The Rise….. And Rise ….and Fall of China ?. The Chinese Dragon.

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Presentation transcript:

The Rise….. And Rise ….and Fall of China ?

The Chinese Dragon

 Land Area : mn sq km. ( India, 3.287)  Population : 1.38 billion ( India, 1.27)  Population Growth : 0.5% (1.2%)  Population Density : 142 persons /sq. km (India, 367)  GDP (April 2016) in trillion US$ : Country Nominal Purchasing Power Parity (PPP) USA China India

The Chinese Dragon The neighboring countries of China are : Russia Japan Philipines North Korea Mongolia Kazakhstan Kyrgyzstan Tajikistan Afghanistan Pakistan Nepal India Bhutan Myanmar (Burma) Laos Vietnam

The China Growth Story

“ How does it matter whether the cat is black or white so long as it catches the mice” ---Deng Xiaoping Pushed bold reforms in 1978 that re- shaped the economy

How Large is China’s Industrial Base?

Trend of Foreign Trade and Investment

China’s Global Ambitions

What is the Scenario Now ?

 Slowing GDP growth rate --- from ≥10% to below7% but some analysts suspect it is closer to 4%  Sustained contraction in industrial & construction sectors leading to heavy under-utilization of capacities and idle labour  Very high leverage with trillions of dollars of stressed assets in banking sector --- Debt to GDP 300% approx.  Crash in stock market --- wiping out billions of dollars of household savings  Rising wage rates make manufacturing less competitive  Sharp rise in trade disputes with the developed world due to dumping of Chinese goods – steel, cement, etc.  Tensions with the United States, Japan and South Asian neighbours due to China’s geo-political ambitions

What is Chinese Government Doing?

 Trying to re-structure the economy from investment & export led growth to one based on domestic consumption  Devalue the currency to still maintain the competitiveness of Chinese goods  Shift from low end manufacturing to higher valued goods & services  Improve productivity thru’ automation and robotics to negate rising wages

Will China Succeed in Reversing its Economy Decline?

All indicators point in one direction : China’s downturn will be significant ; the question is ‘how hard the landing will be?’ “China’s Financial Status looks like Wall Street before the Crash” “Countries that depend on China for trade represent 40% of global GDP. “ So if China really does go into decline, it is going to take a lot of countries down with it” Jim Chanos

According to well known investment guru George Soros, the concern is that the Chinese government is prioritizing growth over debt, and allowing debt to spiral out of control. Much of this debt is bad debt; it will not be repaid. Most growth is dependant upon credit, any tightening of credit (or debt) will lead to recession.

Since China is a socialist market economy and decision making is by a collective leadership, China’s political leaders could delay dealing directly with these problems for a few years. Because of global inter-dependence, the US led developed countries do not want China to collapse and may actually co-ordinate economic policy making with China.

President Obama has reportedly said: We are unhappy that China is ahead of us but we will be even more unhappy if China descends into chaos. Is China just too big to fail?