China: An Old-Fashioned Recovery, Headwinds Ahead
Li-Gang Liu Chief Economist, Greater China MAR 2013
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China: An Old-Fashioned Recovery, Headwinds Ahead Li-Gang Liu Chief - - PowerPoint PPT Presentation
China: An Old-Fashioned Recovery, Headwinds Ahead Li-Gang Liu Chief Economist, Greater China MAR 2013 1 Industrial production rebounded, led by the heavy industry sector China - Industrial Production China - Electricity Consumption (y/y)
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China - Industrial Profits (y/y)
5 10 15 20 25 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12
China - Industrial Production (y/y)
8 10 12 14 16 18 20 22 24 26 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13
Light Industry Heavy Industry
China - Industrial Production Growth vs Ferrous Metal Smelting & Pressing (y/y)
5 10 15 20 25 Oct 10 Dec 10 Feb 11 Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Headline Industrial Production Smelting & Pressing of Ferrous Metals
China - Electricity Consumption (y/y)
5 10 15 20 25 30 Feb 11 Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13
Overall Light Industry Heavy Industry
China - Government Expenditure Target 2012
20 40 60 80 100 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12
Government Expenditure, % implemented Target (45 degree line)
China - Newly Started Projects (y/y)
10 20 30 40 50 60 70 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13
China - Residential Property Investment vs GDP (y/y, ytd)
5 10 15 20 25 30 35 40 45 2008 2009 2010 2011 2012 6 8 10 12 14 Residential Property Investment GDP (RHS)
China - 70 City New Residential Property Price (number of cities m/m change)
10 20 30 40 50 60 70 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13
Decrease No Change Increase Number of Cities
China - 70 City New Residential Property Price (number of cities y/y change)
10 20 30 40 50 60 70 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13
Decrease No Change Increase Number of Cities
China - Property Price Index (y/y)
2 4 6 8 10 12 14 16 18 2005 2006 2007 2008 2009 2010 2011 2012 2013
Official Property Price Index ANZ Property Price Index
China - Contribution to GDP Growth
5 10 15 20 01 02 03 04 05 06 07 08 09 10 11 12 Consumption Investment Net Exports GDP, y/y
China - Incremental Capital Output Ratio
1 2 3 4 5 6 7 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 ICOR, 5 year moving average
Period Avg. GDP Growth Investment Share of GDP (%) ICOR 1981-1990 9.3 35.2 3.8 China 1991-2000 10.5 37.8 3.6 2001-2011 10.6 43.4 4.1 Japan 1960-70 10.4 26.1 2.5 Korea 1981-91 9.7 30.4 3.1 Incremental Capital Output Ratio
China - Provincial Growth and Investment Targets in 2013 (%)
5 10 15 20 25 30 35
Guizhou Shaanxi Jilin Gansu Qinghai Yunnan Chongqing Tianjin InnerMongolia Tibet Ningxia Heilongjiang Fujian Sichuan Guangxi Xinjiang Henan Jiangsu Hubei Hunan Jiangxi Hainan Shanxi Anhui Shandong Liaoning Hebei Zhejiang Guangdong Beijing Shanghai 2013 GDP Growth Target 2013 Investment Growth Target
China - Inflation vs CRY Index (y/y)
5 10 15 2005 2006 2007 2008 2009 2010 2011 2012
20 40 60 CPI PPI CRY Index (RHS) China Hog Price Cycle 50 70 90 110 130 150 170 190 6 12 18 24 30 36 2011 - current 2008 to 2011 2005 to 2007 2002 to 2004 months Index
China - CPI Inflation
2 4 6 8 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13
1 2
m/m (RHS) y/y
China - PPI Inflation
3 5 8 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13
1 2
m/m (RHS) y/y
China - First Tier City New Residential Property Prices (y/y)
2 4 6 8 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13
Beijing Shanghai Guangzhou Shenzhen
China - Property Prices (y/y)
1 2 3 4 5 6 7 8 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13
39 cities with property curbs 31 cities without property curbs *average prices
PBOC resumed repos to drain liquidity from the
Market rates much more stable this year, suggesting relaxed market liquidity Capital inflows rebounded in Q4 2012 and are expect to surge in Q1, prompting repos operations Food prices hit record high, raising inflation concerns
China Food Price Index
140 150 160 170 180 190 200 210 220 230 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 China - PBoC Weekly Open Market Operations (RMB bn)
200 400 600 800 1,000 27 Aug 17 Sep 08 Oct 29 Oct 19 Nov 10 Dec 31 Dec 21 Jan 11 Feb 04 Mar
CB Bill Matured Repo Matured Reverse Repo CB Bill Repo
Net Liquidity Injection Liquidity Withdrawal
China - 7-day Repo Rate
1 2 3 4 5 6 7 8 9 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13
One week before Chinese New Year
China - Monthly Change of Financial Institutions FX Position (RMB bn)
100 200 300 400 500 600 700 800 Jan 09 May 09 Sep 09 Jan 10 May 10 Sep 10 Jan 11 May 11 Sep 11 Jan 12 May 12 Sep 12 Jan 13
China-GDP(y/y)
7 8 9 10 11 12 13 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13
forecasts
China - CPI (y/y)
1 2 3 4 5 6 7 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Government Target
forecasts
10 10
Source: Bloomberg, ANZ
CNY Exchange Rate (Index: 1 Jan 2012 = 100)
90 95 100 105 110 115 120 125 130 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 CNY/EUR CNY/JPY CNY/AUD CNY/USD CNY Appreciation
USD/CNY
6.20 6.25 6.30 6.35 6.40 6.45 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 USD/CNY Spot Trading Band Fixing
China - CNY and CNH Rates
6.18 6.20 6.22 6.24 6.26 6.28 6.30 6.32 6.34 6.36 6.38 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13
100 200 300 400 500 Spread (pips, RHS) USD/CNY USD/CNH China - CNY Basket 6.20 6.30 6.40 6.50 6.60 6.70 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 ANZ Basket Track CNY Spot
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China - Contribution to GDP Growth (ppt)
2 4 6 8 10 12 14 16 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Final Consumption Investment Net Exports GDP China - GDP Composition (2011)
Household Consumption 35% Investment 49% Net Exports 3% Government Consumption 13%
China - GDP Composition (2015)
Household Consumption 39% Investment 47% Government Consumption 13% Net Exports 1%
China - GDP Composition 2011
Secondary: Other 14% Tert: Transport, Storage, Post 5% Tert: Wholesale & Retail 9% Tert: Banking & Insurance 5% Tert: Real Estate 6% Tert: Other 19% Primary 10% Secondary: Manufacturing 32% Total Tertiary 43%
Source: CEIC, ANZ Projection
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China’s urban population. That’s three times the amount of rural Chinese (103 million) that have migrated to the cities since 1990
kilometres of metro rail will be laid
twice the number that all of Europe has today
will be built to construct five million buildings
every ten planes assembled by Boeing and Airbus will be delivered to China
from 60 quadrillion British thermal units (QBTUs) to between 123 QBTUs and 142 QBTUs – equivalent to 25% of the world’s total energy demand today
Capital Stock per Capita in 2011 (USD 2005 Price)
50,000 100,000 150,000 200,000 250,000 300,000 US Japan China
It will take China 10 more years to reach Japan's level assuming 20% (p.a) growth in capital stock It will take China 12 more years to reach US level assuming 20% (p.a) growth in capital stock
China - Urbanisation 200 400 600 800 1,000 1,200 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 20 40 60 80 100 Rural population (mn) Urban population (mn) Percentage urban (%, RHS)
China’s high speed rail network by 2020 China’s city clusters by 2020
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17 Consumption versus out-of-pocket health spending 2007 Brazil China India Indonesia Italy Russia Thailand France Germany Japan South Korea South Africa UK US y = -0.2815x + 0.8243 R2 = 0.24 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% OOP share in total health spending, % Consumption as % of GDP
China - Durable Units per 100 Urban Households
93 83 1 36 13 121 32 96 97 17 119 79 134 203
50 100 150 200 250 Washing Machines Refrigerators Automobiles Air Conditioners Computers Color TV Mobile Phone 12/2001 03/2011
China - Rural Cash Income Per Capita (ytd, y/y)
5 10 15 20 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
China - Average Wage (ytd, y/y)
10 11 12 13 14 15 16 17 18 19 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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China GDP: 12,383 M2: 15,637 Australia GDP: 961 M3: 1,567 Brazil GDP: 2,366 M2: 859 Japan GDP: 4,617 M2: 9,506 New Zealand GDP: 129 M3: 210 ASEAN-5 GDP: 3,087 M2: -- United States GDP: 15,653 M2: 10,459 Eurozone GDP: 16,074 M2: 11,912 CH -> EU: 334 CH <- EU: 213 CH -> ASEAN: 153 CH <- ASEAN: 165 CH -> JP: 152 CH <- JP: 178 CH -> US: 352 CH <- US: 133 CH -> AU: 38 CH <- AU: 85 CH -> NZ: 3.9 CH <- NZ: 5.8 CH -> BZ: 33 CH <- BZ: 52 Source: IMF, China General Administration of Customs, Bloomberg, CEIC, ANZ Research
Bilateral Trade in USD (billion) GDP figures are IMF’s 2012 estimates based on purchasing power parity M2 and M3 figures are denominated in USD (billion)
CH -> AFRICA: 85 CH <- AFRICA: 113
appointed a clearing bank for personal RMB business in Hong
residents can
accounts.
began.
engaging in tourism and consumer services can open RMB deposits and convert RMB receipts into HKD; current account is allowed for Hong Kong residents who are subject to a daily remittance limit
RMB non-deliverable forwards.
issuance of RMB bonds by China Development Bank.
signed Currency Swap Agreement (3 years, RMB200bn/HKD227bn)
border trade settlements in four
relevant Mainland provinces and cities can settle their merchandise imports, service trades and other current account transactions in RMB, while an expanded list of eligible enterprises were able to settle their merchandise exports in RMB.
expanded to cover 20 provinces and cities.
platform to conduct cash notes business for Taiwan.
Participating Banks of RMB Business in Hong Kong can conduct trading in the Mainland’s interbank bond market upon approval by the PBOC.
banking activities including the introduction of net open position and 3-month requirement for trade settlements.
Many more in the pipeline China’s RMB capital account to basically convertible by 2015
RMB.
Kong Exchange by Huixian REIT.
Association launched offshore RMB fixing.
Keqiang announced a series of measures to support Hong Kong’s
tendered 3-, 5-, 7-, 10-year RMB sovereign bonds in Hong Kong. Cross-border trade settlement scheme was expanded to the whole country.
Direct Investment Programme.
Foreign Institutional Investor (RQFII) scheme was announced.
Shanghai’s plan to be global RMB centre by 2015.
exporters’ participation in RMB trade settlements.
investment and settlement of debt securities.
their linkages in the RMB market, specifically regarding clearing and settlement systems, market liquidity and the development of new RMB denominated financial products.
NOP requirements.
Kong.
clearing in Taipei and Shanghai.
released.
London
reached RMB 14bn in H1 2012
an average daily volume of US$ 1.7bn
credit grew 20 times to RMB 3.7bn
initiative was formally launched in April 2012.
services via RTGS with Hong Kong desks
frequently Hong Kong: China’s preferred testing ground for a market-based RMB under the National 12th Five Year Plan. Total deposits reached RMB624bn in January 2013. Taiwan: RMB clearing is available in 2013 Singapore Issued full banking licences to two Chinese banks in 2012 RMB banking services available at institutional and retail level
2011 2015 RMB to become convertible RMB as trade currency 2012 Promote RMB reciprocal capital flows 2013 2014
Hong Kong's RMB Market 500 1,000 1,500 2,000 2,500 3,000 2009 2010 2011 2012
1 2 3 4 5 6 7 8 9 10 RMB Deposits (billion) RMB Trade Settlements (Billion) % of Total Deposits Taiwan - OBU RMB Deposits (RMB million)
5,000 10,000 15,000 20,000 25,000 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12
Australia/New Zealand RBA and NZRB signed bilateral currency swap agreements with the PBoC in 2011 and 2012 RBA set up a joint forum with HKMA for RMB business cooperation Japan Yen-Yuan direct trading launched in Shanghai and Tokyo in June
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