Understand the China’s new economy and unlock your opportunities*

Marcetable shares the growth of China's service industry.

China 2015 GDP growth : 7.0% vs. 2016 GDP growth: 6.7%

The good vs. bad cholesterol in China’s economy

  • Good cholesterol
    • Low unemployment & high job creation
      • China added 13 million urban jobs in 2015
      • Urban employment rate:4.1%
    • Low inflation
      • Inflation is currently at 1.6%, down from 6% in 2011
      • Low inflation provides policy makers with flexibility on monetary policy
    • Rising disposable income & consumption
      • Disposable income up 8.8% in 2015, reaching US $4,937
      • Retail sales were up 11% reaching USD 4.70 trillion in 2015
  • Bad cholesterol
    • Fixed asset investment
      • In 2015 fixed asset investment was up by 12% from 16% in 2014. This is its slowest growth rate in more than a decade. Shows China’s shifting away from investment-led growth.
    • Credit
      • New financing in China totaled US$1.8 trillion in the first half of 2015, down by 14% y-o-y.
      • In 2014, China experienced its first on-shore corporate bond default.
    • Exports
      • Exports have decreased by an estimated 3.0% y-o-y from 2014 to 2015.
      • The government has not released any policies to support growth in the export sector as the government is focused on shifting the economy aware from low-value added exports.

 Moving from low to high value

  • In China, the size of service sector surpassed the industrial sector in 2013, demonstrating that the bulk of China’s output is shifting from the low-cost manufacturing sector towards the higher value-added service sector.
  • Services are foretasted to account for 61% of China’s GDP by 2030, up from just 22% in 1980. The share of industry is expected to decline to 35% of GDP by 2030.

Two examples:  Mrs. Wang & Mayor Li

Mrs. Wang’s Purse

  • Car keys: 7 million passenger vehicles were sold in China in 2015
  • House keys: housing sales rose 18.2% y-o-y in the first three quarters of 2015. About 10 million new homes were sold in 2014.
  • Itinerary – international travel: 120 million outbound trips were made from China in 2015, up from 109 million in 2014
  • Smartphones: over 1.2 billion mobile phone users and 650 million internet users. In 2015, Chinese consumers purchased more than US$600 billion worth of goods online.
  • Credit Cards: there are now over 400 million credit cards in circulation in China, up from just 11 million in 2004.
  • Consumer services: urban household consumption went from US $7000 in 2005 to over US$20,000 in 2015.

Marcetable China Economy Mayor Li’s City

  • Technology:
    • China has designated 184 cities as testing grounds for Smart City technology.
    • Investment in Smart Cities reached more than US$30 billion last year.
  • Mobility
    • From 2010-25, 300 million rural residents will move to cities
    • China’s cities are expanding urban rail networks from a 2,900 km currently to 7,000 km by 2020.
  • Healthcare
    • 90% of healthcare in China is administered in public hospitals, which suffer from overcrowding and outdated medical technology
    • Healthcare spending in China is forecast to reach more than US$880 billion by 2018.
  • Environment
    • China has pledged to peak its carbon emissions by 2030 and to generate 20% of electricity from renewable sources.
    • China has adopted the Euro V emissions standard in Shanghai & Beijing and will implement the standard nationwide by 2018.

Still an opportunity?

China still remains an excellent destination for foreign business

  1. Market growth, particularly in the consumer sector, exceeds that of the US.
  2. RMB depreciation should slow down cost growth in USD terms
  3. Since 2014, capital requirements are significantly relaxed for a China Wholly Foreign Owned Enterprise (WFOE) subsidiary setup
    1. No minimal capital requirement (previously RMB 100,000).
    2. Up to 30 years to meet capital commitment (previously,15% down and 2 years to fulfill).
  • Capital injection can consist of cash, as well as equipment or IP.

* Source: Chinavest.com

Lisa11

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