update on china the new normal?... one belt one road initiative ——the new silk road (1) •...
TRANSCRIPT
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Update on China – the New
Normal?Richard Cant – North American Director
June 14th 2016 – Charlotte Economics Club
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Agenda
1. Dezan Shira & Associates & Asia Briefing
2. Current Economic Trends
3. China & its Region
4. Reform Process & US Opportunities
5. Q&A
Asia Briefing
&
Dezan Shira & Associates
Section I
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Numbers That Matter
1992300+
2,000+80+
17+
Our team of legal, tax, accounting and audit professionals
Dezan Shira’s establishment
Multinational clients that have already chosen us
Countries served by our professional services
Our offices in China (Beijing, Shanghai, Guangzhou, Shenzhen,
Dalian, Qingdao, Hangzhou, Suzhou, Zhongshan, Ningbo,
Dongguan and Hong Kong), India (New Delhi, Mumbai),
Vietnam (Hanoi and Ho Chi Minh City), Singapore, liaison
offices in Italy, the United States and Germany, and alliance
offices in Indonesia, Malaysia, the Philippines, and Thailand.
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Services Suite
Current Economic
Trends
Section II
Recent Developments
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China Economic Snapshot
Population 1.35 billion (slightly up)
Nominal GDP $10.75 trillion
GDP Growth (2015) 6.9%
Ease of Doing Business
90th (steady)
Exports $2.3 trillion (- 2.5%)
Imports $1.7 trillion (- 14%)
Inflation 1.6%
Unemployment 4.1%
Latest 5 Year Plan 2016-2020
GDP Per Capita $7,800
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China v USA
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China Current Economic Drivers
• Transition from manufacturing to services and consumer based consumption
• Anti-corruption campaign
• Infrastructure
• Growth of the services sector
• Greater market liberalization of key industries (finance, telecom)
• Consumer society and nationwide retail boom and booming e-commerce industry
• Appetite for technology, high-end consumer items and infrastructure
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The New Normal?
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GDP of China’s Provinces
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Regional GDP
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Debt Crisis & Overcapacity
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“Moderately Well-Off Society”
——What the Party Wants (1)
• Domestic Growth
• Poverty: Improve living standards of rural and impoverished people
• Education: Invest in schools, including subsidies for rural areas
• Innovative Society: Increase positive employment policies
• Healthcare: Significant investment in all sectors
• Environmental: Reduce pollution, enforce strict regulations
• Stability: Controlling dissent in mass incidents
• Urbanization: Reform ‘hukou’ system, city planning, infrastructure
• Rule of Law: or Rule by Law?
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“Moderately Well-Off Society”
——What the Party Wants (2)
• Environmental: Reduce pollution, enforce strict regulations
• Stability: Controlling dissent in mass incidents
• Urbanization: Reform ‘hukou’ system, city planning, infrastructure
• Rule of Law: or Rule by Law?
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Conflicting Trends & Challenges (1)
• Aging Population & Talent Crutch
• Rising Disposable Income
• Rising Labor & Production Costs
• Transformation from a Manufacturing to Service Based Economy
• Decrease in Household Savings
• Urbanization
• Environment Concerns
• Flight of Capital
• Lack of Investment Options
• Protectionism & Increased Competition
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Conflicting Trends & Challenges (2)
• Urbanization
• Environment Concerns
• Flight of Capital
• Lack of Investment Options
• Protectionism & Increased Competition
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China’s Challenge – An Aging Population
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Urbanization & Migration
China & its Regions
Section III
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One Belt One Road Initiative
——The New Silk Road (1)• Secure new Energy Supply chains
• Improve Regional Security
• Focus is on Emerging Economies that can rise simultaneously
• Paid for by Asian Infrastructure Investment Bank
• Reduce USA Influence
• Takeaways for foreign investors:
– Augmenting infrastructure networks and connectivity
– Improve infrastructure via China’s western landlocked provinces
– Drive demand for commodities
– Allow foreign investors to eventually integrate their supply chains within the OBOR geographic
span
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One Belt One Road Initiative
——The New Silk Road (2)
• Takeaways for foreign investors:
– Augmenting infrastructure networks and connectivity
– Improve infrastructure via China’s western landlocked provinces
– Drive demand for commodities
– Allow foreign investors to eventually integrate their supply chains within
the OBOR geographic span
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Free Trade Agreements & The Regions
• Free Trade Agreements - Australia and South Korea in 2015
• Note that China has signed FTAs with the majority of TPP signatories
• Remain cautious with Trans-Pacific Partnership (TPP) implementation as no
comments on potential impacts have been issued
• Regional Comprehensive Economic Partnership (RCEP) and the Association of
Southeast Asian Nations (ASEAN) continue to develop alongside the TPP
• Bilateral Investment Treaty with the USA
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ASEAN
• ASEAN Economic Community (AEC) - a mega-regional initiative programmed to
consolidate a single market and production base signed via legally binding contracts amid
member states
• ASEAN has signed an ASEAN FTA. Also has signed FTA’s with China, India, South Korea,
Australia & New Zealand. Japan in negotiation.
• Outlined in 4 key strands:
– Creating a single-market production base
– Forming a competitive economic region
– Facilitating equitable economic growth
– Deeper integration with the rest of the global economy
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Reform Process &
Opportunities for US
Business
Section IV
Recent Developments
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China Market Entry Reform (1)
• Introduction
– Climate of reform
– New Foreign Investment Catalogue
– Negative List Changes
– New draft Foreign Investment Law
– New Free Trade Zones
– Caution: Still one of the most difficult places to do business and reform pace is
glacial
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China Market Entry Reform (2)
• Shanghai Free Trade Zone
– Long history of special economic zones in China
– In 2013, the pilot SFTZ was announced to bring major reform to foreign investment
– Negative List replaces the Foreign Investment Catalogue
– Simplify the establishment process
– Expansion to South, North & East China
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China Market Entry Reform (3)
• Certain Industry Sectors Liberalized in SFTZ
– Financial services
– Shipping & Transportation
– Telecommunications
– Education
– Healthcare
– Professional services
– Media, Culture & Entertainment
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Services FDI
• FDI moving away from manufacturing and towards services
• In 2014, FDI into manufacturing was down 12.3%. Problems such as overcapacity and
rising labor costs
• Service sector FDI has overtaken manufacturing as the largest share of FDI into China
• Service sectors like financial, healthcare, education, telecommunications have yet to
really be opened up
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Opportunities for US Businesses
• Energy
• Environmental & Clean/ Green tech
• Automotive
• Healthcare
• Financial Services & Fintech
• Travel & Tourism
• Education
• Aviation
• Ecommerce Retail
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Questions?
Dezan Shira & Associates
Your Partner for Growth in Asia
Presenter: Richard Cant
North America Director
Contact: [email protected]
