Download - B412 Week 5 Lecture - Economy
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School of Business
International Business Regions: China
Economy
Lecture Week 5
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Pearson College London XXXX 2
School of Business
International Business Regions: ChinaEconomy
Learning Outcomes Week 5
• China’s development since 1979 and the
transformation from an Agricultural to a Service
Economy
• Banking Sector: situational analysis & challenges
• Housing Market: ready to pop?
• Convertibility of the RMB: threat to US$ hegemony
and a shift in trading status quo?
• Innovation & spearheading R&D
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Pearson College London XXXX 3
School of Business
International Business Regions: ChinaEconomy
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Pearson College London XXXX 4
School of Business
International Business Regions: ChinaEconomy
Make up of Chin’s GDP 2013/14
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Pearson College London XXXX 5
School of Business
International Business Regions: ChinaEconomy
Banking
• 78% of all Chinese banks are state owned• Banks regulated by the China Banking • Regulatory Commission (CBRC)
• The big 5 state banks are: • Industrial & Commercial Bank of
China (also the largest bank globally)
• China Construction Bank• Bank of China• Agricultural Bank of China • Bank of Communications
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Pearson College London XXXX 6
School of Business
International Business Regions: ChinaEconomy
Graph showing % of Non Performing Loans
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Pearson College London XXXX 7
School of Business
International Business Regions: ChinaEconomy
Shadow Banking
DEFINITION: ‘The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight.’
• Shadow banking accounts for 40+% of lending in China
• Loans are made via various vehicles:
1. Trust Companies2. Small Lending Companies and informal lending
circuits3. Wealth Management Products
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Pearson College London XXXX 8
School of Business
International Business Regions: ChinaEconomy
0 20 40 60 80
1950
2000
2013
2030
Urbanisation growth as % of
population since 1950
Urbanisation
growth as % of
population since1950
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Pearson College London XXXX 9
School of Business
International Business Regions: ChinaEconomy
Housing/Property
Home ownership is <60% in Tier 1 cities. Since April 2010 buyers have a mandatory down payment
20-30% -1st Home 40%-60% - 2nd Home
No mortgages for 3rd Homes
Source: Deutsche Bank (2011), BBVA (2011)
70% of Chinese now own their own home
Source: May 2013 - Jones Lang Wooten research by Amy Pan
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Pearson College London XXXX 10
School of Business
International Business Regions: ChinaEconomy
Global Convertibility of RMB
“The Renminbi [is expected] to become a top three global currency for trade settlement by 2015 and to be fully convertible in five years.” - HSBC, 2013
• RMB trade settlement:In 2012 accounted for 12% of China’s total trade – up from 9% a year earlier.
• Offshore trading centres: Hong Kong, London, Frankfurt & Singapore
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Pearson College London XXXX 11
School of Business
International Business Regions: ChinaEconomy
Innovation
“[China will] step up science and technology innovation and improve the technological
sophistication, quality and brand awareness of Chinese industry.”
- Li Keqiang, Premier of China, World Economic Forum,Tianjin 10 September 2014
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Pearson College London XXXX 12
School of Business
International Business Regions: ChinaEconomy
Types of Innovation
• Cost Innovation• Process innovation: a big focus in China• Application (app) innovation: low hanging fruit• Supply chain innovation• Product innovation: incremental to radical• Business model innovation: often copied and adapted
• New product innovation is Research & Development led
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Pearson College London XXXX 13
School of Business
International Business Regions: ChinaEconomy
China’s Research & Development Spending
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Pearson College London XXXX 14
School of Business
International Business Regions: ChinaEconomy