The Chairman’s Forum, Looking Ahead From the City of LondonCass Business School, London 15th September 2015

China at a Turning PointThe Trade Development Cycle & the One Belt One Road concept

Martin StopfordPresident,

Clarkson Research

Future of China & the m

aritime industry

Martin Stopford, Clarkson Research 1

Figure 1: World seaborne imports in 2014

0

2

4

6

8

10

121

95

0

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

Billion tonnes of cargo

..

China

China accounted for 41% of import

growth since 2003

Martin Stopford, Clarkson

Research

2

Figure 2: China’s seaborne imports and exports

0

500

1000

1500

200019

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

14

seab

orne

trad

e M

t

Sea imports 2015 Imports forecastSea Exports Line 5

1991199219941995199719982000200220032005200620082010201120132014-10%

-5%

0%

5%

10%15%

20%

25%

30%35%

Figure 3: China’s Industrial production growth

1992/3 Bubble

Post 1997 Asia Crisis Recession

Source: industrial data from various sources

Average14%pa

Turning point

Stage 1Early Industrial

Stage 2Transitional

Stage 3Mature

1

2

For the shipping industry the key

issue is thetiming of the two

turning points

China ?

Source: Maritime Economics martin Stopford (1997)

economyundeveloped

Resource intensive growth

Value added growth• The trade development cycle

(TDC) describes the import growth path of transitional economies

• It has three stages:-– Stage 1: modest imports

funded by primary exports– Stage 2: As the economy speeds

up imports of raw materials grow rapidly

– Stage 3: the volume of imports grows slowly

• China seems to have reached turning point 2

Figure 4: Typical “trade development cycle” peaking

19501955

19601965

19701975

19801985

19901995

20002005

20102015

0

500

1,000

1,500

2,000

2,500Europe

Trade development cycles 1950-2015: EUROPE

• There have been four waves of regional growth:-

1. Europe lead the way in the 1950s

1

Imports M tonnes

19501955

19601965

19701975

19801985

19901995

20002005

20102015

0

500

1,000

1,500

2,000

2,500Europe Japan• There have been four

waves of regional growth:-

1. Europe lead the way in 1950s,

2. Followed by Japan in 1960

1 2

Trade development cycles 1950-2015: JAPANImports M tonnes

19501955

19601965

19701975

19801985

19901995

20002005

20102015

0

500

1,000

1,500

2,000

2,500Europe Japan SE Asia• There have been four

waves of regional growth:-

1. Europe lead the way in 1950s,

2. Followed by Japan in 1960

3. Asia in about 1975

1 2 3

Trade development cycles 1950-2015: SE ASIAImports M tonnes

19501955

19601965

19701975

19801985

19901995

20002005

20102015

0

500

1,000

1,500

2,000

2,500Europe Japan SE Asia China• There have been four

waves of regional growth:-

1. Europe lead the way in 1950s,

2. Followed by Japan in 1960

3. Asia in about 19754. Chinese trade

started to grow rapidly in 1994

• The growth pattern was a slow start followed by rapid growth

1 2 43

Figure 5: Trade development cycles 1950-2015: CHINA Imports M tonnes

19501955

19601965

19701975

19801985

19901995

20002005

20102015

0

500

1,000

1,500

2,000

2,500Europe Japan SE Asia China• There have been four

waves of regional growth:-

1. Europe lead the way in 1950s,

2. Followed by Japan in 1960

3. Asia in about 19754. Chinese trade

started to grow rapidly in 1994

• The growth pattern was a slow start followed by rapid growth

1 2 43

Figure 5: Trade development cycles 1950-2015Imports M tonnes

Martin Stopford, Clarkson Research

1.37

0.90

1.5

1.65

3.55

6.42

0 1 2 3 4 5 6 7 8 9 10 11 12Sea imports per person a year in 2015

Japan

Europe

N. America

China

ROW

World 2015

Average 3.5 tonnes/capita1 billion OECD import 3.5

billion tonnes of cargo

Average 1.0 tonne/capita6 billion Non-OECD countries

import 6.4 billion tonnes of cargo

11

Future Trade Scenario: Challenging

World Average 1.4 tonne/capita

• China is now 18-20% of population, GDP and sea imports

• Big impact on trade growth

• Big shipbuilding share

Exchange rate measure of world GDP

38%

33%

10%

41%

20%

17%

15%

18%

0% 5% 10%

15%

20%

25%

30%

35%

Population

GDP (market)

GDP (PPP)

Sea Trade

Trade Growth

World Fleet

Deliveries

Orderbook

of trade growth 2003-2014

Shipyard orderbook CGT

Deliveries CGT

Share of world shipbuilding

China’s share of world total 2014/5

PPP measureof world GDP

Figure 6: China in the world maritime economy

Iron OreCrude

Minor BulkCoal

MetalsContainerisable

GrainsManufactures

Chemical

0 100 200 300 400 500 600 700 800 900

877

35 17

243235231

96 80

51

Million tonnes increase in trade 1999-2014

Figure 7 China’s import growth by commodity 1999-2014

Iron ore dominates trade growth

Figure 9: Steel consumption per capita 2013

JapanEU (27)

USAChina

M EastCIS

IndiaS Am

Africa

0 100 200 300 400 500 600

516274

300

213227

58

10542

515

Column2

Source: World Steel Association “World Steel in Figures 2014”

Urumqi

KhoigasAlmaty

BishkekSamarkandDushanbeTehran

Moscow

Istanbul

One Belt, One Road – President Xi’s vision

Gwadar

Samarkand

Gwadar

Gwadar

Central Asia

Figure 10: China Silk Road ECONOMIC Belt

• The economic belt will lop thousands of kilometres of the traditional sea routes for Chinese exports

• It is a vital transport route for imports of oil, gas and other natural resources.

Source Gavekal/Dragonomics

Figure 11: China’s Silk Road MARITIME Belt

• Improved connectivity between Asia and Europe, creating valuable new trade routes and boosting regional growth:

• Measures to improve performance include – upgrade ports; – improved logistics; lower

trade barriers; – financial integration

Source Gavekal/Dragonomics

Eurasia Land Bridge

Better connectivity will enable its underdeveloped border regions to become viable trade zones

photos: Tom Miller

Conclusions• China is moving from the transitional stage of development

to maturity• There is surplus capacity in shipbuilding, steel and

infrastructure development companies.• The Silk Road Economic and Maritime Belt might open up

Central Asia & maritime Asia.• Shipping will benefit from better port and inland

infrastructure within Asia, and economic development, making improved transport services possible.

8. England 1735:merchant fleet

overtakes Dutch shipping

4. Rome100 BC: dominates west Mediterranean

9. 1880-1950: growing power of

N. America as global trade hub

2. Phoenicians: trade from Lebanon

1500-300 BC

6. Hanseatic League1400 AD: trade between N. W. Europe and the

Baltic sea

5. Venice 1000: crossroads for

East /West trade

3. Greece 300BCtrade centres

Corinth & Athens

1. Gulf: 3000 BC trade between

India and Babylon

10. 1950-70 Japan:miracle economy

leads shipping

12.1970s S Korea

emerges as industrial power

13. 1990s China emerges as major

power

7. Dutch 1650 AD: dominate sea trade

Figure 12: The Westline – 5000 years of maritime trade

One Belt, One Road

Sea trade scenarios 2015-2065

18651878189119041917193019431956196919821995200820212034204720600

50001000015000200002500030000350004000045000

Sea Trade Scenario 1 4 tonnes per capita in 2065 Scenario 2: 1.7 tonnes per capita in 2065

1865-19353.5% pa growth

Liner & tramp shipping (pushing out sailing ships)

1950-2014 4.8% pa growth

Bulk, specialized, container shipping

2015-2065That works out at 1.1%-

2.8% pa growth

Scenari

o A: 4.0 to

nnes/cap

ita

Scenario B: 1.9 tonnes/capita

Figure 8: China’s steel production & iron ore imports

19531956

19591962

19651968

19711974

19771980

19831986

19891992

19951998

20012004

20072010

20130

100200300400500600700800900

1000 Steel forecast Steel ProductionIron Ore Imports Iron ore imports forecast