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CHINA 2013 MACRO OVERVIEW
MACRO OVERVIEW CHINA 2013
KEY FACTS Peer comparison
% of GDP
General government debt
China Median
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014f
60 50 40 30 20 10 0
e = estimate f = forecast
Source: Fitch
GDP per capita income, 2012e
At market exchange rates, USA=100 Median (AA) Saudia Arabia (AA-) Korea (AA-) Median (A) Taiwan (A+) Chile (A+) China (A+)
markets – if a recent Bank of America Merrill Lynch (BoAML) survey is anything to go by. The firm’s July survey of 238 fund managers found that China was now the biggest source of concern to investors. But a managed slowdown in China’s economy does not look half as threat ening if you are an entrepreneur in the local services sector – nor if you are unfortunate enough to have been living beneath a blackened smoke-stack in one of China’s hopelessly polluted cities. “We don’t think a slowdown is necessarily bad for China,” says Joseph Zeng, a partner and head of the Hong Kong office of the China-focused Greenwoods Asset Management, which has some $2.7 billion in assets under management. His fundamental thesis, which is shared by a number of market participants, is that a transformation from an investment-driven to a consumer-driven economy in China is as inevitable as it is desirable. “Reform policies, such as interest rate liberalisation, potential relaxation of the one-child policy, and strengthening of rules in areas such as environmental protection are fundamentally beneficial for the Chinese economy,” says Zeng. To be sure, the transformation will bring an end to the dizzying rates of growth that China has enjoyed in recent years, and which peaked at 14.2% in 2007, according to the World Bank. But a new emphasis on quality rather than quantity will underpin a far more sustainable expansion. “With a successful transition, China will grow at a healthy pace for years to come,” notes the International Monetary Fund’s most recent report on China. “Activity may be somewhat slower, a trade-off worth making for the benefit of much higher income in the Zhao Chen, managing medium to long run – a growth trajectory that will director at BCA in Montreal also be good for the global economy.” >> The new government is Under the new government, this process appears committed to breaking up to be accelerating. “China has made some progress with its rebalancing story, with the share of services state-owned monopolies >>
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10
20
40 60 80 100
Source: Fitch
September 2013 Special Report 9