after the economic crisis?
DESCRIPTION
Presentation made by Polarwide ltd.at the 5th Asian Aromatics & Derivatives Conference,Singapore, July 2011TRANSCRIPT
After the economic crisis:
Possible next Asian scenarios
• China’s Development and its impact • What role: India? • How will this impact the chemical industry?
?
2009
2007
By: Daniël de Blocq van Scheltinga
Polarwide Ltd.
The 5th Asian Aromatics & Derivatives Conference, July 2011
1
Current Situation
Current Situation
High oil and commodity prices
Emerging economies: growing at pre-crisis pace
Developed countries: recovery or another
new crisis?
Boost food prices and other end products
Inflationary pressures in Asian countries
2
Current Situation
EUROPE - Greek Debt Issue - Under austerity - How to boost GDP?
USA - Continually high unemployment rate - Weak dollar - Housing prices are still falling - 2% growth rate – weakest in 9 decades - QE3?
ASIA - China - India - Japan
3
IN ASIA... (China)
GDP Annual Growth in 2009
- World’s largest merchandise exporter - World’s second largest economy
• Holds foreign reserves of over $2.5 trillion
US, France -2.6%
China, India: 9.1% UK: -4.9%
Inflationary pressure Losing comparative advantage over other emerging economies – rising costs
Inflation Rates by June 2011
4
IN ASIA... (India)
A stable political regime and democracy
Huge deficit in infrastructures – power, roads, ports, etc.
Broaden economic base – gradually move up the agricultural value chain (3/4 of population depends on farming)
Low labour costs (competitive edge in certain industries)
Edge in technology in manufacturing industries (China: labour-intensive)
5
India GDP Composition
in 2010
Agriculture, Forestry & Fishing
Mining and Quarrying
Manufacturing
Construction
Hotel, Transport, Communication & Trade
Real Estate, Insurance, Financing, & Bus Service
Social, Personal & Community, Services
From: Business Maps of India
What‘s next?
1) Asian region will have a continued rapid growth in demand for consumer goods and raw materials a) Migration of high-end and low-end manufacturing industries b) Large scale import of natural resources
2) High oil prices and increasing awareness of
environmental issues lead to growth of investment in new energy sources
6
Impact on the chemical industry
1) Growth of China and emerging markets - It is expected that the China chemical industry will be able to
increase its world market share to 13% from present 8% within 2015.
9.3
10.1
5
13
8.8
6.4
0 2 4 6 8 10 12 14
World
E.U.
United States
Asia (exclude Japan)
Japan
South America
Chemical production (excluding pharmaceuticals) in 2010 Real change compared with the previous year (%)
7
Impact on the chemical industry
1) Growth of China and emerging markets - There will be a gradual shift in the chemical market: from
North America, Western Europe and Japan to China, India and other Asian emerging regions
- Increased M&As of worldwide chemical companies
8
The volume of transactions completed worldwide held steady at about 70 to
80 per year from 1999 to 2007. In 2008 and 2009 there was dramatic slow
down. Volume has picked-up in 2010 with 64 deals completed.
Acquisitions of Worldwide Chemical Companies – Number of Deals
M&A Trends
Impact on the chemical industry
2) Constrained resources - Insufficient oil supply - Surging demand - A drive for sustainable and green innovation
9 Source: IEA WEO 2008, BP Statistical Review of World Energy 2008
Possible Scenario (1) : If China succeeds...
10
Europe – US – Japan
US - China
Long term shift
In China: - Still remainining heavily dependent on investment from public sectors and
exports - More infrastructure construction projects are still needed to direct the
migration of rural labour - Reforms are needed to maintain the edge of lower cost - Result: China will maintain a growth of 9% and surpass US to be the
world’s number one energy importer
Possible Scenario (2): If China fails...
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Europe – US – Japan
US – India-emerging markets
Long term shift
In China: - Insufficient returns from the heavy investments in infrastructures Bad debts in the banking systems Burst of a property price bubble
- Tight monetary policies may have hurt economic growth and caused
credit crunch for companies - Widening inequality in income - Inadequate legislation, social welfare and medical care system
Conclusion
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• Not yet clear if the global slowdown is a soft patch, or something more serious;
• With both Europe and the US facing sovereign debt issues, fiscal tightening and austerity, Asia is key ;
• Oil prices remain important to watch;
• China’s hard or soft landing is vital to Asia, and hence globally;
• Scenario 1 or 2: “flip a coin” !
13
Thank you!
Contact Details
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Daniel de Blocq van Scheltinga Tel: +852-2530-0611 E-mail: [email protected] Website: http://www.polarwide.com Truly Objective and Independent Financial Advisory & Consultancy Services Polarwide Limited, Registered in Hong Kong