11 WORLD TRADE GROUP. LLP.
WORLD TRADE GROUP, LLPWORLD TRADE GROUP, LLPand and
Rogers Towers, P.A. Rogers Towers, P.A.
ChinaChina Trade & BusinessTrade & Business
2003 Year in Review2003 Year in Review
Present
22 WORLD TRADE GROUP. LLP.
33 WORLD TRADE GROUP. LLP.
44
2003 2003 Economic OverviewEconomic Overview
55 WORLD TRADE GROUP. LLP.
-5
0
5
10
15
20
25
Annual G
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s GDPCPIUrban IncomeRural Income
China Economic China Economic IndicatorsIndicators
66 WORLD TRADE GROUP. LLP.-2
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2
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6
8
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China Aisa-Pacificw/o China
US World
An
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2000
2001
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2003
Comparative GDP GrowthComparative GDP Growth( China = 3.9 % of global GDP ( China = 3.9 % of global GDP
15 % of global growth ) 15 % of global growth )
77 WORLD TRADE GROUP. LLP.
Asia-Pacific Economic Asia-Pacific Economic GrowthGrowth
-4
-2
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2
4
6
8
10
Annual %
GD
P G
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2000200120022003
88 WORLD TRADE GROUP. LLP.
Manufacturing – 35% of GDPManufacturing – 35% of GDPExports – 26% of GDPExports – 26% of GDPInfrastructure expansionInfrastructure expansionForeign investmentForeign investmentDomestic consumptionDomestic consumptionCapital MarketsCapital Markets
Market sectors driving Market sectors driving growthgrowth
99 WORLD TRADE GROUP. LLP.
Foreign Corporate Foreign Corporate Expansions Expansions
• WalmartWalmart
• Kfc / Pizza HutKfc / Pizza Hut
• Heinz / P&GHeinz / P&G
• MacDonaldsMacDonalds
• Office 1 SuperstoreOffice 1 Superstore
• Home DepotHome Depot
• Honda / Toyota / VW Honda / Toyota / VW GM / Ford / GM / Ford / MitsubishiMitsubishi
• IntelIntel
• MicrosoftMicrosoft
• DellDell
• MotorolaMotorola
• Computer AssociatesComputer Associates
• DuPontDuPont
• RockwellRockwell
• ToshibaToshiba
1010 WORLD TRADE GROUP. LLP.
New Milestones -- 2003New Milestones -- 2003
9% GDP growth – largest globally9% GDP growth – largest globally 16% increase in domestic investment16% increase in domestic investment #1 in foreign investment - $53.5 #1 in foreign investment - $53.5
billionbillion #1 in cell phone users – 258 million#1 in cell phone users – 258 million #2 in computer sales - $11 Bil.#2 in computer sales - $11 Bil. #2 in Internet users – 80 million#2 in Internet users – 80 million #3 in auto sales – 3.2 million#3 in auto sales – 3.2 million Foreign investment in stock marketsForeign investment in stock markets Allowing investment outside ChinaAllowing investment outside China
1111 WORLD TRADE GROUP. LLP.
Foreign Direct Investment Foreign Direct Investment (FDI)(FDI)• Form of investmentForm of investment
– WFOE’s ……… ……………….60%WFOE’s ……… ……………….60%– Equity JV’s…………………… 30%Equity JV’s…………………… 30%– Contractual JV’s……………. 10%Contractual JV’s……………. 10%
• Project typesProject types– Factories (2/3)Factories (2/3)– Infrastructure projectsInfrastructure projects– WTOWTO– 2008 Olympics2008 Olympics
1212
China Foreign TradeChina Foreign Trade
1313 WORLD TRADE GROUP. LLP.
China’s Big 3 Big Three Trading China’s Big 3 Big Three Trading CentersCenters
Beijing / Tianjin
Shanghai / Jiangsu /ZhejiangGuangdong / Shenzhen
Other
Rogers Towers Bailey Jones & Gay
1515 WORLD TRADE GROUP. LLP.
China’s Trade with the China’s Trade with the WorldWorld
(Billion USD)(Billion USD)
0
50
100
150
200
250
300
350
400
1999 2000 2001 2002 2003
Exports
Imports
1616 WORLD TRADE GROUP. LLP.
US Trade with ChinaUS Trade with China
0
20
40
60
80
100
120
140
160
180
1999 2000 2001 2002 2003
US Exports
US Imports
1717 WORLD TRADE GROUP. LLP.
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1818 WORLD TRADE GROUP. LLP.
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Annual GDP Growth 1990-2000
Annual GDP Growth 2000-2010
Florida Trading Partners: GDP Growth
1919 WORLD TRADE GROUP. LLP.
China’s Major Exports - China’s Major Exports - 20032003
• Apparel, clothing & footwearApparel, clothing & footwear
• Electrical equipment & partsElectrical equipment & parts
• Machinery & partsMachinery & parts
• Textiles & yarnTextiles & yarn
• Chemical industrial productsChemical industrial products
• Furniture, house waresFurniture, house wares
• toys, handicraftstoys, handicrafts
• Food stuffsFood stuffs
2020 WORLD TRADE GROUP. LLP.
China’s Major Imports - China’s Major Imports - 20032003
• Electrical equipment & partsElectrical equipment & parts
• Machinery, parts & transportation equip.Machinery, parts & transportation equip.
• Crude oil and fuelsCrude oil and fuels
• Iron and steelIron and steel
• AirplanesAirplanes
• Plastics and plastic articlesPlastics and plastic articles
• Services ??Services ??
2121 WORLD TRADE GROUP. LLP.
China’s Leading MarketsChina’s Leading Markets
US
HK
JAPAN
EU
OTHER
2222 WORLD TRADE GROUP. LLP.
China’s Work ForceChina’s Work Force
2323 WORLD TRADE GROUP. LLP.
0.61
3.52
5.41
9.16
16.02
21.33
0 5 10 15 20 25
China
Mexico
Taiwan
Korea
Canada
USA
2003 Manufacturing Wages
Hourly Compensation Costs
2424 WORLD TRADE GROUP. LLP.
2003 Annual Wages (USD)2003 Annual Wages (USD)China Major Cities v. MexicoChina Major Cities v. Mexico
Guangzhou $ 2,750
Shanghai $ 2,630
Beijing $ 2,313
Tianjin $ 1,728
Chongqing $ 1,150
Mexico $ 7,322
2525 WORLD TRADE GROUP. LLP.
China’s Work Force China’s Work Force AllocationAllocation((percentage of work forcepercentage of work force))
0
10
20
30
40
50
60
Industry and commerce
agriculture and forestry
other
2626 WORLD TRADE GROUP. LLP.
China’s Labor SupplyChina’s Labor Supply
19991999 20002000 20012001 20020022
20032003
Labor costLabor costUSD / hourUSD / hour
0.420.42 0.440.44 0.440.44 0.500.50 .61.61
Recorded Recorded UnemploymeUnemploymentnt**
5.505.50 7.07.0 6.06.0
????????8.08.0
????????10.010.0
????????
* Does not include 150 mil. Underemployed in rural areas
2727 WORLD TRADE GROUP. LLP.
Labor Over-SupplyLabor Over-Supply
At current GDP growth rate: At current GDP growth rate:
8 million new jobs / 8 million new jobs / yryr
Current annual rate of new workers:Current annual rate of new workers:
12 million / yr.12 million / yr.
2828 WORLD TRADE GROUP. LLP.
Internal DevelopmentsInternal Developments
2929 WORLD TRADE GROUP. LLP.
New LeadershipNew Leadership• Hu JintaoHu Jintao
– President & Chairman of Central CommitteePresident & Chairman of Central Committee– Rejuvenation of PartyRejuvenation of Party– Continuation of private sector expansionContinuation of private sector expansion– ““Spreading the growth” to inner ProvincesSpreading the growth” to inner Provinces– Social security and health care benefitsSocial security and health care benefits– Fighting corruptionFighting corruption– Expanding influence in World politicsExpanding influence in World politics– TaiwanTaiwan
3030 WORLD TRADE GROUP. LLP.
Major Government Major Government InitiativesInitiatives
• Public HousingPublic Housing
• Private Home ownershipPrivate Home ownership
• TransportationTransportation
• Telecom / InternetTelecom / Internet
• Water / sewer / garbageWater / sewer / garbage
• Environmental clean-upEnvironmental clean-up
• 3-Gorges Dam3-Gorges Dam
• Gas PipelineGas Pipeline
3131 WORLD TRADE GROUP. LLP.
Continued WTO – Related Continued WTO – Related ChangesChanges
• TariffsTariffs
• Quotas and other non-tariff barriersQuotas and other non-tariff barriers
• Anti-dumping / overproductionAnti-dumping / overproduction
• Enhanced IP protection and enforcementEnhanced IP protection and enforcement
• Transparency rules and systemsTransparency rules and systems
• Accelerated Clean up of banking and Accelerated Clean up of banking and securities marketssecurities markets
• Service industries – continued expansionService industries – continued expansion
3232 WORLD TRADE GROUP. LLP.
Expanding ServicesExpanding Services
• Sales and Sales and distributiondistribution
• 33rd rd party Logisticsparty Logistics
• TelecomTelecom
• Banking and financeBanking and finance
• InsuranceInsurance
• Construction and Construction and developmentdevelopment
• Project consultingProject consulting
• EngineeringEngineering
• ArchitectureArchitecture
• Environmental Environmental
• Legal servicesLegal services
• Education / trainingEducation / training
• Travel servicesTravel services
• Employment Employment agenciesagencies
• FranchisingFranchising
3333 WORLD TRADE GROUP. LLP.
Continuing ChallengesContinuing Challenges• Resistance & confusion re WTO changesResistance & confusion re WTO changes
• WTO Transition -- economic impactWTO Transition -- economic impact
• Clean up of Banks and SOE’sClean up of Banks and SOE’s
• Enforcement - Open markets / IPEnforcement - Open markets / IP
• Legal system overloadLegal system overload
• Labor abusesLabor abuses
• Currency evaluationCurrency evaluation
• Economy overheatingEconomy overheating
3434
Succeeding in ChinaSucceeding in China
3535 WORLD TRADE GROUP. LLP.
Conducting Market AnalysisConducting Market Analysis
• Government info – MOFTEC, NBS, etc.Government info – MOFTEC, NBS, etc.• US Dept. Commerce - FCSUS Dept. Commerce - FCS• US Dept. of State – background notesUS Dept. of State – background notes• US Industry GroupsUS Industry Groups• Private consultantsPrivate consultants
– Analytical studiesAnalytical studies– Surveys and Questionnaires Surveys and Questionnaires – Investigation & IntelligenceInvestigation & Intelligence– Sampling & Taste TestsSampling & Taste Tests
3636 WORLD TRADE GROUP. LLP.
Legal Representation in Legal Representation in ChinaChina• Domestic law firmsDomestic law firms
• Foreign law firmsForeign law firms
• Law firm networks and affiliatesLaw firm networks and affiliates
Advice: Advice: Deal with who you know !!Deal with who you know !!
3737 WORLD TRADE GROUP. LLP.
Miscellaneous IssuesMiscellaneous Issues
• Who am I really dealing with ?Who am I really dealing with ?
• Referrals to “Friends”Referrals to “Friends”
• Who is in charge ?Who is in charge ?
• Public corruptionPublic corruption
• Language & document translationLanguage & document translation
• “ “Contract” = a living documentContract” = a living document
• Cultural differencesCultural differences
3838 WORLD TRADE GROUP. LLP.
SuccessSuccess in China = in China = ………..the ………..the PANDAPANDA formula formula
• Lots ofLots of Patience Patience
• The The Assistance Assistance of qualified prosof qualified pros
• A trusted A trusted NetworkNetwork of friends and of friends and alliancesalliances
• Attention to Attention to DetailDetail
• The right The right AttitudeAttitude
3939 WORLD TRADE GROUP. LLP.
WORLD TRADE GROUP, LLPWORLD TRADE GROUP, LLPand and
Rogers Towers, P.A. Rogers Towers, P.A.
ChinaChina Trade & BusinessTrade & Business
2003 Year in Review2003 Year in Review
Present
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