Morris

Information about Morris

Published on October 12, 2007

Author: Nathaniel

Source: authorstream.com

Content

China’s Economic Prospects:  China’s Economic Prospects An analysis of the risks Nick Morris Chief Executive, ACIL Tasman Impressive, but variable, growth:  Impressive, but variable, growth China’s Economic Prospects Some Aspects:  China’s Economic Prospects Some Aspects Impressive growth has been driven by public borrowing, a low exchange rate, cheap labour and a high savings rate These will not all continue forever If China’s economy does crash, it could derail the world economy and take ten years to recover Major problems include: Property rights and investment decisions Pensions and welfare Contingent liabilities The banking system Environment The transition from a centrally-planned system to a market economy is complex International Comparison of Economies:  International Comparison of Economies 2003 Data Source: Data taken from the World Bank The Urban Legend of Shanghai’s Cranes:  The Urban Legend of Shanghai’s Cranes “For several years in the 1990s, more than half of the building cranes in the world were in Shanghai. Here are some of the things they built: China's tallest building with offices on the first 55 floors, and luxury hotel rooms, with a view, all the way up to 88; the Pearl TV tower, which looks like a giant hypodermic straight out of Buck Rogers.” CBS 60 Minutes (14 August, 2002) Key Drivers:  Key Drivers Flow of funds because of an undervalued exchange rate export growth rates high massive accumulation of foreign exchange International businesses have spent large sums to harness Chinese low cost labour Captive Chinese savings The absence of unions or genuine worker representation which ensures the minimal level of workplace regulation and minimal labour standards Low cost production facilitated by lack of environmental controls International relations:  International relations Chinese accession to WTO and Free Trade Agreements highlight the need to accommodate world needs An economic confrontation with the United States (and other developed economies) is possible if nothing is done Hence either the Chinese currency may rise quite considerably or action will be taken to limit Chinese imports Property Rights:  Property Rights “Last week, Mr. Wang, living in western Haidian District of Beijing, was driven out of his own home by a real estate developer and had his 12 houses leveled by the developer's bulldozer. All of his family belongings were buried by the debris. “Wang's story is not unique in the construction spree across China over the past few years. And in rural areas, farmers have no say in sale of land-use rights by village heads.” The People’s Daily Online (dated July 25, 2005) Property Rights:  Property Rights “Police officials in Yulin, Shaanxi province, have confirmed that they detained Feng Bingxian on July 26. Feng, a businessman, has been leading a lawsuit by thousands of investors against the local government. The investors claim that Shaanxi provincial officials illegally seized privately owned oil wells worth up to $850 million. Feng is not the first individual to be detained in connection with the sensitive case.” Washington Post (August 19, 2005) Misdirected Investment?:  Misdirected Investment? “You can see the fruits of China's high investment rate, and a lot of it is impressive. But part of it - 5 percent of GDP, maybe? - reflects the corruption and incompetence of the Chinese financial system.” Washington Post “China’s economy has been growing 9.5% annually since 2003, and this has been mainly due to rapid expansion of fixed investment, which contributes over 60% of GDP growth. With plenty of evidence that the overall efficiency of investment is deteriorating rapidly, this investment-led growth model must be adjusted to avert a financial crisis and growth stagnation.” HSBC Global Research Banking System:  Banking System “In general, how much corruption is there in China’s financial sector? “In regard to defaults and punishments, do banks pursue defaulters?:  “In regard to defaults and punishments, do banks pursue defaulters? The Reported Response of the Chinese:  The Reported Response of the Chinese Officials caught directing activity for personal gain may be jailed. Journalists are being encouraged to report on corrupt practices of this kind. The Bank of China has fired its workforce and is asking each of these former employees to reapply for their previous jobs. Foreign banks from next year are to be allowed to operate within China for the first time. An ageing population:  An ageing population Social change:  Social change Dramatic decline in fertility rates (created partly by the one child policy) the vast majority of today’s workers have no pension coverage at all and will rely on their children (the “4-2-1 problem” – one child expected to support two aged parents and four grandparents); Fairly low official retirement ages: 55 for female cadres (Party members) 50 for female workers 60 for men These problems were noted in The Economist [dated May 24, 2004]: “China's economy will eventually be crippled if nothing is done.” Pension liabilities:  Pension liabilities The growth of public debt:  The growth of public debt Public Debt:  Public Debt Contingent Liabilities in China - End 2001 Data source: Citigroup (2002) estimates State Owned Enterprises (SOEs):  State Owned Enterprises (SOEs) the distortion of financial statements vague property rights a lack of transparency poor management information systems Normal market mechanisms don’t work because of: controls on SOE pricing controls on interest rate determination controls on exchange rate China’s SOEs are hampered by: SOE liabilities:  SOE liabilities An emerging inflation problem?:  An emerging inflation problem? Externalities and the Environment :  Externalities and the Environment Two-thirds of Chinese cities have air quality below WHO standards By some measures, at least six of the world's 10 most polluted cities are in China Several Chinese cities have the highest rates of airborne carbon monoxide in the world Living in Chinese cities with the worst air pollution does more damage to an average Chinese person's lungs than smoking two packs of cigarettes a day Forest cover has fallen by more than half over the past two decades Externalities and the Environment:  Externalities and the Environment Deserts are expanding by several hundred thousand square kilometers per year, faster than anywhere else in the world Water in five of China's largest rivers is so polluted it is dangerous to the touch, because it causes skin diseases Several of the country's main waterways, including the Yellow River, run dry before reaching the sea More than 600 million Chinese, roughly half the country's population, now drink water contaminated with animal and human waste Chinese Energy Sources:  Chinese Energy Sources Source: US Energy Information Administration Risk summary I:  Risk summary I Export growth is built on an undervalued currency and a poorly paid workforce, with large public debts Exports are funded at the cost of environmental degradation – a cost not included in the price of goods sold on foreign markets but one which will eventually need to be met The banking system is technically bankrupt and is an incompetent mechanism for channeling savings into productive investment Risk summary II:  Risk summary II Economic decisions are regularly determined according to the views of the bureaucracy in which non-financial considerations are more important than potential profitability Prices are not allowed to reflect the underlying economic position Exchange rates and interest rates are tightly controlled Property rights are vague and only loosely enforced Overview:  Overview China’s recent growth may be hard to continue China is tightly run and cohesive – it is not Argentina or the Soviet Union Continuation of present policies demands a pliant workforce and continued high domestic saving Environmental problems will need to be solved soon Welfare and pension reforms are crucial

Related presentations


Other presentations created by Nathaniel

11 noise
26. 02. 2008
0 views

11 noise

Great Barrier Reef Marine Park
10. 10. 2007
0 views

Great Barrier Reef Marine Park

Women Inventors
15. 10. 2007
0 views

Women Inventors

local anesthetics 2006
15. 10. 2007
0 views

local anesthetics 2006

International Legal Issu qb
17. 10. 2007
0 views

International Legal Issu qb

NILE
21. 10. 2007
0 views

NILE

SEAPORT ENHANCED
22. 10. 2007
0 views

SEAPORT ENHANCED

World War II
23. 10. 2007
0 views

World War II

NorthAfrica
23. 10. 2007
0 views

NorthAfrica

mascots aodv
30. 10. 2007
0 views

mascots aodv

securite adhoc
07. 10. 2007
0 views

securite adhoc

xie
25. 10. 2007
0 views

xie

UP
03. 01. 2008
0 views

UP

pc dvl
02. 10. 2007
0 views

pc dvl

Optimised PR
08. 10. 2007
0 views

Optimised PR

FTMA latest
21. 10. 2007
0 views

FTMA latest

5 Productivity CPE jun2004
17. 10. 2007
0 views

5 Productivity CPE jun2004

Esto es hermoso
02. 10. 2007
0 views

Esto es hermoso

Gaffney
04. 12. 2007
0 views

Gaffney

jfy2001
09. 10. 2007
0 views

jfy2001

omni cdr
04. 01. 2008
0 views

omni cdr

A2 Allan Clark
15. 10. 2007
0 views

A2 Allan Clark

luther
27. 02. 2008
0 views

luther

me579 04 MP 4fcns
28. 02. 2008
0 views

me579 04 MP 4fcns

Raytheon
07. 03. 2008
0 views

Raytheon

Dorin Marcu COLLAGEN
11. 03. 2008
0 views

Dorin Marcu COLLAGEN

amp
12. 03. 2008
0 views

amp

TUAB201
13. 03. 2008
0 views

TUAB201

PONENCIA JDB EXTENDA
23. 10. 2007
0 views

PONENCIA JDB EXTENDA

MorganStanley Mazzilli
26. 03. 2008
0 views

MorganStanley Mazzilli

mountains
03. 10. 2007
0 views

mountains

Fumi
29. 10. 2007
0 views

Fumi

parent brief 07
02. 11. 2007
0 views

parent brief 07

Kathryn Mohrman
16. 10. 2007
0 views

Kathryn Mohrman

Embryology
15. 11. 2007
0 views

Embryology

06 Hallegatte Perugia
14. 04. 2008
0 views

06 Hallegatte Perugia

june052002 session1
16. 04. 2008
0 views

june052002 session1

102505brownbag
17. 04. 2008
0 views

102505brownbag

NetMarkets
18. 04. 2008
0 views

NetMarkets

02 P Daniel
22. 04. 2008
0 views

02 P Daniel

SynFormationII
10. 10. 2007
0 views

SynFormationII

proposal tanzania
28. 04. 2008
0 views

proposal tanzania

Adelsheim
07. 01. 2008
0 views

Adelsheim

overview6 hooks
07. 05. 2008
0 views

overview6 hooks

Healthways MHS Stories
02. 05. 2008
0 views

Healthways MHS Stories

whytalk2rev
02. 05. 2008
0 views

whytalk2rev

Doing Business With UNDP
22. 10. 2007
0 views

Doing Business With UNDP

10638222521Maroc Onep French
23. 10. 2007
0 views

10638222521Maroc Onep French

030515 mattiaslinde
20. 11. 2007
0 views

030515 mattiaslinde

Dylan WIT
15. 10. 2007
0 views

Dylan WIT

tbc
25. 10. 2007
0 views

tbc

P1091 NEPAD 3Years Oct2004
23. 10. 2007
0 views

P1091 NEPAD 3Years Oct2004

santosppt5
12. 10. 2007
0 views

santosppt5

epidemics
05. 10. 2007
0 views

epidemics

Ft Subscription
29. 09. 2007
0 views

Ft Subscription

erwin broeders
16. 10. 2007
0 views

erwin broeders

lgb BMR hors ed
24. 10. 2007
0 views

lgb BMR hors ed

E6MScomparativeadjec tives
03. 10. 2007
0 views

E6MScomparativeadjec tives

20years
16. 10. 2007
0 views

20years

revitalizingiudscond ensed
25. 03. 2008
0 views

revitalizingiudscond ensed

Make Half Your Grains Whole
04. 03. 2008
0 views

Make Half Your Grains Whole

20061020MMGAConf
17. 10. 2007
0 views

20061020MMGAConf

jerry landerson
29. 02. 2008
0 views

jerry landerson

NAP de Mesoamerica 082003 v3
22. 10. 2007
0 views

NAP de Mesoamerica 082003 v3

PrionDisease
16. 10. 2007
0 views

PrionDisease