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March 2012
China: Supporting Growth Without Reviving Bubbles
Jing Ulrich
Managing Director & Chairman
of Global Markets, China
(852) 2800 8635
Amir Hoosain
(852) 2800 8641
Ling Zou
(852) 2800 8962
1Chin
a: S
upport
ing G
row
th W
ithout R
eviv
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ubble
s
-4
-2
0
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011
Contribution to China’s GDP Growth (%)Contribution to China’s GDP Growth (%)
Export slowdown increases the need to boost consumption
Net Exports
Consumption
Gross Capital Formation
2Chin
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Rate of fixed asset investment growth will slow in 2012
Fixed Asset Investment
Manufacturing
34% of FAI
Real Estate
20% of FAI
Transportation
9% of FAI
3Chin
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China’s likely policy approach in 2012
Income
Growth
Support of
Smaller
Enterprises
Tax Reform
Spending
Boost in
Strategic Areas
Consumption
Incentives
Monetary Easing
4Chin
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th W
ithout R
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Loan growth below expectations in Jan/Feb 2012
Loan growth: RMB and foreign currencies (YoY%)Loan growth: RMB and foreign currencies (YoY%)
0%
5%
10%
15%
20%
25%
30%
35%
40%
May-0
6
Se
p-0
6
Jan
-07
May-0
7
Se
p-0
7
Jan
-08
May-0
8
Se
p-0
8
Jan
-09
May-0
9
Se
p-0
9
Jan
-10
May-1
0
Se
p-1
0
Jan
-11
May-1
1
Se
p-1
1
2006 2009 2012
5Chin
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More RRR cuts needed to support growth
4
6
8
10
12
14
16
18
20
22
24
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
Reserve requirement ratio (%)Reserve requirement ratio (%)
Large banks
Small & mediumbanks
18.5%
20.5%
2005
6Chin
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upport
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ithout R
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Resource taxResource tax
Tax reforms to play a more prominent role on the policy agenda
Consumption
tax
Consumption
tax
Personal
Income Tax
Personal
Income TaxVAT
Reform
VAT
Reform
7Chin
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-40%
-20%
0%
20%
40%
60%
80%
100%
Jan-10 Jan-11 Jan-12
Monthly residential floor space starts (YoY%)Monthly residential floor space starts (YoY%)
Growth in floor space starts slowed sharply in 2H11
8Chin
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China overtook Japan as the world’s top coal importer in 2011
China’s coal net imports since 2005 (million tons) China’s coal net imports since 2005 (million tons)
-50
0
50
100
150
200
2005 2006 2007 2008 2009 2010 2011 2012 Jan
+23.2% YoY
9Chin
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Copper imports dropped in 2011, but rose 46.2% YoY in Jan-Feb 2012
Source: Bloomberg
China’s copper imports since 2005 (million tons) China’s copper imports since 2005 (million tons)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2005 2006 2007 2008 2009 2010 2011 2012 Jan-Feb
+46.2% YoY
10Chin
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Iron ore imports rose 5.5% YoY
China’s iron ore imports since 2004 (million tons) China’s iron ore imports since 2004 (million tons)
0
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009 2010 2011 2012 Jan-Feb
+5.5% YoY
11Chin
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upport
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12Chin
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March 2012
China: Supporting Growth Without Reviving Bubbles
Jing Ulrich
Managing Director & Chairman
of Global Markets, China
(852) 2800 8635
Amir Hoosain
(852) 2800 8641
Ling Zou
(852) 2800 8962
