73
-China Commercial Relations
US-China Commercial Relations
Pop Quiz
US-China Business Council
Maps
Stats + Data
Cities with a population over 1 million
160
9
Labor force
780 million
155 million
China is expected to build over the next 15 years some 1,000 gigawatts of new power generation capacity.
WSJ
There are 270 regularly scheduled flights each week between Chinese and Taiwanese cities. The number of weekly flights is set to grow to more than 400 in a few weeks.
WP
More than a million Taiwanese now live in China full time -- about half of them in the Shanghai area -- running factories, starting restaurants, attending universities, buying property.
WP
Analysts estimate G.M. is worth $50 billion to $90 billion, with China accounting for about $15 billion of that total.
NYT
General Motors Co. sold more cars and trucks in China last year than it did in the U.S., for the first time in the company's 102-year history.
AP
“China is one of the larger and faster-growing markets for us,”said Karen Gerwitz, the new executive director of the World Trade Center Denver. China purchased $440 million worth of Colorado goods last year, ranking third.
Denver Post
The trade numbers don't include service providers such as CH2M Hill that are helping China industrialize, build infrastructure and clean up environmental problems. "We are very bullish on China," said Thomas Searle, president of CH2M Hill International.
Denver Post
Number of time zones
1
6
China has plenty more room to grow. Its potential lies in the fact that about one-fifth of the world lives there and virtually every major company looking to increase market share, from General Electric to Caterpillar, has a strategy to somehow reach those consumers.
People’s Daily
3M reported a growth of 53 percent in sales during the first half of 2010. A strong performance in China helped lift the company's global net profit to $1.12 billion in the second quarter, said George Buckley, president and chief executive officer, 3M. "China has been performing well for some time now, and for many years we had a growth of 20 to 25 percent," said Buckley.
People’s Daily
McDonald's plans to double to number of stores to 2,000 by 2013.
CNBC
In 2010, China was the fifth biggest box office market outside of the US, with $1.5 billion in revenue.
LAT
China government only allows about 20 non-Chinese films into theaters each year.
LAT
Number of movie theatres
6,200
39,000
China’s economy is more oil intensive than either America or Europe, while half of its imported oil comes from the Middle East and north Africa, compared with one-quarter for the US.
FT
Energy accounts for a third of the cost of grain production and oil prices are increasing demand for biofuels. Food prices are rising twice as fast as consumer prices overall..
FT
For multinationals, the shift from exports to domestic consumption will increase the importance of treating China as a core market.
Businessweek
GDP composition by sector
9.6% Agriculture46.8% Industry43.6% Services
1.2% Agriculture22.2% Industry76.7% Services
Companies will find it beneficial to align their China strategies with the
government's policy agenda.Businessweek
Exports
$1.51 trillion
US 20%Hong Kong 12%Japan 8%S. Korea 5%Germany 4%
$1.27 trillion
Canada 19%Mexico 12%China 7%Japan 5%UK 4%Germany 4%
While market opportunities are likely to be abundant in most industries, we anticipate that some sectors, such as health care, financial services, and travel and tourism, are likely to grow at a much faster rate thanthe GDP.
Businessweek
According to a World Bank report, China moved up from the world's 21st-largest source of FDI in 2006 to the 13th-largest in 2010. Given the country's abundance of capital and a determined policy push, we anticipate that China is likely to move into the ranks of the top five by 2015.
Businessweek
GDP
$5.745 trillion
$14.62 trillion
Per capita GDP
$7,400
$47,000
Trends
Demographics:Baby boomers (born after 1980) 50%+ of population by 2015,
45% of workforce by 2020Aging to quadruple total real wage
Source: Morgan Stanley Research (E) estimates.
Urbanization:47% to 65% in the long-term, adding
300 million urban residents
Source: Morgan Stanley Research (E) estimates.
Zhengzhou
Xining
Shijiazhuang
Taiyuan
Hohhot
Nanchang
Nanning Zhanjia
ngHaikou
Macau
Kunming
Guiyang
Dalian
QingdaoLianyung
ang
Hangzhou
Fuzhou
Xiamen
Hong Kong
ShantouZhuh
ai
Xian
Yinchuan
Lhasa
Urumqi
Yumen
BeijingTianj
in
Shanghai
Shenyang
Changchun
Harbin
YantaiJin
an
Changsha
Guangzhou
Hefei
Chengdu
Chongqing
Lanzhou
Wuhan
Shenzhen
Nanjing
Super HubsEmerging HSR Hubs
Infrastructure:
China to have the longest + fastest high speed rail grid in the world by 2015
Road capacity to outpace US by 2015Source: Morgan Stanley Research (E) estimates.
Consumer financing:Credit consumption as % of total:
10% to 40%Source: Morgan Stanley Research (E) estimates.
China college education coverage ratio
Education:College degree of workforce:
from 10% to 35%
Source: Morgan Stanley Research (E) estimates.
Business Environment
USCBC 2010 Member Priority Survey Results
US Companies’ China Outlook:China Operations Profitable and Growing;Protectionism Concerns Real and Rising
Five-Year Outlook for Business in China
Optimistic 57%
Somewhat optimistic 37%
Neutral 4% Somewhat pessimistic 2%
USCBC 2010 Survey
View of Current Business Climate Compared with Three Years Ago
More optimistic 26%
Less optimistic 39%
No change 35%
USCBC 2010 Survey
China's Prominence in Overall Company Strategy
Top priority 18%
Among top five priorities 74%
One of many non-key priorities 6%
Not a priority 2%
USCBC 2010 Survey
Will accelerate compared to last
year 66%
Remain unchanged 34%
Company Resource Commitment to China over Next 12 Months
USCBC 2010 Survey
Company Objectives in China
Access or serve the China market
Export platform to servemarkets other
than the US
Export platform to serve the US
Other
96%
40%
22%
6%
USCBC 2010 Survey
Are China Operations Profitable?
Yes 87%
No 13%
USCBC 2010 Survey
Profitability of China Operations in2009 vs. 2008
Profitability of ChinaOperations vs.
Company's Global Rate
In-creased
58%
Re-mained essen-tially un-
changed 28%
De-creased
14%
Better 68%
Same 20%
Worse 12%
USCBC 2010 Survey
USCBC 2010 Survey
Primary Restraint on Profitability
27%
24%
21%
17%
8%
1%
16%
USCBC 2010 Survey: Top 10 Challenges
1. Human resources: Talent recruitment and retention 1. Administrative licensing1. Competition with PRC state-owned enterprises4. IPR: Enforcement5. Cost increases6. Market access in services7. Transparency8. Protectionism risks in China9. Government procurement10. Standards and conformity assessment
USCBC 2010 Survey
USCBC 2010 Survey: Top 10 Challenges
1. Human resources: Recruitment & retention 1. Administrative licensing1. Competition with PRC state-owned enterprises4. IPR: Enforcement5. Cost increases
USCBC 2010 Survey
Operating Costs
USCBC 2010 Survey
Rising Costs of Most Concern
Labor 58%
Land 9%
Utilities 5%
Materials 11%
Taxes 17%
Human Resources
Increased costs….. Increased competition…..
2011 Minimum Wage Increases
Beijing 20%Tianjin 16%Chongqing 32%Shandong 26%Jiangsu 17%Guangdong 18%
Among ChinaHR’s 2010 survey of top 50 employers in China, only 4 were foreign companies, down from 21 in 2009. SOEs made up 66% of the list.
ManPower’s 2010 Employee survey, 59% of job seekers prefer Chinese private companies because of better long-term career development opportunities.
USCBC 2010 Survey
Impact of Rising Costs on Long-term Planning
Rising costs in
China 57%
Market access restric-
tions 14%
Better prospects for capital
deploy-ment 5%
Other 24%
Reasons Company Considers Moving operations from China to other Asian/East Asian country
No impact 21%
Some impact 75%
Considerable impact 4%
USCBC 2010 Survey: Top 10 Challenges
6. Market access in services7. Transparency8. Protectionism risks in China9. Government procurement10. Standards and conformity assessment
USCBC 2010 Survey
Policy and Regulatory Costs
Seeing Signs of Protectionism in…..
Standards setting
Market access barrie
rs
Government procurement/b
uy local
Administrativ
e licensing
Pressure to fa
vor Chinese fir
ms
Tighter enforcement
Difficulty
in bidding on certa
in contracts
M&A review/approvals
Subsidies/external financing
Other
47%44%
42% 42% 41%39%
32%
28%
23%
1%
32%
23%
28%
19%
14%11%
16% 14%
6%
20102009
USCBC 2010 Survey
Selected Industrial Issues and Advocacy Map
Key Commercial Policies Spread Across Agencies, Not Always Well-Coordinated;Effective Advocacy Targets All Key Stakeholders … And Senior Leadership
Key Commercial Policies Spread Across Agencies, Not Always Well-Coordinated;Effective Advocacy Targets All Key Stakeholders … And Senior Leadership
Zhang DejiangVice Premier
Li KeqiangVice Premier
Wang QishanVice Premier
Liu YandongState Councilor
Wen JiabaoPremier
Agencies
SelectedResponsibilities
NDRC, MOHURD, MOF, MLR, MOH, MEP, SAT
MIIT, MHRSS, MOT, MOR, SASAC, SAWS
MOFCOM, PBOC, SAIC, Customs, AQSIQ, SIPO,
CSRC, CBRC, CIRC
MOE, MOST, SARFT, Min of Culture, GAPP
Economic planningCommodity pricesPublic finance/taxHealthcare reform
Climate /energy policy
Financial sectorTrade & investmentQuality inspectionBusiness licensingCompetition policy
S&ED, JCCT
Industrial reformTelecom, IT, transportation
Labor, social securityProduction safety
State-owned enterprises
Science & technologyEducation
CultureSports
HK & MacaoIssues
Govt procurement
Tax/HNTE
Standards
Indig Innovation
IPR
M&A
Industrial policy
MOF, NDRC MOFCOM
MOF, SAT MOST
AQSIQ MIIT
MOF, NDRC MOST
SIPO, SAIC GAPP
MIIT
NDRC MIIT
NDRC MOFCOM, SAIC SASAC, MIIT
MOST
AQSIQ = Quality & Inspection AdminCS/B/IRC = Securities, Bank, Insurance regulatorsGAPP = Gen Admin of Press & PubsMEP = Min of Envir ProtectionMIIT = Min of Industry & Info Tech
MLR = Min of Land & ResourcesMOE = Min of EducationMOF = Min of FinanceMOFCOM = Min of CommerceMOH = Min of Health
MOHURD = Min of Housing, Urb/Rural DevMHRSS = Min of Hum Resources & Soc SecMOR = Min of RailwaysMOST = Min of Science & TechnologyMOT = Min of Transportation
NDRC = Nat. Devel & Reform CommPBOC = People’s Bank of ChinaSAIC = State Admin of Ind & CommerceSARFT = Radio, Film, TV AdministrationSASAC = State Assets Commission
SAT = State Tax AdminSAWS = State Admin of Workplace SafetySIPO = State Intellectual Property Office
Energy Efficiency NDRC, MEP, MOF SASAC, MIIT AQSIQ MOST
Advocacy Strategies Pursued
Direct e
ngagement
Foreign-based org.
Professional service firm
China-based org.
US government
Informal coalitio
n of companies
Affiliated PRC company
Other
74%
62%
46% 46% 46%
36%31%
2%
USCBC 2010 Survey
What Keeps CentralPlanners Awake?
What Keeps AverageCitizens Awake?
#1 - Social (in)stabilityNext Issues:• Inflation, inflation,
inflation• Resource allocation• Control over local
governments• “Imbalances”• Corruption
• Social security• Justice• Anti-corruption• Personal income• Housing prices• Healthcare reform• Commodity price
control• Environment
pollution• Food safety• Education reform
Policy Environment
12th FYP
Key Goals
Encourage domestic consumption
Improve social safety net
Industrial “upgrading” (Strategic Emerging Industries plan)
Regional development – Central & Western China
Energy efficiency and environmental sustainability
Taxation and financial systems reform
Urbanization
