Globalisation, Growth, China

Linda YuehUniversity of Oxford & London Business School

www.lindayueh.comTwitter @lindayueh

Outline of presentation

• China’s growth drivers: past & future

• China’s integral role in international trade/global supply chains

• Global impact from China’s slowdown

2

Real Average GDP Growth and Institutional Reform

0

2

4

6

8

10

12

14

16

19791980

19811982

19831984

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

CRS

HRS

%

"Open door" policy

WTO membershipBRS

Stock markets established

Company Law passed

Private property recognised

3

Average income near “trap” level

China’s impressive growth

5

0

2

4

6

8

10

12

14

%

Growth drivers

6

60-70% from capital/labour

30-40% TFP productivity

9.6% average

GDP growth

7

50% adding capital

10-20% adding

workers

60-70% Factor

accumulation

8

11-15% Human capital

8-15% Re-allocativeefficiency

16-17% Innovation

30-40% TFP

9

Up to 2/3rd Imitation

6-13% Technology

16-17% Innovation

Contributions to growth

Factor accumulation: 60-70%

• Capital accumulation: 50%

• Labour accumulation: 10-20%

Total Factor Productivity (TFP): 30-40%

• Human capital: 11-15%

• Factor re-allocation: 8-15%

• Innovation: 16-17% minus “imitation” = 6-13%

10

Re-balancing challenges

(1) Increase reliance on own market, less on exports

(2) Raise consumption, reduce inefficient savings

(3) Grow private sector, reduce distortions from state-owned sector

(4) Increase innovation, as imitation limits reached

(5) Continued opening, include firms “going global”

11

China’s role in international trade & global impact

China rising

13

Source: IMF

14

China “going global”

Source: IMF.

-10

0

10

20

30

40

50

60

70

19821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010

US

$bn

Exports as share of GDP

0

50

100

150

200

250

300

350

Singapore Hong KongSAR

Malaysia Thailand Korea,Republic of

Philippines Indonesia China India Japan Germany UnitedStates

1990 1995 2000 2007

Trade as share of GDP

0

100

200

300

400

500

600

Singapore Hong KongSAR

Malaysia Thailand Korea,Republic of

Philippines Indonesia China India Japan Germany UnitedStates

1990 1995 2000 2007

$0

$2 000

$4 000

$6 000

$8 000

$10 000

$12 000

$14 000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

intra-regional Rest of the world

Intra-regional/global supply chains

Page 18

Total exports of China to the rest of the world (US$1,000), 1980-2005

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Primary agricultural products Primary mineral products

Machinery & equipment Office machines, telecomm. equipment & electrical machinery

Clothing & apparel accessories, textiles, footwear Other manufactures

Source: UN.

Page 19

Total imports of China from the rest of the world (US$1,000), 1985-2005

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Agricultural raw materials Petroleum & gas

Metals and other minerals Office machines, telecomm. equipment & electrical machinery

Chemicals & related products Other manufactures

Source: UN.

China consumes (% of world’s)

• 54% of aluminium, 50% of nickel, 48% of copper, 45% of steel

• 30% of rice

• 23% of gold

• 17% of wheat

• 12% of oil

• 6% of natural gas

Source: WEF.

China’s global impact

• End of commodity super-cycle

• Slowdown & economic restructuring will affect exporters, including capital goods

• Slower income growth will also have impact on multinational companies from the West

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