china’s competitive threat a sector perspective presented by mark killion, cfa managing director...
TRANSCRIPT
Copyright 2002 Global Insight, Inc.
China’s Competitive ThreatA Sector Perspective
Presented by
Mark Killion, CFAManaging Director
Global Insight’s World Industry Services
2Copyright 2004 Global Insight, Inc.
Agenda
1) China’s Market Size and Growth Patterns
2) China’s Manufacturing Sector, Role in World Markets
3) China’s Trading Patterns, Sector Winners & Losers
3Copyright 2004 Global Insight, Inc.
Manufacturing Sector is Leading Overall Growth(% Growth in Inflation Adjusted Chinese Sector Sales – Includes Domestic Sales + Exports)
0
2
4
6
8
10
12
14
16
18
20
1999 2000 2001 2002 2003 2004 2005 2006-2010
GDP (All Sectors)Manufacturing SectorServices SectorsConstruction Sector
What is the Outlook for Growth in China?
Source: World Industry ServiceSource: World Industry Service
4Copyright 2004 Global Insight, Inc.
0
5
10
15
20
25
30
35
40
45
50
1999 2000 2001 2002 2003 2004 2005 2006-2010
Small Household Appliances
Computers & Commun. Electronics
Autos & Parts
What is the Outlook for Manufacturing Sectors?
Growth Rates of Chinese Electronics & Autos (% Growth in Inflation Adjusted Sector Sales – Includes Domestic Sales + Exports)
Source: World Industry ServiceSource: World Industry Service
5Copyright 2004 Global Insight, Inc.
Growth Rates of Key Chinese Manufacturing Sectors(% Growth in Inflation Adjusted Sector Sales – Includes Domestic Sales + Exports)
0
5
10
15
20
25
1999 2000 2001 2002 2003 2004 2005 2006-2010
Textiles & Apparel
Rubber & Plastics
NonMetal Minerals
Chemicals & Products
Source: World Industry ServiceSource: World Industry Service
What is the Outlook for Manufacturing Sectors?
6Copyright 2004 Global Insight, Inc.
Growth Rates of Key Chinese Manufacturing Sectors(% Growth in Inflation Adjusted Sector Sales – Includes Domestic Sales + Exports)
0
2
4
6
8
10
12
14
16
18
1999 2000 2001 2002 2003 2004 2005 2006-2010
Paper & Paper Products
Drugs & Medicines
Food Products
Source: World Industry ServiceSource: World Industry Service
What is the Outlook for Manufacturing Sectors?
7Copyright 2004 Global Insight, Inc.
Chinese Manufacturing Has Lagged in Employment
Share of Manufacturing Employment in Total Employment
-15
-10
-5
0
5
10
15
20
25
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
Growth Rate of Manufacturing EmploymentGrowth Rate of Gross Output of Manufacturing ISIC 3
Growth Rate of China Manufacturing Output Versus Growth Rate of
Manufacturing Employment
0
5
10
15
20
25
30
35
19
75
19
80
19
85
19
90
19
95
19
99
20
02
China JapanSouth Korea USTaiwan
Source: National Statistics Agencies of Above Source: National Statistics Agencies of Above CountriesCountries
8Copyright 2004 Global Insight, Inc.
0
5
10
15
20
25
1980 1985 1990 1995 2000 2005
Share of Total US Imports from China in US Consumption
Share of Total US Imports(exc. China) in US Consumption
Share of U.S. Consumption of Manufactured Goods Supplied by
Imports from China and Others
Share of US Imports from Regions, Manufacturing
How Important is Chinese Manufacturing to U.S. Markets?
0
5
10
15
20
25
30
35
1980 1985 1990 1995 2000 2005
US Imports Share from NAFTA US Imports Share from West Europe
US Imports Share from Japan US Imports Share from China
Source: World Industry ServiceSource: World Industry Service
9Copyright 2004 Global Insight, Inc.
China Manufacturing Sales
($1.9 Trillion, 2002)
Minerals5%
Basic Metals
10%
Machinery &
Equipment37%
Food & Tobacco
11% Textiles12%
Wood1%
Paper and Printing
3%Chemicals20%
Others1%
What is the Size of Chinese Manufacturing Sectors?
Source: World Industry ServiceSource: World Industry Service
0
5
10
15
20
25
30
35
40
45
China Europe Japan Taiwan UnitedStates
India
Manufacturing Sector Share of Total GDP, 2002
10Copyright 2004 Global Insight, Inc.
What is the Size of Chinese Manufacturing Sectors?
Sales of Machinery & Equipment($410 Billion, 2002)
Fabricated Metal10%
Transportation Equip.
22%
Electrical & Electronics
46%
Industrial Machinery
21%
Source: World Industry ServiceSource: World Industry Service
Sales of Electrical & Electronics(including Computers)
($242 Billion, 2002)
Others14%Appliances
12%
Communication Equip.
10%
Industrial Elect.40%
Computers, Offi ce
Equipment24%
11Copyright 2004 Global Insight, Inc.
Regional Share of Total World Manufacturing Sales
($18.4 Trillion, 2003)
Western Europe
30%Other
Emerging Asia7%
China12%
Japan13%
United States
24%
Other16%
What is the Size of Chinese Manufacturing in the World Economy?
0
5
10
15
20
25
30
35
40
45
Share of World Manufacturing Sales
Share of Total Increase in World Manufacturing Sales Over Last 5 Years(Total Inflation Adjusted, Increase Over 1999-2003 was $2 Trillion)
Share of World Sales and Share of Sales Growth – Manufacturing Sector
Source: World Industry ServiceSource: World Industry Service
12Copyright 2004 Global Insight, Inc.
What is Role of Chinese Exports in World Trade?
Greater China Manufacturing Exports Percent Share of Total World Manufacturing Exports
0
2
4
6
8
10
12
14
1980 1990 1995 2000 2005
China* Hong Kong* Taiwan* Intra-Regional
* Export totals from China, Hong Kong and Taiwan exclude trade with each other. These are included in Intra-Regional.
Source: World Industry ServiceSource: World Industry Service
13Copyright 2004 Global Insight, Inc.
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Ch
an
ge
in S
ha
re
Taiwan South Korea China
1980-1989 1990-1999 2000-2009
Change in World Manufacturing Export Shares (Delta on the Shares: Share at End of Period less Share at Start of Period)
What is the Chinese Competitive Threat?
2004--2009: +1.7%
2000--2003: +2.5%
Source: World Industry ServiceSource: World Industry Service
14Copyright 2004 Global Insight, Inc.
Manufacturing Exportsas % of World Manufacturing Exports, 2003
0
10
20
30
40
50%
Greater China(13%)
Western Europe(41%)
NAFTA (19%)
Exports w/n Region (Intra-Regional)Exports to Rest of World
Note: Greater China includes China, Hong Kong & Taiwan
0
10
20
30
40
50 %
Greater China(30%)
Western Europe(41%)
NAFTA (23%)
Exports w/n Region (Intra-Regional)Exports to Rest of World
Manufacturing Exports as % of Total Domestic Economy Sales, 2003
What is Role of Chinese Exports in the Economy?
Source: World Industry ServiceSource: World Industry Service
15Copyright 2004 Global Insight, Inc.
-40
-20
0
20
40
W1 W2 W3 W4 L1 L2 L3 L4
China Trade Balance as a Percent of Total Chinese Sales – 2003Selected Industrial Sectors
Sectors with Trade SurplusW1: Textiles, Apparel, Wood & Paper (Rising)W2: Rubber Products & Plastics (Rising)W3: Office & Computing Machinery (Rising)W4: Small Household Appliances (Rising)
Sectors with Trade DeficitL1: Primary Metals & Non-Metals (Deteriorating)L2: Chemicals (Steady)L3: Communication Equipment (Deteriorating)L4: Motor Vehicles (Steady)
%
In Which Sectors Are Imports Outpacing Exports?
Source: World Industry ServiceSource: World Industry Service
16Copyright 2004 Global Insight, Inc.
0
10
20
30
40
50
60
70
80
90
100
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Trade Shares for Textiles, Apparel & Leather
(Percent, 2003)
Trade Shares for Wood & Wood Products
(Percent, 2003)
0
10
20
30
40
50
60
70
80
90
100
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Source: World Industry ServiceSource: World Industry Service
How Does China’s Trade Compare to Other Countries?
17Copyright 2004 Global Insight, Inc.
0
5
10
15
20
25
30
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Trade Shares for Paper, Paper Products & Printing
(Percent, 2003)
Trade Shares for Primary Metals & Non-Metals (e.g. Glass & Cement)
(Percent, 2003)
0
10
20
30
40
50
60
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Source: World Industry ServiceSource: World Industry Service
How Does China’s Trade Compare to Other Countries?
18Copyright 2004 Global Insight, Inc.
0
5
10
15
20
25
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Trade Shares for Rubber Products & Plastics
(Percent, 2003)
Trade Shares for Chemicals(Percent, 2003)
0
5
10
15
20
25
30
35
40
45
50
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Source: World Industry ServiceSource: World Industry Service
How Does China’s Trade Compare to Other Countries?
19Copyright 2004 Global Insight, Inc.
0
20
40
60
80
100
120
China
Taiwan
S. Korea
Brazil
India
Export Share of Production Import Share of Consumption
Trade Shares for Office & Computing Machinery
(Percent, 2003)
Trade Shares for Small Household Appliances(Percent, 2003)
0
10
20
30
40
50
60
70
80
China
Taiwan
South Africa
Brazil
India
Export Share of Production Import Share of Consumption
Source: World Industry ServiceSource: World Industry Service
How Does China’s Trade Compare to Other Countries?
20Copyright 2004 Global Insight, Inc.
0
10
20
30
40
50
60
70
80
90
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Trade Shares for Communication Equipment
(Percent, 2003)
Trade Shares for Motor Vehicles(Percent, 2003)
0
5
10
15
20
25
30
35
40
45
50
China
Taiwan
S. Korea
Brazil
S. Africa
Export Share of Production Import Share of Consumption
Source: World Industry ServiceSource: World Industry Service
How Does China’s Trade Compare to Other Countries?
21Copyright 2004 Global Insight, Inc.
Chinese Competitive Threat: Summary
• Competitive manufacturing threat from China is real• Degree of threat varies quite a bit among sectors• US and Europe do also benefit from lower consumer prices, and by pulling China
into their supply chain• China’s competitive threat felt more strongly in other developing countries
• Sizable increase in world manufacturing market share still to come• Driven by FDI, MNCs, fast growth differential with rest of world• Sovereign influence on commerce still pervasive, But Will it Slow Growth?
• Brutal competition, low domestic price gains• Domestic pricing conditions exported to rest of world
• Fast growth and development requires a lot of imports• Domestic demand pulls in commodities and technology• Production requirements supporting commodity input prices
• Low Chinese export prices, along with fast Chinese growth supporting higher commodity input prices, will continue to pinch the profits of many western producers and emerging economy competitors
22Copyright 2004 Global Insight, Inc.
Thank you!
Mark Killion, CFAManaging Director
World Industry Services
Phone: 610-490-2547
Email: [email protected]