2009 China Business Outlook

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2009 China Business Outlook Powered By Docstoc
					China’s Market
Under Global Economic Slowdown
-Opportunities and Challenges

May 21, 2009
Andrew M. Pan
                                 Outline


• China’s Economy Under Global
  Economic Slowdown
• Opportunities
   - Central Government Stimulus Package
   - Opportunities by Industry Sectors
• Challenges
• Prediction
                                           2
                                         China’s Economy Under
                                       Global Economic Slowdown


                                                          • GDP growth statistics
      China's GDP growth (2000-2008)                           • 9% in 2008
15%                                                            • 2008 Quarters
12%
                                                                  –   10.6% (Q1)
9%
                                                                  –   10.1% (Q2)
6%
                                                                  –   9.0% (Q3)
3%
                                                                  –   6.8% (Q4)
0%
                                                               • 6.1% in Q1, 2009
   00

   01

   02
   03

   04

   05

   06
   07

   08

   09




                                                               • 2009 target: 8%
 20

 20

 20
 20

 20

 20

 20
 20

 20

 20




                                                                                    3
         Source: National Bureau of Statistics of China
                  China’s Economy Under
                Global Economic Slowdown

• Export/import decline
     • Export declined 19.7%, import declined
       30.9% in Q1, 2009
• Foreign Direct Investment (FDI) decline
     • FDI flows weakened, with a 20.6% decline in
       Q1, 2009
• Unemployment increase
     • Raised 2009 target to 4.6%, the highest
       since 1980
                                                     4
                China’s Economy Under
              Global Economic Slowdown
                                         Shanghai SSE Composite Index

                           7,000
                           6,000
• Stock market             5,000




                   Index
                           4,000
• Housing market           3,000
                           2,000
• Auto market              1,000
                               0
                                   2000 2001 2002 2003 2004 2005 2006 2007 Sep- 2008
                                                                            07
                                                         Year




                                                                              5
                               Opportunities:
                          China’s Stimulus Package


• 4 trillion RMB ($586 billion USD) stimulus package for
  government investment in infrastructure, tax
  deductions and subsidies, to stimulate domestic
  spending
• Announced Nov. 9, 2008, projects and spending
  already started in 2008
• 2 years, 10 major areas:
   • Finance, housing, rural infrastructure, transportation, industry,
     health and education, disaster rebuilding, environmental
     protection, technological innovation, and tax reform

                                                                         6
                       Opportunities:
                  China’s Stimulus Package



• Value Added Tax (VAT) reform
  • RMB 120 billion tax reduction from January 1st,
    2009
• Export VAT refund rate increase to help
  exporters
  • Applicable to 3,770 goods



                                                      7
                             Opportunities:
                            Industry Sectors



• Finance
     •   Removing lending quota on commercial banks
     •   Increasing the lending scale
     •   Credit support to M&A
     •   Credit support to rural areas
     •   Credit support to small and medium enterprises



                                                      8
                           Opportunities:
                          Industry Sectors



• Housing
    • Tax reduction to boost real estate market
    • Affordable and low-rent housing
    • Expanding the pilot program to rebuild rural
      housing
    • Increasing senior housing



                                                     9
                              Opportunities:
                             Industry Sectors



• Rural infrastructure/modernization
     • Improving countryside roads and power grids
     • Ensuring drinking water safety
     • Expediting the North-South water diversion project
       and country-wide reservoirs
     • Rural Home Appliance Subsidies Program



                                                       10
                             Opportunities:
                            Industry Sectors



• Transportation
     • Building more airports in the western areas
     • Expanding highway system
     • Building more dedicated passenger rail links and
       coal routes




                                                     11
                             Opportunities:
                            Industry Sectors


• Automobile
     • Tax reduction for purchasing economic cars less
       than 1.6L
     • Subsidies to farmers for purchasing light trucks
       and minivans
     • RMB 10 billion fund to subsidize auto industry
       technological innovation and new energy vehicles
     • Encouraging M&A and brand name development
       to tap overseas market
     • Expanding auto financing

                                                     12
                              Opportunities:
                             Industry Sectors


• Telecom
    • Long awaited 3G licenses issued to China Mobile
      (TD-SCDMA), China Telecom (CDMA2000) and
      China Unicom (WCDMA)
    • Will spend RMB 170 billion in 2009, and 400 billion
      by 2011 on 3G network
    • Could lead to US $290 billion in private-sector
      investment by 2011
    • Target: 50 million subscribers by 2011, covering all
      cities and bigger townships

                                                       13
                                Opportunities:
                               Industry Sectors


• Health and Education
     • Improving health and medical systems in rural areas
     • Restructuring the healthcare system
     • Building more joint-venture hospitals
     • Expanding health insurance, especially to rural areas
     • Developing cultural and educational sectors in rural
       areas
     • Building more schools in rural western and central
       areas
                                                         14
                              Opportunities:
                             Industry Sectors

• Energy and environment
     • Technology upgrade of coal-burning power plants to
       reduce pollution
     • Encouraging investment in renewable energy such
       as nuclear, wind, solar, and biomass
     • Encouraging energy conservation, and improving
       energy efficiency
     • Clean Development Mechanism (CDM) projects –
       greenhouse gases reduction projects
     • Waste management
     • Eco-city plan
                                                      15
                           Opportunities:
                          Industry Sectors


• Other opportunities
     •   Luxury goods and brands
     •   Fashion
     •   Hotels and hospitality
     •   E-commerce
     •   Media and advertising
     •   Professional services


                                             16
                                Challenges


• Global/U.S. economic slowdown lasting can cause
  China’s economic growth sluggish and market (most
  sectors) downsize dramatically
• Are 4 trillion RMB enough?
• Saving vs. Spending
• USD and RMB value disputes between U.S. and China
• Trade disputes between U.S. and China
• Banking trouble again: non-performing loans rising?
• GDP growth rate lowering than 8% may cause high
  unemployment, and further cause social instability

                                                        17
                                           Prediction

• China – First to Recover?
      • Premier Wen Jiabao said on April 12, 2009 that China’s economy
        is showing positive changes
      • China aims to be the first to recover
      • Start to recover in the 2nd half of 2009, and gain full steam in 2011
• Sectors to Recover First
      • Real estate, construction, steel and other construction materials,
        auto, telecom, financial, home appliances, and energy
• Transformation of Growth Pattern
      • Now: excess consumption of natural resources; environmental
        pollution; too much investment; insufficient domestic consumption
      • Aim: more sustainable and steady growth with a better skilled
        work force and technological innovation; boost domestic       18
        consumption
                              Contact


North American Representative Office of
    Shenzhen, P.R. China (NAROS)

            Andrew M. Pan
  Chief Representative & Managing Director
        350 S. Figueroa Street, Suite 288
             Los Angeles, CA 90071
            Tel: (213) 628-9888
            Fax: (213) 628-8383
      andrewpan@shenzhenoffice.org
          www.shenzhenoffice.org


                                             19

				
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