremental reforms to open China's capital account. Mr Sheng's report is just one of a number of publications which have indicated that the government is now pursuing capital account liberalisation with greater vigour. Indeed, its timescale may prove conservative, given the recent pace of opening. However, officials remain cautious about the potential for inward or outbound hot money flows to destabilise China's financial system. The State Administration of Foreign Exchange has estimated that a net US$3.1bn of hot money exited China in 2011, in contrast to net inflows of US$35.5bn in 2010.
Monetary policy continues to be loosened gradually
Financial reform makes headway at last
A think-tank report attacks SASAC
16 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Meanwhile, in the financial sector the new head of the China Securities Regulatory Commission (CSRC), Guo Shuqing, has made a storming start since his appointment in late 2011. Besides overseeing a sharp increase in the permitted level of foreign investment in China's security markets through the qualified foreign institutional investor (QFII) programme (including renminbi-denominated QFII flows from Hong Kong), Mr Guo has also advanced reform on several other fronts. In February the CSRC published for the first time a list of firms that had applied to list on China's stock exchanges. The CSRC has also declared that it will no longer participate in the initial review process for listings on Shenzhen's ChiNext exchange for growth stocks. On top of this, in February China began simulated trading of futures in Treasury bonds, and the CSRC has confirmed that it expects to allow firms to start issuing riskier, high-yield "junk" bonds in 2012. The latter move may help to alleviate financing constraints on private-sector firms, which often find it harder than SOEs to secure finance from banks. However, the CSRC has signalled no new moves on the long-awaited international board that would allow foreign firms to list in Shanghai.
Economic performance
Recent data continue to suggest that economic growth is slowing. Industrial value added output was up by 11.4% year on year in real terms in January-February�its slowest rate of growth in two years. This weak picture was underscored by modest year-on-year growth of just 7.1% in electricity generation in the first two months of 2012. Those of a pessimistic bent could point further to two important sectors, cement production and car retailing, that have both performed poorly in recent months, and to rising inventories of items such as copper and airconditioners. Moreover, China posted a trade deficit in January-February, although this partly reflected seasonal factors and the trade balance is expected to return to surplus as the year progresses.
Nevertheless, the government's stance at the NPC appeared to show that officials are not particularly worried about the recent downturn, suggesting that it remains under control. In February the city of Wuhu in Anhui province became the latest local authority to be forced by the central government to backtrack on its planned loosening of restrictions on property purchases. The government's unwillingness to allow a significant easing of restrictions in the property sector, despite month-on-month falls in property prices and weak sales data, highlighted its comfort with the current pace of economic growth.
On top of this, surveys of business confidence suggest a brighter picture. The official government purchasing managers' index (PMI) stood at 51 in February (a reading over 50 indicates an expansion in business activity). A similar PMI produced by a UK-based financial firm, HSBC, also pointed to a modest rate of expansion despite weakness in export orders. In addition, that fact that in February imports rose by 39.6% year on year, to US$146bn�an extremely rapid rate of growth, even discounting for the boost linked to the timing of the Chinese New Year holiday period in 2012�suggests that commodity imports remain firm. This would seem to indicate that local producers are upbeat about the prospects for an imminent upturn in areas such as construction.
Data show slow growth, but sentiment remains buoyant
China 17
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
In March the Ministry of Land and Resources revealed that new surveys show that China has an estimated 25.1trn cu metres of recoverable shale-gas reserves. Although seismic exploration has been under way for some time, so far no shale-gas project has reached commercial production. However, the National Development and Reform Commission said in March that it believes that output could reach 6bn cu metres a year in 2015, and 60bn-100bn cu metres by 2020. This could allow gas to take on a bigger role in energy provision, reducing the country's dependence on coal�as well as its greenhouse gas emissions.
In February the 12th five-year plan industrial template for the development of the solar industry was released by the Ministry of Industry and Information Technology. This envisages reducing the cost of energy generated by solar panels to Rmb7,000 (US$1,100) per kw by 2015. The government aims to have one solar company with annual sales of over Rmb100bn, and three to five with sales of at least Rmb50bn. The authorities will encourage consolidation among manufacturers of polysilicon and solar panels to promote efficiency�the sector is currently suffering from overcapacity and falling prices, and has been the subject of anti-dumping litigation in overseas markets. China overtook Japan as Asia's biggest solar energy market in 2011, and is set to install around 5 gw of solar capacity in 2012.
Shale-gas reserves are larger than originally thought
18 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Data and charts Annual data and forecast
Pl ea se se e g ra p hi c b el ow
2007a 2008a 2009a 2010a 2011 b 2012c 2013c
GDP
Nominal GDP (US$ bn) 3,494 4,532 5,069 5,824 7,053 8,194 9,463
Nominal GDP (Rmb bn) 26,583 31,490 34,632 39,431 45,570 51,463 58,454
Real GDP growth (%) 14.2 9.6 9.2 10.4 9.2 a 8.3 8.5
Expenditure on GDP (% real change)
Private consumption 10.8b 8.4b 9.1b 5.9b 9.0 9.2 10.2
Government consumption 11.9b 9.0b 9.0b 12.9b 9.8 12.5 8.9
Gross fixed investment 13.7b 9.8b 23.5b 11.9b 10.1 8.5 9.4
Exports of goods & services 16.7b 4.7b -4.2b 20.3b 10.1 7.6 9.7
Imports of goods & services 13.8b 3.8b 4.5b 20.7b 10.9 9.7 12.2
Origin of GDP (% real change)
Agriculture 3.7 5.4 4.2 4.3 4.5 a 3.0 2.8
Industry 15.1 9.9 9.9 12.3 10.6 a 8.5 8.8
Services 16.0 10.4 9.3 9.8 8.9 a 9.1 9.2
Population and income
Population (m) 1,290b 1,297b 1,305b 1,312b 1,320 1,328 1,335
GDP per head (US$ at PPP) 5,749b 6,407b 7,030b 7,804b 8,599 9,476 10,427
Fiscal indicators (% of GDP)
General government revenue 19.3 19.5 19.8 21.1 22.8 22.6 23.1
General government expenditure 18.7 19.9 22.0 22.7 23.9 24.4 25.1
General government balance 0.6 -0.4 -2.2 -1.6 -1.1 -1.8 -2.0
Net public debt 17.1b 15.2b 16.5b 16.4b 15.6 15.9 16.2
Prices and financial indicators
Exchange rate Rmb:US$ (end-period) 7.31 6.84 6.83 6.62 6.30 a 6.26 6.13
Exchange rate ¥:Rmb (end-period) 10.67 9.51 9.79 8.87 8.31 a 7.79 7.54
Consumer prices (end-period; %) 6.5 1.2 1.9 4.6 4.1 a 4.2 4.4
Producer prices (av; % change) 3.1 6.9 -5.4 5.5 6.0 2.2 5.4
Stock of money M1 (% change) 21.0 9.0 33.2 20.4 8.7 a 13.4 14.5
Stock of money M2 (% change) 16.7 17.8 28.4 18.9 17.3 a 14.2 16.5
Lending interest rate (end-period; %) 7.5 5.3 5.3 5.8 6.6 6.8 7.3
Current account (US$ bn)
Trade balance 315.4 360.7 249.5 254.2 243.8 a 225.7 205.2
Goods: exports fob 1,220.0 1,434.6 1,203.8 1,581.4 1,903.6 a 2,057.8 2,306.5
Goods: imports fob -904.6 -1,073.9 -954.3 -1,327.2 -1,659.8 a -1,832.0 -2,101.4
Services balance -7.9 -11.8 -29.4 -22.1 -55.5 a -72.7 -88.5
Income balance 7.9 17.7 7.3 30.4 -14.1 -17.7 -10.8
Current transfers balance 38.7 45.8 33.7 42.9 26.9 a 33.6 38.8
Current-account balance 354.0 412.4 261.1 305.4 201.1 a 169.0 144.6
External debt (US$ bn)
Debt stock 373.1 379.8 432.2 548.6 657.3 724.9 824.0
Debt service paid 31.8 33.3 39.8 62.6 39.3 46.8 54.7
Principal repayments 20.4 24.0 33.4 28.5 29.3 33.4 38.0
Interest 11.4 9.3 6.3 34.1 10.0 13.3 16.7
International reserves (US$ bn)
Total international reserves 1,534.4 1,953.3 2,425.9 2,875.9 3,212.6 a 3,505.2 3,726.4
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Source: IMF, International Financial Statistics.
China 19
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Quarterly data Pl ea se se e g ra p hi c b el ow
2010 2011
1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr
Output
Real GDP (% change, year on year) 11.9 10.3 9.6 9.8 9.7 9.5 9.1 8.9
Industrial production, gross value added (1990 prices; % change, year on year) 15.5 16.0 13.5 13.3 14.9 13.9 13.8 12.8
Electricity production (% change, year on year) 22.1 17.0 11.8 6.2 12.1 12.4 n/a n/a
Prices
Consumer prices (2000=100) 115.1 114.9 115.5 118.6 120.9 121.5 122.4 123.0
Consumer prices (% change, year on year) 2.2 2.9 3.5 4.7 5.1 5.7 6.0 3.8
Financial indicators
Exchange rate Rmb:US$ (av) 6.83 6.82 6.77 6.66 6.58 6.50 6.42 6.34
Exchange rate Rmb:US$ (end-period) 6.83 6.79 6.70 6.62 6.56 6.47 6.36 6.30
Deposit rate (end-period; %) 2.3 2.3 2.3 2.8 3.0 3.3 3.5 3.5
Prime lending rate (end-period; %) 5.3 5.3 5.3 5.8 6.1 6.3 6.6 6.6
3-month interbank rate (av; %) 2.0 2.5 2.6 3.5 4.6 5.0 5.8 5.73
Total loans 24.1 19.2 18.7 19.6 16.0 15.3 14.5 14.3
Short-term loans 10.5 9.0 9.4 13.1 21.6 24.2 25.4 27.0
Medium- & long-term loans 44.6 37.6 32.6 29.5 17.7 14.2 10.9 9.4
Urban & rural savings deposits 15.6 15.5 17.0 16.3 17.9 17.2 14.2 16.3
M1 (end-period; Rmb bn) 22,940 24,058 24,382 26,662 26,626 27,466 26,719 28,985
M1 (% change, year on year) 29.9 24.6 20.9 20.4 16.1 14.2 9.6 8.7
M2 (end-period; Rmb bn) 64,995 67,392 69,647 72,585 75,813 78,082 78,741 85,159
M2 (% change, year on year) 22.5 18.5 19.0 18.9 16.6 15.9 13.1 17.3
Shanghai �A� share price index (end-period; Feb 21st 1992=100) 3,260 2,514 2,782 2,890 3,066 2,894 2,471 2,304
Shanghai �A� share price index (% change, year on year) 30.9 -16.1 -4.6 -15.9 -6.0 15.1 -11.2 -20.3
Sectoral trends (% change, year on year)
Retail sales, consumer goods 23.7 21.9 23.9 22.0 17.1 18.2 17.3 15.8
Foreign trade (US$ bn)
Exports fob 316.1 388.9 429.6 443.3 399.6 474.7 518.3 506.6
Imports cif -301.9 -347.8 -364.7 -381.6 -401.5 -428.0 -455.4 -458.5
Trade balance 14.2 41.1 64.9 61.6 -2.0 46.7 62.9 48.1
Capital flows (US$ bn)
Foreign direct investment 23.4 28.0 22.9 31.4 30.4 30.6 25.8 29.3
Foreign direct investment (% change, year on year) 7.7 31.8 10.3 19.5 29.5 9.1 12.7 -6.6
Reserves excl gold (end-period) 2,464 2,471 2,667 2,866 3,067 3,220 3,223 n/a
Sources: IMF, International Financial Statistics; China Statistical Information Centre; National Bureau of Statistics, China Monthly Economic Indicators; People's Bank of China,
Quarterly Statistics Bulletin.
20 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Monthly data Pl ea se se e g ra p hi c b el ow
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Exchange rate Rmb:US$ (av) 2010 6.83 6.83 6.83 6.83 6.83 6.82 6.78 6.79 6.74 6.67 6.66 6.65
2011 6.60 6.58 6.57 6.53 6.50 6.48 6.46 6.41 6.38 6.36 6.34 6.33
2012 6.32 6.30 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Exchange rate Rmb:US$ (end-period) 2010 6.83 6.83 6.83 6.83 6.83 6.79 6.78 6.81 6.70 6.69 6.68 6.62
2011 6.59 6.58 6.56 6.50 6.49 6.47 6.44 6.39 6.36 6.32 6.35 6.30
2012 6.31 6.29 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Real effective exchange rate (2000=100; CPI basis) 2010 105.77 107.38 107.05 107.64 110.39 111.69 110.53 109.44 109.37 107.88 109.62 110.37
2011 110.06 109.66 109.31 108.87 109.36 110.52 110.60 111.33 114.38 115.67 116.06 116.73
2012 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Money supply M1 (% change, year on year) 2010 39.0 35.0 29.9 31.3 29.9 24.6 22.9 21.9 20.9 22.1 22.1 20.4
2011 14.0 15.6 16.1 14.0 13.9 14.2 12.4 11.9 9.6 9.2 8.5 8.7
2012 3.2 4.3 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Money supply M2 (% change, year on year) 2010 26.1 25.5 22.5 21.5 21.0 18.5 17.6 19.2 19.0 19.3 19.5 18.9
2011 17.3 15.7 16.6 15.4 15.1 15.9 14.7 13.6 13.1 12.9 12.7 13.6
2012 12.4 13.0 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Deposit rate (end-period; %) 2010 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.5 2.5 2.8
2011 2.8 3.0 3.0 3.3 3.3 3.3 3.5 3.5 3.5 3.5 3.5 3.5
2012 3.5 3.5 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Prime lending rate (end-period; %) 2010 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.6 5.6 5.8
2011 5.8 6.1 6.1 6.3 6.3 6.3 6.6 6.6 6.6 6.6 6.6 6.6
2012 6.6 6.6 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Industrial production (% change, year on year) 2010 n/a 12.8 18.1 17.8 16.5 13.7 13.4 13.9 13.3 13.1 13.3 13.5
2011 n/a 14.9 14.8 13.4 13.3 15.1 14.0 13.5 13.8 13.2 12.4 12.8
2012 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Retail sales of consumer goods (% change, year on year) 2010 18.2 32.3 21.5 23.2 18.7 24.0 23.3 24.3 24.0 21.9 22.7 21.6
2011 19.9 11.6 20.0 18.6 18.0 18.1 17.6 17.0 17.2 15.8 15.9 15.7
2012 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Shanghai �A� share price index (end-period; Feb 21st 1992=100) 2010 3,135 3,200 3,260 3,009 2,718 2,514 2,764 2,765 2,782 3,121 2,953 2,890
2011 2,922 3,042 3,066 3,049 2,873 2,894 2,829 2,689 2,471 2,585 2,444 2,304
2012 2,402 2,544 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Consumer prices (av; % change, year on year) 2010 1.5 2.7 2.4 2.8 3.1 2.9 3.3 3.5 3.6 4.4 5.1 4.6
2011 4.9 4.9 5.4 5.3 5.5 6.4 6.5 6.2 6.1 5.5 4.2 4.1
2012 4.5 3.2 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Producer prices (av; % change, year on year) 2010 4.3 5.4 5.9 6.8 7.1 6.4 4.8 4.3 4.3 5.0 6.1 5.9
2011 6.6 7.2 7.3 6.8 6.8 7.1 7.5 7.3 6.5 5.0 2.7 1.7
2012 0.7 0.0 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
China 21
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Total exports fob (US$ bn) 2010 109.5 94.5 112.1 119.9 131.6 137.4 145.5 139.2 144.9 135.9 153.3 154.1
2011 150.7 96.7 152.2 155.6 157.1 162.0 175.2 173.3 169.7 157.5 174.4 174.8
2012 149.8 114.5 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Total imports cif (US$ bn) 2010 95.4 87.1 119.3 118.4 112.2 117.1 116.9 119.5 128.3 109.1 131.0 141.5
2011 144.8 104.6 152.2 144.3 144.0 139.7 144.7 155.5 155.2 140.4 159.8 158.3
2012 122.7 146.0 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Trade balance fob-cif (US$ bn) 2010 14.1 7.3 -7.2 1.4 19.4 20.3 28.6 19.7 16.6 26.7 22.3 12.6
2011 5.9 -7.9 0.0 11.3 13.1 22.3 30.5 17.8 14.5 17.0 14.6 16.5
2012 27.2 -31.5 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Foreign-exchange reserves excl gold (US$ bn) 2010 2,432 2,441 2,464 2,507 2,456 2,471 2,556 2,565 2,667 2,780 2,786 2,866
2011 2,952 3,012 3,067 3,168 3,188 3,220 3,267 3,284 3,223 3,295 3,242 3,203
2012 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Sources: IMF, International Financial Statistics; Haver Analytics.
22 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Annual trends charts Pl ea se se e g ra p hi c b el ow
Annual trends charts
Source: Economist Intelligence Unit. Source: Economist Intelligence Unit.
GDP per head (US$; PPP)
Trade balance (% of GDP)
Source: Economist Intelligence Unit. Source: Economist Intelligence Unit.
Source: Economist Intelligence Unit. Source: Economist Intelligence Unit.
Real GDP growth(% change)
Consumer price inflation(av; %)
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0 World Asia (excl Japan) China
1312111009082007-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0 World Asia (excl Japan) China
1312111009082007
0.0
2.0
4.0
6.0
8.0
10.0 Asia (excl Japan) China
13121110090820070
2,000
4,000
6,000
8,000
10,000
12,000
14,000 World Asia (excl Japan) China
1312111009082007
Leading markets, 2010(% of total) (% of total)
Leading suppliers, 2010
South Korea4.4
Germany4.3
Others51.9
US18.0
Hong Kong13.8
Japan7.6
Others61.9
Japan12.6
South Korea9.9
Taiwan8.3
US7.3
China 23
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Quarterly trends charts Pl ea se se e g ra p hi c b el ow
Quarterly trends charts
Real GDP growth(% change)
Price inflation(av; %; year on year)
Interest rates(av; %)
Exchange rate(Rmb:US$; av; inverted scale)
Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.
Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0Money market rateLending rate
Q112
Q111
Q110
Q109
Q108
Q107
Q106
Q105
Q104
Q12003
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0Quarter on quarter Year on year
Q112
Q111
Q110
Q109
Q108
Q107
Q106
Q105
Q104
Q12003
-10.0
-5.0
0.0
5.0
10.0
15.0ProducerConsumer
Q112
Q111
Q110
Q109
Q108
Q107
Q106
Q105
Q104
Q12003
8.5
8.0
7.5
7.0
6.5
6.0
Q112
Q111
Q110
Q109
Q108
Q107
Q106
Q105
Q104
Q12003
24 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Monthly trends charts Pl ea se se e g ra p hi c b el ow
Monthly trends charts
Price inflation(% change, year on year)
Interest rates (av; %)
Monetary aggregates (% change, year on year)
Retail sales (% change, year on year)
Foreign-exchange reserves(US$ m)
Exchange rate (Rmb:US$; av; inverted scale)
Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.
Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.
Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.
1,600,000
1,800,000
2,000,000
2,200,000
2,400,000
2,600,000
2,800,000
3,000,000
3,200,000
3,400,000
OctJulApr
Jan11
OctJulApr
Jan10
OctJulApr
Jan09
OctJulApr2008
7.1
7.0
6.9
6.8
6.7
6.6
6.5
6.4
6.3
OctJulApr
Jan11
OctJulApr
Jan10
OctJulApr
Jan09
OctJulApr2008
10.0
15.0
20.0
25.0
30.0
35.0
OctJulApr
Jan11
OctJulApr
Jan10
OctJulApr
Jan09
OctJulApr2008
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0 Lending rate Deposit rate
OctJulApr
Jan11
OctJulApr
Jan10
OctJulApr
Jan09
OctJulApr2008
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0 M2 M1
OctJulApr
Jan11
OctJulApr
Jan10
OctJulApr
Jan09
OctJulApr2008
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0 Producer prices Consumer prices
OctJulApr
Jan11
OctJulApr
Jan10
OctJulApr
Jan09
OctJulApr2008
China 25
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Comparative economic indicators Pl ea se se e g ra p hi c b el ow
Comparative economic indicators, 2010
Gross domestic product(US$ bn; market exchange rates)
Gross domestic product(% change, year on year)
Consumer prices(% change, year on year)
Sources: Economist Intelligence Unit estimates; national sources.
Sources: Economist Intelligence Unit estimates; national sources.Sources: Economist Intelligence Unit estimates; national sources.
Sources: Economist Intelligence Unit estimates; national sources.
Gross domestic product per head(US$ '000; market exchange rates)
0 500 1,000 1,500 2,000
Laos
Papua New Guinea
Cambodia
Myanmar
Sri Lanka
Bangladesh
Vietnam
New Zealand
Pakistan
Philippines
Hong Kong
Singapore
Malaysia
Thailand
Taiwan
Indonesia
South Korea
Australia
India
Japan
China
0.0 10.0 20.0 30.0 40.0 50.0 60.0
Bangladesh
Myanmar
Cambodia
Pakistan
Laos
Vietnam
India
Papua New Guinea
Philippines
Sri Lanka
Indonesia
China
Thailand
Malaysia
Taiwan
South Korea
Hong Kong
New Zealand
Japan
Singapore
Australia
-2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
Japan
Taiwan
Malaysia
New Zealand
Hong Kong
Singapore
Australia
South Korea
China
Thailand
Cambodia
Philippines
Indonesia
Sri Lanka
Laos
Papua New Guinea
Myanmar
Bangladesh
Vietnam
India
Pakistan
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0
New Zealand
Australia
Pakistan
Japan
Myanmar
Cambodia
Bangladesh
South Korea
Indonesia
Vietnam
Hong Kong
Papua New Guinea
Malaysia
Philippines
Thailand
Sri Lanka
Laos
India
China
Taiwan
Singapore
5,824.1
5,488.4
26 China
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Country snapshot
Basic data
9,561,000 sq km
1.35bn (end-2011; official estimate)
Population (millions) of metropolitan areas. (Economist Intelligence Unit Access China estimates, 2010)
Shanghai 16.1 Chengdu 8.4 Beijing (capital) 14.0 Wuhan 8.3 Shenzhen 11.1 Xi'an 6.8 Guangzhou 9.3 Zhengzhou 6.7 Tianjin 9.2 Nanjing 6.2 Chongqing 9.2 Changsha 5.3
Continental, with extremes of temperature; subtropical in the south-east
Hottest months, July and August, 23-33°C (average daily minimum and maximum); coldest month, January, -1 to 9°C; driest month, September, less than 5 mm average rainfall; wettest month, June, 160-165 mm average rainfall
Mainly putonghua, or Standard Chinese, based on northern Chinese (the Beijing dialect known as Mandarin); local dialects and languages are also used
The metric system is used alongside certain standard Chinese weights and measures, of which the most common are:
1 jin = 0.5 kg 2,000 jin = 1 tonne 1 dan = 50 kg 20 dan = 1 tonne 1 mu = 0.0667 ha 15 mu = 1 shang = 1 ha
Renminbi (Rmb), or yuan. Rmb1 = 10 jiao = 100 fen. Average exchange rate in 2011: Rmb6.46:US$1
January-December
8 hours ahead of GMT
New Year, January 1st-3rd; Chinese New Year, January 22nd-28th; Qingming Festival, April 2nd-4th; Labour Day, April 29th-May 1st; Dragon Boat Festival, June 22nd-24th; Mid-Autumn Day, September 30th; National Day, October 1st-7th. All public holidays are technically one day long except for Chinese New Year and National Day, which are three days long. When the holiday covers weekdays in excess of this figure, they are compensated for by working weekends around the holiday
Climate
Weather in Shanghai (altitude 4 metres)
Language
Measures
Fiscal year
Time
Public holidays
Land area
Population
Main towns
Currency
China 27
Country Report April 2012 www.eiu.com © The Economist Intelligence Unit Limited 2012
Political structure
People's Republic of China
One-party rule by the Chinese Communist Party (CCP)
The State Council, whose membership is approved by the legislature; State Council members, including the premier, may serve no more than two consecutive five-year terms
A president and a vice-president are approved by the legislature for a maximum of two consecutive five-year terms
The unicameral National People's Congress (NPC), whose 2,989 delegates are selected by provinces, municipalities, autonomous regions and the armed forces. The NPC approves the president and members of the State Council, as well as the membership of the standing committee of the NPC, which meets when the NPC is not in session. All arms of the legislature and the executive sit for five-year terms
There are 22 provinces, four municipalities directly under central government control and five autonomous regions. These elect local people's congresses and are administered by people's governments
The current government line-up was approved at the NPC meeting in March 2008. A new party leadership will be announced at the 18th national congress of the CCP in late 2012. The new government line-up will be announced in March 2013 at the NPC, when Xi Jinping and Li Keqiang are expected to take over from Hu Jintao and Wen Jiabao as president and premier respectively
The politburo (political bureau) of the CCP decides on policy and controls all administrative, legal and executive appointments; the nine-member politburo standing committee is the focus of power
The CCP, of which Mr Hu is the general secretary
Hu Jintao Wu Bangguo Wen Jiabao Jia Qinglin Li Changchun Xi Jinping Li Keqiang He Guoqiang Zhou Yongkang
President Hu Jintao Vice-president Xi Jinping Premier Wen Jiabao Vice-premiers Li Keqiang Hui Liangyu Zhang Dejiang Wang Qishan Commerce Chen Deming Finance Xie Xuren Foreign affairs Yang Jiechi National Development & Reform Commission Zhang Ping
Zhou Xiaochuan Central bank governor
National legislature
Regional assemblies and administrations
National government
Main political organisation
Politburo standing committee members
Form of government
The executive
Head of state
National elections
Heads of selected state ministries and commissions
Official name
Recommended