Zhan Su, Universit é Laval Quebec and Canadian firms faced with an emerging China Presentation at...

Zhan Su, Université LavalZhan Su, Université Laval

Quebec and Canadian firmsfaced with an emerging China

Presentation at the CÉRIUM’s Summer SchoolChina Risen

How it changes and changes us

Quebec and Canadian firms faced with an emerging China

Dr. Zhan SU

Professor of international managementand business strategy

Director of GÉRAC (Research Group on Contemporary Asia)

Université LavalJuly 2006

China is attracting attention from the whole world

Chinese burden (Brown, 1994) Chinese illusion (Segal, 1999; …) Chinese manipulation (Rawski, 2001) Bankruptcy of China (Chang, 2001; …) Chinese miracle (..., 2002; …) Chinese opportunity (…, 2003; …) Chinese threat (…, 2003; …) Chinese jungle (…, 2005; …) Chinese shocks (Brown, 2005; …)

Part 1China as a world factory: myth or reality?

Part 2Trade relationships between

Canada/Quebec and China: a win/lose, lose/lose, or win/win relationship?

Part 3Quebec and Canadian firms faced with an emerging China: what position and which

strategies to take?

Fundamental characteristics of China

- An emerging key economic player

- A developing country• Still more than 100 million people living in poverty• Current GDP / capita is equal to South Korea in

1982 and Japan in 1961. They need another 25 years to reach the current GDP / capita in Japan.

- A country in transitionOne thing China is not lacking today are PROBLEMS.

But, as long as there is growth…

The rise of Chinese economy is an undeniable fact

• Growth: 9.4% from 1978 to 2005, from 147 billion $US to 2,240 billion; 4th biggest

• GDP per capita: from 340 $US to more than 1,700 US$ in 2005; China quickly surpassed India

• Poverty reduction: from 500 million to less than 100 million; a record

• International trade: from 20 billion $US in 1978 to 1,422 billion in 2005; from less than 1% of world trade to 6%; currently 3rd biggest

• Foreign currency reserves: from 0.17 billion $US in 1978 to 854 billion in February 2006; 1st place

Part 1

China as a world factory:myth or reality?

Source: WTO

Exceptional growthof exportations:

China : + 1200%Malaysia : + 600%Mexico : + 600%Brazil : + 300%

China, a world factory

• 90% of DVDs• 75% of toys• 70% of tractors • 65% of sports goods• 60 % of bicycles• 58% of telephones• 50 % of cameras• 45% of watches and clocks• 40% of screens• 40 % of micro-waves• 36 % of television sets• 30 % of air-conditionners• 20 % of refrigerators• … …

“Made in China” myths (1)

- China does not have a dominant place in world manufacturing industry.

Although China is currently the first producer of more than one hundred products, it realizes only 5% of the world industrial production, far behind

the United States (20%), Japan (15%) and Germany.

China is particularly weak in industrial goods production where the added value is much more important (a share of 30% in the Chinese manufacturing industries against 42% in the United States, 44% in

Japan and 46% in Germany).

Currently, China does not have the necessary technological level to become a world manufacturing center, because it is very dependent on

advanced technologies coming from abroad, and this, in most of its industries.


- Products “made in China” are the result of a globally organized production system

China is not the main master of the “made in China” products. China currently counts approximately 500.000 companies with

foreign capital. They contribute to more than 33.4% of the Chinese industrial production and to more than 60% of Chinese exports.

A lot of countries participate in the production of “made in China”. Ex: of the 12 million lap-top computers sold by China to the United States in 2005: the majority of the key pieces (screens, software, sound cards, hard drives, etc.) were in fact imported from around

the world to be assembled in China. The true contribution of China in this case represents less than 30% of the final value of

the product.


- China only obtained a small percentage of the value added of the products “made in China”

The development of the products “made in China” was very beneficial for China. There is today more than 80.000.000 jobs in China directly involved in this activity. Thanks to the technological

and managing learning, the competitiveness of Chinese companies is no more limited just to the low cost of Chinese labor.

However, China just obtains a small percentage of the value added of products “made in China”. Ex: to purchase an Airbus A-380,

China needs to export 800 million shirts. A Barbie doll, produced for 2 $US in China will be sold for 16 $US in the United-States.

“Made in China” myths

China occupies today a very important place in the world economy. That is due as much to its

relative economic weight as to the impacts generated by its fast rise. However, it is

exaggerated to already qualify China as a “world factory”, the title that was given to

empires of past and present (England, the United States, Japan, etc). China should rather be considered as a country which is today only an assembly workshop of world in industries of consumer goods, but aims at becoming a world

industrial superpower.

What will be the future of the “Made in China”?

According to many experts, in spite of innumerable problems, Chinese manufacturing industries will in the future still accentuate their place in international market, and will occupy, in addition, an increasingly important place in the field of

high technologies.

China is an atypical developing country, because it has at the same time the absolute advantages with regards to costs, the comparative advantages with regards to productivity and the competitive advantages in several high-tech

sectors. According to a study by Mc Kinsey (2002), in several industrial sectors, the productivity of Chinese workers is already 20% greater than European countries.

An increasingly complete and efficient industrial system, an important tank of rural human capital, little qualified but inclined to work for low wages, a political stability ensured by a totalitarian regime which however puts the economic growth at the

center of its concern, an increasing domination of the private companies in Chinese economy, the existence of an important and relatively inexpensive infrastructure are as many factors that contributed and which likely seem to continue to contribute to

the rise of the “made in China” products in international market.

China will remain the giant of the

manufacturing products Exportation de marchandises

0

0,5

1

1,5

2

2002 2004 2006 2008 2010

trill

ion

s d

e U

S$

Inde

Chine

China: a world laboratory?Results of a survey to American high-tech firms done by

“The Economist” in 2005

• Favoured countries for the implementation of R&D centers in the upcoming years :

• China (39%)• United States (29%)• India (28%)

• Determining factors :

• Fiscal advantages (70%)• Current and future local market• Labour costs• Large supply of skilled workers

Part 2

Trade relationships between Canada/Quebec and China: a

win/lose, lose/lose, or win/win relationship?

Principal trade partners of China in 2005

Origin of import. in 2005

Country Part (%)

Japan 15.2%

South Korea 11.6%

ASEAN 11.4%

Taiwan 11.3%

EU 11.1%

United-States 7.4%

Australia 2.5%

Russia 2.4%

Saudi Arabia 1.9%

Hong Kong 1.9%

Destination of export. in 2005

Country Part (%)

United-States 21.4%

EU 18.9%

Hong Kong 16.3%

Japan 11.0%

ASEAN 7.3%

South Korea 4.6%

Taiwan 2.2%

Russia 1.7%

Canada 1.5%

Australia 1.5%

Source: Ministère du commerce de la Chine

Echanges commerciaux du Canada avec la Chine

-30 000

-20 000

-10 000

0

10 000

20 000

30 000

40 000

Exportations du Canada vers la Chine Importations du Canada vers la Chine Solde

Echanges commerciaux du Québec avec la Chine

-6000

-4000

-2000

0

2000

4000

6000

Exportations du Québe vers la Chine Importations du Québec vers la Chine Solde

Punish Us, Pleaseby Jim Stanford, Canadian Auto Workers, No 80, 25 avril 2004

Chinese officials have hinted darkly that if Canadian politicians express support for Tibetan independence in meetings with the Dalai Lama, there could be repercussions for our bilateral trade. We should take them up on that offer. Because the evidence is mounting that trade with China is doing us much more harm than good.

A decade ago, we had a modest, balanced trading relationship. Since then, our exports to China have grown by $2 billion - but our imports have grown 8 times as much. That makes China our second-largest trading partner, and our $15 billion bilateral deficit is our largest anywhere. That imbalance represents at least 50,000 lost Canadian jobs.

The bleeding is set to accelerate in the years to come, as Chinese exports become more diverse and technically sophisticated. Stop thinking about plastic toys from McDonald's; start thinking about cars, computers, and airplanes.

Free-traders have a pat answer. China is a low-cost, labour-intensive country. It's good for us to import labour-intensive goods from them, in return for exports of knowledge-intensive goods and services from us. That's how "comparative advantage" works.

Yet this standard free-trade model has never been more out to lunch than in explaining Canada-China trade. China's boom does not reflect a natural abundance of labour (which every poor country has). It reflects a deliberate, semi-planned strategy to construct advantage in increasingly sophisticated industries, with the help of powerful state interventions: subsidized capital, investments in infrastructure, a managed currency, and - of course - forcibly cheap and compliant labour.

What's more, our puny stake in China's phenomenal growth - $5 billion annual exports to a country with GDP approaching $10 trillion - does not mostly reflect our "brains." It is our traditional commodity industries (minerals, agriculture, and other resources) that will capture most of the crumbs coming our way from China's economic miracle. Believe it or not, trade with China is reinforcing our historical status as an exporter of staples, even as they work consciously to escape their role as a supplier of cheap labour.

Standard responses to the Chinese trade threat won't even slow the coming explosion of our jobs-destroying bilateral deficit. Investing in education for Canadian workers is no panacea: workers in China, India, and elsewhere are just as capable of learning high-tech skills as Canadians are. Easing interest rates won't help much, either - beyond undoing some of the damage of last year's run-up in the loonie. Pressing China to float its currency (the current U.S. tactic) will make hardly any difference: the yuan could double tomorrow, and companies would still be flocking there.

Ultimately, it will require direct measures to limit trade imbalances and force Chinese planners to buy as much from us as we buy from them. Fortunately, by threatening their own retaliation for our hospitality to the Dalai Lama, the Chinese have made it easy. We'll let them disrupt this one-sided relationship, instead of us.Applying my well-known diplomacy and tact, I therefore propose an escalating 8-point strategy to disrupt our trade. It's sure to get a rise out of China's touchy apparatchiks, and provoke the punishment we so richly deserve:

Appoint Iona Campagnolo as our new ambassador to Beijing - after she takes an assertiveness-training course.

Make the Dalai Lama an honorary citizen of Canada (his purchases of incense can stay GST-exempt). Keep Canada's team home from the 2008 summer Olympics in Beijing. (The only risk is that no-one might notice.) Lend Don Cherry to provide commentary for Tibetan hockey games (since his days at CBC are numbered anyway). Invite Tibet to join NAFTA - with appropriate dispensation for their softwood lumber exports. Pay $100 million to several ad agencies to sponsor patriotic Tibetan festivities. Organize an official bilateral cultural exchange. Tibet would send us a traveling exhibit of artifacts from

Lhosa, and we would send them DVDs of the Trailer Park Boys. Send MP Dennis Mills to shout "Vive le Tibet libre!" from a balcony of the Imperial Palace.

If all else fails, we could always just get down on our knees and plead for sanctions. I know it sounds kinky to beg for punishment. But in this case, the facts are clear: it's gonna hurt them far more than it hurts us.

Jim Stanford is economist with the Canadian Auto Workers. He owns no handcuffs, whips, or leather straps.

“Hidden” impacts for Canada (1)

• An economy of several billion per year for consumers

According to several recent American studies, the imports of “made in China” products would have made it possible to the American consumers to save about 60 billion US$ per year in the nineties. Since the value of trade sino-Canadian represents nearly 1/10 of that of the sino-American exchanges, we can estimate that, thanks to the consumption of the cheap products “made in China”, there are several billion dollars which can be saved or consumed for other goods by the Canadians each year. For families with moderate incomes, this means an increase of purchasing power by 5 to 10%

• Increasing revenues from Canadian firms operating in China

“Hidden” impacts for Canada (2)

• Improvement of Canadian firm’s international competitiveness

. Since several years, Canada has imported more industrial goods than consumer goods from China. Quebec and Canadian companies tend more and more to take advantage of the strengths of China to be modernized and to reinforce our international competitiveness

• The trade with China constitutes an engine of growth for the Canadian economy, given the increasing importance of Canadian exports towards China.

Canadian imports from China 2004 - million Canadian dollars

Product Value Variation (%)

Machines 4707.80 55.58

Electric materials 4325.45 32.77

Toys and sports equipments 2049.37 6.38

House furniture 1634.58 29.99

Woven clothing 1120.05 15.08

Shoes 913.18 5.34

Knitted clothing 887.79 29.34

Steel and iron products 752.29 38.66

Plastic 721.32 12.35

Optical and medical equipments 680.73 24.53

Sources: World Trade Atlas

Canadian exports bound for China2004 – Million Canadian dollars

Product Value Variation (%)

Wood pulp 1033.23 23.36

Organic chemicals 868.68 107.8

Cereals 766.57 1059.5

Machines 320.76 28.86

Fish and sea food 295.17 17.59

Manure 274.86 7.52

Electric material 251.67 -7.83

Nickel 232.15 152.27

Ores, slags and ashes 161.13 9.12

Grease and oil 152.79 158.45

Sources: World Trade Atlas

Canada's imports and exports

0100200300400500600700800900

1990

1992

1994

1996

1998

2000

2002

2004

$ 000 000 000

Excédent

Importations totales

Exportations totales

Part 3

Quebec and Canadian firms faced with an emerging China: what position and which strategies

to take?

PRINCIPAUX DÉFIS IDENTIFIÉS PAR LES MANUFACTURIERS POUR LES 5 PROCHAINES ANNÉES

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25

23

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17

15

13

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APPRÉCIATION DU DOLLAR

CONCURRENCE DE LA CHINE

CHANGEMENTS DE PATTERNS DE CONSOMMATION

COÜTS PLUS ÉLEVÉS

ACCÈS À UNE MAIN-D'ŒUVRE QUALIFIÉE

COMMERCIALISATION

CONCURRENCE D'AUTRES PAYS

INNOVATION EN MATIÈRE DE PROCÉDÉS

FISCALITÉ ET RÉGLEMENTATION PLUS COÜTEUSE

CHANGEMENTS TECHNOLOGIQUES

SURCAPACITÉ

GÉRER LA CROISSANCE

ACCÈS AUX MARCHÉS ÉTRANGERS

DISPONIBILITÉ ET COÜT DE L'ÉNERGIE

CONCURRENCE POUR L'INVESTISSEMENTPERCENT OF COMPANIES

Is the worst still to come ?

Quebec/Canada faced with the emergence of China

The emergence of China is both a threat and an opportunity.Above all, it represents a challenge.

If China were not the major supplier of consumer goods for Western countries, another developing country would be.

The most important is to be able to take advantage of the competitive factors of China that are in our favour, and not try to

beat China at any cost

To be successful in global competition, firms must put emphasis on the development of new and distinct competencies, instead

of simply trying to keep all what we have. We need to know how to do things differently than our principal competitors instead of

contenting ourselves to passively follow their lead.

Quebec and Canadian companies should reconsider their business strategies

• Produce by ourselves? Excel in the domains where we posses distinctive advantages, or where there are strategic importance for our future.

• Have them produced? Delocalise in a selective manner the activities that represent the least amount of competitive advantage in order to take advantage of the strengths of China to reinforce our international competitiveness and even to halt the disappearance of certain industrial sectors.

• Produce together?Exploit complementarities and synergy through partnerships.

• Don’t produce, or stop producing? Be capable of bring about the radical changes necessary to ensure the “survivability” of our firms.

Possible competitive strategies faced with Chinese competition

• In industries that are labour and capital intensive

• Integration by specialisation (outsourcing)• Confrontation by differentiation• Avoidance by focalisation (niche)

• In knowledge intensive industries

• Exploitation by penetration• Integration through collaboration

Positioning! Positioning!!Positioning!!!

The business opportunities in China are too attractive for us let them pass by• Poverty is ever present

• Still more than 100 million people living in poverty • Current GDP / capita is equal to South Korea in 1982 and

Japan in 1961• Wealth / capita is currently only 2% of the American figure• They need another 25 years to reach the current GDP / capita

in Japan and more than 30 years to reach the South Korea

• But, a huge potential consumer market• The middle class represents 20% of the population• Annual growth of 20% in luxury goods; China will be the

second largest market in 2015• 70 000 marriages celebrated each day• 7th market in 2004 (3%), but 2nd in 2014 (11%)

New Chinese development strategy

• More value added• More efficiency• More socially responsible• More environmental• More diplomatic

Objectives:- Growth: by 2010 double the GDP per capita of 2000- Efficiency (consumption of energy resources for each unit of

GDP): 20% less in 2010 than in 2005- Innovation capacity: In the top 20 by 2020- Standard of living: a developed country by 2050

Factors for future Chinese growth

- Growth in local consumption (especially by the rural population)- Urbanisation (40% vs. 60% in Asia)- Growth in service sectors (40.7% vs. 70% and more)- Improving the competitiveness of Chinese products on the international market (labour costs, productivity and quality)- Development of high technology domains

more proactive more reflective more adapted more concerted in our efforts in it for the long haul better supported

The Chinese market is too complicated for us to treat it lightly

To succeed in doing business in China,our companies must be:

Chair of global business strategies and

emerging Asian markets

Mission:• Raising awareness of the new reality of the Asian

competition; • Competitive intelligence of emerging Asian

markets’ evolution; • Developing expertise and decision-making tools; • Training experts on the matter; • Providing assistance to Quebec and Canadian

companies and organizations.

Chair: Dr. Zhan Su

Faculté des sciences de l’administration, Université Laval

We are not so far behind, and China is not so far ahead. But, we still need

to do better! We do need to make changes.

If not, the worst is still to come.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most

adaptable to change.”

- Charles Darwin

Part 4

China since 1978:

what’s happened and why?

The determining factors of Chinese growth

• Introduction of a market system (private firms: 61% in 2004; foreign capital: 8.7% of total assets)

• Government’s power to mobilise and to control

• Investments (44.2% in 2004)• International markets (69.8%)• Internal consumption (53%)

Two fundamental policy changes adopted in 1978

Reform to the economic systemReform of economic decision making mechanisms

Reform of motivation mechanisms

Openness to the worldIntroduction of capital, technologies and modern management methods from the rest of the world

The processes of economic modernisation in the Mao era

• Predominance of ideological movements

• Monopoly of public property in the national economy

• Creation of a a centrally planned economy

• Practises of equal distribution of riches

Failure of the Maoist ideology in the economic sphere

• Large fluctuations and discontinuities in the evolution of the national economy

• An economy of shortage• Poor performance of state run firms:

“Eating from the same pot”• Lack of motivation on the part of

workers, each with “an iron rice bowl”

Principal characteristics of Chinese reform

• No precise objective (model): a trial/error approach: “We cross the river by looking for the stone bridge in the water”

• Gradual approach : progressive elimination of the elements of the planned system and the progressive introduction of market elements

• Development based on inequality : “We must allow a small number of people and regions to get rich firstly ”

• Fundamental condition : political stability assured by the domination of the Communist Party of China

• Motivation of the Party: “Only economic development will allow the Chinese Communist Party to remain in power”

The transformation of the Chinese State

From a State that produces, programs and protects to a State that firstly promotes, and also

programs, protects and produces

China today is remarkably open. But this is not due to the fact that it is very liberal, rather because it

is not.

China today combines all the most negative aspects of the two worlds: a capitalist culture

introduced by Deng, superimposed on a traditional Maoist bureaucracy.

Index of corruption perception Source : Transparency International 2003

Rank Country Score

1 Finland 9,7

11 Canada 8,7

11 United Kingdom 8,7

14 Hong Kong 8,0

16 Germany 7,7

18 United States 7,5

20 Chile 7,4

23 France 6,9

30 Taïwan 5,7

40 Hungary 4,8

54 Brazil 3,9

54 Czech Republic 3,9

64 Mexico 3,6

64 Poland 3,6

66 China 3,4

83 India 2,8

86 Russia 2,7



• Power to mobilise and Government control


Investments in China

Year

Total sum of the investments

(100 million $US)

Volume of foreign capital

(100 million $US)

% of foreign capital / sum of

investments

1991 1050.97 43.66 4.15

1992 1465.22 110.08 7.51

1993 2268.71 275.15 12.13

1994 1977.34 337.67 17.08

1995 2397.23 375.21 15.65

1996 2763.22 417.26 15.10

1997 3059.97 452.57 14.79

1998 3437.29 454.62 13.23

1999 3608 403.18 11.17

2000 3944.26 407.15 10.32

2001 4458.11 468.46 10.51

2002 5223.94 527.43 10.10

Weight of foreign investments in China’s industrial production

(in millions of yuan)

AnnéeProduction

industrielle (100 millions yuans)

Contribution des capitaux étrangers

(100 millions yuans)

% des capitaux étrangers dans la

production industrielle

1990 19701.04 448.95 2.281991 23135.56 1223.32 5.291992 29149.25 2065.59 7.091993 40513.68 3704.35 5.151994 76867.25 8649.39 11.261995 91963.28 13154.16 14.311996 99595.55 15077.53 15.141997 56149.70 10427 18.571998 58195.23 14162 241999 63775.24 17696 27.752000 73964.94 23145.59 22.512001 94751.78 26515.66 28.052002 101198.73 33771.09 33.37

Degree of opening

1998 1999 2000 2001 2002 2004

Canada 69,27 70,58 73,79 70,15 67,18

USA 18,65 19,02 20,90 19,06 18,26

Argentina 19,35 17,23 18,16 17,47 33,65

Bolivia 36,33 33,87 36,47 37,31 39,48

Brasil 14,18 18,83 18,89 22,93 24,33

Chili 49,55 45,38 49,95 54,60 55,23

Mexico 59,00 58,79 59,56 53,13 52,38

Paraguay 45,49 34,19 39,68 46,32 50,84

Uruguay 29,42 26,75 28,68 27,43 31,54

Venezuela 34,44 33,16 39,60 36,00 41,05

China 34,23 36,38 43,89 43,35 49,03 70

Indonesia 79,82 51,91 63,68 61,91 51,13

Japan 16,94 16,35 18,03 18,02 18,88 24

Malaisia 182,37 188,79 199,86 183,99 182,44

Vietnam 76,67 81,17 96,52 95,15 101,27

Middle school and university studies

Korea 100% 60%

Singapore 74% 39%

Philippines 78% 29%

Thaïland 59% 22%

Malaisia 64% 12%

Indonesia 56% 11%

China 70% 5%

Students in science and engineering

China 53%

Korea 34%

Indonesia 28%

Malaisia 28%

Philippines 23%

Thaïland 20%

Attractiveness of the Chinese business environment

- Productive and inexpensive workforce: – Average hourly wage : $ 0.50 US/h– Very large pool of skilled and unskilled workers (20 millions enter

workforce each year; 300 million too many in rural areas)

- Current and future importance of the Chinese market

- Political stability

- Competitive advantages:- Favourable fiscal conditions (competition between local governments)- Low exchange rate- Complete industrial system- Low infrastructure and real estate costs- Relatively abundant and inexpensive supply of natural resources and raw materials

The Chinese model of development is put into question …

• Growth vs. real gains• Growth vs. efficient economy• Growth vs. social justice• Growth vs. resource constraints• Growth vs. sustainable development• Growth vs. outside resistance

One thing China is not lacking today are PROBLEMS. But, as long as there is growth…

China: the “blue collar” workers for the world

• 6% of global industrial production (Japan: 15%, United States: 20%)

• 40 to 100 B$ annual surplus • 100 000 000 jobs (80 000 000 direct jobs) • Technological and managerial learning curves

However:• 60% is done by foreign firms operating in China• 85% is for foreign brands• 40% of exported products have very little value-added : 800

million shirts for 1 Airbus A-380; Barbie doll: $2 vs. $16; average price per textile product: $4; …

• Competitiveness to the detriment of the well-being of Chinese workers

• High procurement costs (annual bill for imported oil: 2% of GDP and more)

• Disastrous environmental consequences (15% of GDP)

China is “subsidizing” foreign countries

• Product prices• Fiscal incentives• Resource prices• Cost of capital• “Harmful” industrial projects accepted• Social conditions of workers• Financial losses (foreign bad credits: 5% vs.

0.25 - 0.5%)

Inefficiency of the Chinese economy

• Two thirds of financing for one third of the production (State run)

• An inefficient and incomplete financial system : bad debt, 30 to 50% of GDP

• 40% more energy resource consumption needed by iron and steel firms; 30% more in the electricity sector;

• 5 the consumption of water and 3 three times more energy needed for each 10 000 Yuan of GDP produced;

• 80% of fatal accidents for 35% of the global coal production … • Coexistence of penury and overproduction (86% of products

implicated)• Investments for political interests• Speculative investments (real estate,…)

Social injustice

• Growing divide in cities• GINI coefficient (inequality of distribution): 0.424 in 1996,

0.456 in 1998, 0.457 in 1999, 0.458 in 2000• 20% of the population hold more than 50% riches, 4.7%

for the poorest 20% • 50% des urbanites and 90% of the rural population have

no medical insurance

• Growing divide between urban and rural populations

• More than 6 times difference in revenue levels and buying power

• 300 to 400 million rural workers too many

China faced with a lack of resources

• Relative poverty of resources: 7% of the cultivable land in the world, 6% of potable water, 4% of forests, 1.8% of oil reserves, 0,7% of natural gas

• In 2004, China already consumed 20% of global aluminium production, 35% of steel production, 35% of coal production, 45% of cement production, 8% of oil production, …

• Self-sufficiency in energy in 2004: 94%• Coal remains the most important energy resource in China

(70% of the total). 40% of oil is imported (Saudi Arabia, Iran, Oman, …)

• By 2020, the consumption of coal and oil will have doubled • An increase in the price of oil by $10 reduces the GDP by

0.5%

China is severely touched by pollution and acid rains (a loss of 15% of the GDP per year)

Source: Economic images of the world 2005

China faced with trade conflicts

• Target of anti-dumping charges (15% globally, 60 cases in 2002 and 49 in 2003)

• Conflicts related to problems concerning prices, norms, working conditions, IP infringement, exchange rates, etc.

• Complaints from developed countries but also from developing ones

• Occidental countries refuse to recognise the Chinese economy as a market economy

Importations du Canada en provenance de la Chine

0

2000

4000

6000

8000

10000

12000

1995 2000 2002 2003 2004

$000 000

produits agricoles

produits énergétiques

produits forestiers

biens industriels

machines etéquipements

produits automobiles

biens deconsommation

Source: l’Observateur Économique Canadien, juin 2005

The rise of the BRICs

Tiré de Goldman Sachs, Octobre 2003 http://www.gs.com/insight/research/reports/99.pdf

Evolution of the world economySource: Keystone India

Pourcentage du PIB mondial en 2004

Inde2%

Ētats-Unis28%

Autres20%

Union Européenne

34%

Japon12%

Chine4%

Ētats-Unis

UnionEuropéenne

Japon

Chine

Inde

Autres


Ētats-Unis27%

Union Européenne

25%

Japon7%

Chine15%

Inde5%

Autres21%

Ētats-Unis

UnionEuropéenne

Japon

Chine

Inde

Autres


Ētats-Unis26%

Union Européenne

15%

Japon4%

Chine28%

Inde17%

Autres10%

Ētats-Unis

UnionEuropéenne

Japon

Chine

Inde

Autres

China is not a homogeneous country

• Two worlds: urban vs. rural

• 31 (34) administrative regions

• Three parts: East vs. Centre vs. West

• Three pole of growth: Delta of the Pearl River vs. Delta of the Yangzi vs. Bohai

• Close to 700 cities

• Favoured areas of development

Segmentation ! Segmentation !! Segmentation !!!

A few cultural traits in today’s China

• Materialism• Voluntarism• Conformism• Pragmatism• Collectivism• Attachment to family

Confucianism, Capitalism and Communism are the sources of Chinese

culture today

China quickly surpasses India

PIB par habitant

0

200

400

600

800

1000

1200

1970 1980 1990 2000 2004

US

$ China

India

Source: Banque Mondiale, Global Insight Inc.

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