Transcript Document

The Second Global Shift and
China’s Rise in the 21st
Century
Victor F.S. Sit
Advanced Institute for Contemporary China Studies
Hong Kong Baptist University
March, 2009
Outline
I.
China’s Economy and the First Global Shift
II.
The Second Shift in 21st Century
Globalization
III.
Financial Tsunami and the New Global
Economic Environment
IV.
China’s Global Strategic Options
I.
China’s Economy and the First Global
Shift
A.
Historic growth in the past 3 decades
B.
Major economic power house in 21st century
C.
Lessons from the First Global Shift
China’s Share in International Sourcing
Global Share (%)
20
2006
2009
18
16
15
14
14
13
12
12
13
12
11
10
9
8
8
7
6
4
2
0
Automobile
Retailing
Consumptive
Products
Electronic
Products
Average
Major Economic Achievements (targets) of the three Recent 5-year Plan
1995-2000
2001-2005
2006-2010 (target)
Average annual growth rate
8.3%
7.5%
7.5%
2000/2005 total (billion ￥)
8,940
18,200
26,100
per capita (yuan)
7,099
13,985
19,270
880
1,685
2,569
Average annual growth rate
16.5%
17.6%
2000/2005 total (billion ￥)
1,338
3,163
Total (billion US$)
289
562
Increase over the previous 5-year
79%
94%
2000/2005 total (billion US$)
474
1,422
Increase over the previous 5-year
69%
200%
2000/2005 total export (billion US$)
249
762
Increase over the previous 5-year
67%
206%
2000/2005 total (billion US$)
165
819
Increase over the previous 5-year
92%
396%
GDP
(US $)
Budgetary Revenue
FDI
Foreign Trade
Foreign Exchange Reserve
C. China Benefitted from the First Global Shift

Achievements in rapid growth

Global forces: FDI & export-push

Labor-intensive, low scale

Global size and potentials

Spatial concentration
China’s Contribution to Global Economic Growth in 2005
World GDP Distribution, 2006
(value at purchasing power parity)
II. The Second Global Shift
A. Meaning and content of the Second Global Shift
B. Reasons
A. The Second Global Shift
Main Shifts
Developed
Countries
(1) Financial Sector
(2) Consumer Durables;
Capital Goods
Less Developed
Countries
China
B. Reasons:

High savings and real economy VS
overspending “derivatives”

will overtake US as the largest economy

advantages of large pool of labor – cost and
range

organizational strength – ‘socialist-market
system’

potential of the largest home market
Finance for Chinese Enterprises, 2006
Source
%
Retained Profits
60
Bank Loans
25
Shares and Stocks
15
III. Financial Tsunami and the New
Economic Environment
A. ‘Demise’ of the Western Capitalism system
B. New financial and economic landscape
C. Post-Tsunami scenario for ‘developed’ countries
D. China’s Response
The Financial Tsunami:
Selected key events
A. ‘Demise’ of Western Capitalism?
1.
Basic of Western Economy under Question




confidence in the market
system of regulation
international institutions
infallibility of the ‘greenback’
2. Key policies (bailouts and others)
 nationalism
 subsidy
 protectionism
B. New financial and Economic landscape
World GDP growth forecast for 2009
Region
Growth rate (%)
World
0.2
E.U.
-0.6
U.S.
-0.5
China
7.5
Of the top 10 banks (by market cap)
4 are Chinese
Top 3, all Chinese
C. Post-Tsunami Scenario for
‘developed’ Countries




Slow down in overall economic growth, a 2-3 year recession – the
worst record since the Second World War.
Major contraction of the financial sector with increased
tightness and conservatism both in its operation and regulation,
leading to increase costs and a clamp on credit even after the
initial shock due to de-leverage induced by the Tsunami.
Devaluation in both financial and real assets will tighten credit
further and impact negatively on production and consumption.
The result is an overall shrinkage of market demand.
To protect local jobs, countries may tilt towards trade
protectionism.
High-tech, high value added and knowledge intensive industries
will be the likely bright spot in developed economies. Hence,
global competition in such products will be very keen.
D. China’s response to the
“Financial Tsunami”





step up pace of development of the financial sector, especially
in internationalization of the Renminbi, such that China’s
lagging financial sector may catch up with its real economy.
Yet, overall progress will contingent on the lapse of the
Financial Tsunami and cycles of the global economy.
stimulate and develop local demand guided by the quest for
environmental and economically sustainable growth.
revamp past convention of export-led growth by “walking on
two legs”, i.e. future growth will be propelled by the twin
engines of exports and domestic market demand.
deepen technology and increase value-added of conventional
industries sectors.
aim for a balanced economy in line with the low skill and large
size of China’s working population.
IV. China’s Global Strategic Options
A. Key issues for China in the 21st Century
B. The New China Economy and Business opportunities
C. Potential new regional Patten
A. Key Issues for China
Major concerns

Energy source

Security
China’s global political role

Peace and harmony

Fair trade and development
B. The New China Economy and
Business Opportunities
Possible new development trends:

RMB will be Asia’s major hard currency

SOE and large private enterprises will globalize

Shares and stocks will be major means for fund raising of Chinese
enterprises

China investment corporations will lead the way and be major
players in global investment and M&A

Major banks in China will globalize through M&A

More free flow of private funds from China to the rest of the world
participate deeper in the global economy
C. Potential new regional pattern

Coastal region concentration will remain

Hong Kong will serve as China’s new global financial centre
and rivaling New York

Port city regions will be converted to high-tech, high-value
added global production platforms

Western margin will assume faster growth