China and Japan: How Asias Economic Giants are Shaping the Regions - PowerPoint PPT Presentation

China and Japan: How Asia’s Economic Giants are Shaping the Region’s Outlook Sean Creehan and Cindy Li March 2, 2016 Country Analysis Unit Federal Reserve Bank of San Francisco “The opinions expressed in this presentation are statements of the speaker's opinion, are intended only for informational purposes, and are not formal opinions of, nor binding on, the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System.”

Japan’s Economic Performance is Better Than You Think Real per capita GDP growth in the G7 (%) -2.0 -1.0 0.0 1.0 2.0 3.0 Germany Japan Canada 2000-2014 average United States 2010-2014 average United Kingdom In fact, it’s the highest among the G7 France over this period if you adjust for the Spain size of the working age population Italy Source: OECD

Demographics a Constraint, Productivity Lags 70 Working Age Population Aged GDP per hour worked 72 15-64 (% of population) (US$ constant 2010 prices) 60 70 50 68 40 66 30 64 Japan Italy 20 62 United Kingdom Canada Germany France 10 60 United States 0 58 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: OECD

Japan Goes Out 500 Outbound FDI flows Outbound FDI Stock Italy (US$bn) (US$ bn as of end-2014) Canada 400 China Japan 300 France United States Hong Kong, China China Japan 200 Hong Kong, SAR Germany Canada France Italy United Kingdom Germany 100 United Kingdom United States 0 0 5000 10000 -100 2009 2010 2011 2012 2013 2014 Source: United Nations World Investment Report, June 2015

China and Japan’s Evolving Roles in the Global Economy 1995 2015 Rest of United United World States States 24% Rest of 24% 25% World 32% Japan 6% Japan Europea 17% China n Union Europea 16% 31% n Union 22% China 3% Source: International Monetary Fund.

China’s New Normal: The Good, the Bad, or the Ugly? Real GDP growth (%) 16 14 IMF projections 12 (As of 10/2015) 10 8 Successful reforms: 6 4-6% 4 "Lost decade": 1-3% 2 0 Hard landing: negative growth -2 1995 2000 2005 2010 2015 2020 Note: The three scenarios are taken from a recent survey by the Council on Foreign Relations. Sources: International Monetary Fund, Council on Foreign Relations.

One Country, Two Business Climates? YoY growth rate, % Contribution to GDP growth, % 20 100 18 90 16 80 66.2 14 70 12 60 10 50 8.2 8 40 6 30 6.1 21.5 4 20 Consumption Investment Industrial sector Tertiary sector 2 10 0 0 2005 2007 2009 2011 2013 2015 2005 2007 2009 2011 2013 2015 (est) Sources: Chinese National Bureau of Statistics, Chinese Ministry of Commerce.

Cold Politics, Warm Economic Ties? China's importance for large multinatioal Japanese manufacturers Chinese visitors, % of total foreign tourists traveling to Japan 30 0.6% 2015: 7.0% 25.3% 25 27.0% 20 53.7% 2.6% 9.1% 15 Share of companies surveyed that... 10 Produce in China (to sell in China) Produce in China (to export to Japan) 5 Produce in China (to export to other countries) Produce in China (both selling in China and exporting) Have sales operations in China but no production bases 0 Others 1990 1995 2000 2005 2010 2015 (est) Sources: Japan Tourism Marketing Co., Japan Bank for International Cooperation.

China and Japan’s importance in regional trade (2014) China Japan Rank as an Rank as an Share of Rank as an Rank as an Share of export import origin exports (%) export import origin exports (%) destination destination Japan 2 1 18.3 - - - Hong Kong 1 1 53.9 3 3 3.6 Korea 1 1 25.4 3 2 5.6 Singapore 1 1 12.6 6 6 4.1 Taiwan 1 1 26.2 5 2 6.3 China - - - 3 1 6.4 India 4 1 4.2 15 18 1.8 Indonesia 2 1 10.0 1 3 13.1 Malaysia 2 1 12.0 3 3 10.8 Philippines 3 1 12.9 1 3 22.5 Thailand 1 1 11.0 3 2 9.6 Vietnam 2 1 10.4 3 3 10.3 Source: Asian Development Bank.

1990 Japan vs. 2014 China 1990 Japan 1990 USA 2014 China 2014 USA GDP Per Capita, PPP 29,550 37,062 12,609 52,118 (Constant 2011 international $) Urban population (% of total) 77 77 54 81 Services value added 59.8 -- 48.2 78.1* (% of GDP) Household final consumption 53 64 36* 68 (% of GDP) Source: World Bank Development Indicators *2013 figure Sources: International Monetary Fund and World Bank.

TPP vs. RCEP Source: Center for Strategic and International Studies.

Asia Infrastructure Investment Bank Source: China Daily

Thank you! Learn more about the Asia Program Visit our Pacific Exchange Blog