China - What If We're All Wrong?

Publication Date	February 2008
Publisher	Business Monitor
Product Type	Report
Pages	30
ISBN Number	not applicable
Product Code	BMI00810

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Summary

BMI View: We are retaining our positive headline growth projections for China across the forecast period to 2012, with our expectations of the continued success of the urbanisation process and export-driven growth model underpinning our assumptions. However, we are increasingly cognisant of gathering headwinds. Ultimately, asymmetries resulting from China's current exchange rate policy exacerbate these key risks and dampen the efficacy of potential solutions. Specifically, environmental degradation, banking sector vulnerability and food and asset price inflation need to be adequately addressed. Given China's rapidly expanding role as the prime driver of global growth, continued policy inertia or missteps would pose a massive risk to global economic and financial stability.

We are forecasting economic growth of 10.7% in 2008, up slightly from our original 10.4% projection, as the spill over effects of 2007's record expansion and continuing loose monetary conditions prevent the authorities from successfully cooling the economy further. In 2009-2012, we expect growth momentum to slow more markedly, as China is forced into stepping up tightening measures; we are now anticipating average annual growth to slow to 9.5% from our prior 9.7% forecast. A continuation of monetary tightening measures will impact growth beyond H108, with administrative controls specifically aimed at containing food price inflation. Urbanisation and the continued build-up of export capacity will remain the key growth drivers, but consumption will gradually assume a prominent role in the national economy.

Content

China: What If We're All Wrong?
The Risk Trilemma: Banking Sector, Environment, Inflation
Currency Policy at The Core
Merchandise Trade, US$Bn
The Banks
The Environment
Price Pressures: Agflation
Cpi (% Change Y-O-Y)
Where next for The Yuan?
What about Inflation?
Exchange Rate Scenarios, Cny/US$
Inflation Scenarios, % Chg Y-O-Y
Real Gdp Growth Scenarios, % Chg Y-O-Y
Loan-Deposit Ratio (%)
Regulatory Obstacles Impede Long-Term Growth Potential
Pragmatic Approach to Skills Transfer
Correlation between Deposit Loan Growth (Y-Axis) & Shanghai Composite
Non-Performing Loan Ratios (%)
Rural Deposits (as A Proportion of Total and Household Deposits, %)
Second-Tier Banks Hold Untapped Potential
Environment: Weak Link in Economy
Air: Coal Power Is The Main Offender
Water: Too Little, Too Toxic
China - Car Ownership Figures
China - Urbanisation Patterns, 1950-2030
Land: from Agriculture to Cities
Health Consequences Could Stymie Labour Force
Centre-Periphery Rivalry Hampers Solutions
China Facing Rising International Criticism
Some Possible Solutions
Clear Downside Risks to Growth
Baltic Dry Index and Shanghai Composite Index
The Political Implications of A Hard Landing
Slowdown Would Trigger More Unrest and Rising Discontent
Unrest Would Exacerbate Intra-Elite Schisms
China - Incidents of Unrest
China - Leading 'new Left' Intellectuals
The 'D' Word
Gdp Data Highlights External/Domestic Trade off
Focus Still on Inflation
Real Gdp (Change % Y-O-Y)
Consumer Price Inflation (% Change Y-O-Y) and Producer Price Inflation (% Change Y-O-Y)
Global Assumptions - Q2 2008
Global Outlook
down but Not out in 2008
Global - Real Gdp Forecasts (%)
United States
The 'R' Word Comes into Play
US - Real Gdp Growth (%)
The US's Medium-Term Prospects
Europe
Strong Euro Will Sting Exporters
US - Unemployment & Private Sector Earnings (Inverted)
US - Initial Jobless Claims ('000S) and 2S-10S Ust Spread
Japan
Economy to Weaken in 2008
Weaker Global Economy May Weigh on Exports
Exchange Rate - US$/Eur
Japan - Quarterly Real Gdp Growth (% Chg, Annualised Rate)
Japan's Medium-Term Prospects
China
Momentum to Slow Only Gradually
Japan - Central Gov't Debt, Outstanding Bonds & Borrowings
Consumer Price Inflation (% Change Y-O-Y) and Producer Price Inflation (% Change Y-O-Y)
Commodities
Oil - Crude Will Remain Costly
Exchange Rate, Cny/US$
Metals - Base Metals to Move Steadily Lower
Risks to Outlook
Agricultural Commodities
Grain Complex to Buoy Softs
Brent Crude Oil (US$/Bbl)
Goldman Sachs Industrial Metals Index
Supply Shocks
Corn - Usc/Bsh (Top) & Soy - Usc/Bsh (Bottom)
Goldman Sachs Agricultural Index
Risks to Outlook
Domestic Usage of US Corn (Millions of Bushels)

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Product features / use

Scope	Expert Insight/Opinion
Level	General Industry Strategies
Data	Detailed Market Forecasts
Profiles	Profiles of Key Companies
Features	Contains SWOT Analysis
Extra Info	Consumer Trends Highlighted