Waves: the founding myth of China and the way ahead - FIRT 2016 - The funding...1986 1991 1996 2001...

Waves: the founding myth of China and the way ahead

A Presentation for the TFI FOT Conference

November 15th, 2016

Alberto Persona – Phosphate Analyst

2 Fertecon | Agribusiness intelligence

China’s founding myth


A history deeply connected with water

Da Yu Xia, 2070 BC Qin Shi Huang, ~230 BC

Mao Tse‐Tung, 1945‐76 AD Xi Jinping, 2013 AD – now


Contents


China’s new waves

The 13th 5‐year plan

Major demographic trends

China and the Global Value Chain

Access to credit and shadow‐banking

Agricultural Outlook – Informa Economics

Fertilizer Outlook – Fertecon


A quick look at the 十三五


The 13th 5‐year plan: word mining


The people of the People’s Republic of China


Increasing urbanization

0

10

20

30

40

50

60

70

80

90

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

% of u

rban

pop

ulation

China India Russia Brazil Italy USA


Following the Florida model? From pyramid to pagoda


The impact of urbanization and ageing

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Billion

peo

ple (fo

recast exclude

s immigratio

n)

Rural Urban


The impact of urbanization and ageing

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Billion

peo

ple (fo

recast exclude

s immigratio

n)

Rural Urban Rural forecast Urban forecast


China’s position in global value added


The long way ahead to services

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

2012

Agriculture Industry Services

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1997

1999

2001

2003

2005

2007

2009

2011

2013

Agriculture Industry Services

United StatesChina


More than a goal, a strategic necessity

China is a net exporting country in terms of total value, but is still webbed in the concept of “global value chain”

Sectoral trade patterns show a net scarcity of raw materials and IP

Where does the competitive advantage lie?

Impo

rts

Expo

rts


…while losing a key advantage at double‐digit speed

0

20

40

60

80

100

120

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

‘000

RMB/pe

rson

/yea

r

Total Agriculture Manufacturing IT

0

2

4

6

‘000

$/mon

th, 2

014

World China East Europe


The status of credit in China


How to finance a growing service economy?

0

2

4

6

8

10

12

14

Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7 Tier 8 Tier 9 Tier 10 Tier 11 Tier 12 Tier 13

Total m

oney creation

Steps of intermediation

The monetary multiplier

Reserve requirement 0.10% 1% 4% 18.50% 44%


Shadow banking: loans in disguise

Pro’s: ‐ Credit creation: no minimum reserve‐ Filling the gaps in a controlled economy‐ Less regulatory boundaries

Con’s:‐ Less regulatory boundaries‐ Different target industries‐ Higher risk: maturity mismatch

036912

2.03.04.05.06.0

May‐03

Nov

‐03

May‐04

Nov

‐04

May‐05

Nov

‐05

May‐06

Nov

‐06

May‐07

Nov

‐07

May‐08

Nov

‐08

May‐09

Nov

‐09

May‐10

Nov

‐10

May‐11

Nov

‐11

May‐12

Nov

‐12

May‐13

Nov

‐13

May‐14

Nov

‐14

May‐15

Nov

‐15

May‐16

Nov

‐16

RMB/USD

Nom

inal yield of

Chinese “T‐bill”

10‐year bond yield Exchange rate


Agricultural outlook for China


Projections for harvested area – key grains

0

20

40

60

80

100

120

1986 1991 1996 2001 2006 2011 2016 2021

Million he

ctares harvested

land

Wheat Rice Maize Oilseeds Other grains


Projections for crop production – key grains

0

100

200

300

400

500

600

700

1986 1991 1996 2001 2006 2011 2016 2021

Million tonn

es grains/oilse

eds



Projections for yields

0

1

2

3

4

5

6

7

8

1986 1991 1996 2001 2006 2011 2016 2021

t/ha



Are yield gains possible?

0

1

2

3

4

5

6

7

Whe

at yield

World China Average

0

2

4

6

8

10

Corn yield

World China Average

0

2

4

6

8

Rice yield

World China Average

0

1

2

3

4

5

Soya yield

World China Average


Fertilizer outlook for China


The impact on fertilizers: nutrient demand history

0

10

20

30

40

50

60

1986 1991 1996 2001 2006 2011 2016 2021

Million tonn

es nutrie

nt

N P2O5 K2O


The impact on fertilizers: Fertecon’s long‐term view

0

10

20

30

40

50

60

1986 1991 1996 2001 2006 2011 2016 2021

Million tonn

es nutrie

nt

N P2O5 K2O


A focus towards efficiency of use

2.0

3.0

4.0

5.0

6.0

0.0

0.1

0.2

0.3

0.4

1986 1991 1996 2001 2006 2011 2016 2021

Aggregate yield pe

r hectare

Application rate, t/ha

N P2O5 K2O Yield


Where is efficiency most needed?

Livestock concentration Water scarcity vs. harvested area


How to tackle fertilization efficiency

Reduce flood‐application

Movement towards fertigation

Higher‐analysis fertilizers: MAP 11:61:0, UAN, coated urea…

Non‐fertilizer products: GMO seeds, urease inhibitors, bio‐stimulants, micro‐nutrients

Abandon local processing of soya?

Better manure management systems


A look at supply: eventually, rationalization

200

250

300

350

400

450

500

550

2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4

$/t D

AP

DAP fob China DAP fob China ‐ no tariff YTH ‐ Kunming


Conclusions


Riding the waves

China’s demographics and wage inflation are key factors for the necessity of a change to a consumption‐oriented (not consumer‐oriented) model

Crop production is forecast to grow – mostly “through services” rather than “through commodities”: yields over area

Demand for fertilizers is forecast to decrease in the upcoming years, following the need for more efficient application and environmental concerns

Shadow banking might slow the process down – but the adjustments are already underway


InformaChristchurch Court10‐15 Newgate Street London EC1A 7AZ

+44 (0)20 7017 5000info@informa.comwww.fertecon.comwww.agribusinessintelligence.com

T

E

W

Alberto Persona – Phosphate Analyst+44 20 7017 [email protected]+44 78 2691 3430

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Waves: the founding myth of China and the way ahead - FIRT 2016 - The funding...1986 1991 1996 2001...

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