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C hina 2020. Victor Gao The Annual Conference of “Promote Iceland” Reykjavik, Iceland April 28th, 2014. How Big Is China’s Economy?. Official GDP in 2013: US$9.31 trillion PPP: US$ 13.37 trillion China’s GDP as % of US GDP: China Official GDP: 55.68% PPP: 79.96%
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China 2020 Victor Gao The Annual Conference of “Promote Iceland” Reykjavik, Iceland April 28th, 2014
How Big Is China’s Economy? Official GDP in 2013: US$9.31 trillion PPP: US$ 13.37 trillion China’s GDP as % of US GDP: • China • Official GDP: 55.68% • PPP: 79.96% • Greater China (Mainland + HK + Macau + Taiwan) • Official GDP: 60.52% • PPP: 88.07%
Not a Zero-Sum Game • Total import & export in 2013: US$4.16 Trillion • Total foreign trade as % of GDP: 45%; • Total trade with EU: US$559 Billion; • Total trade with USA: US$521 Billion; • Total trade with ASEAN: US$443.6 Billion; • Total trade with Japan: US$312.5 Billion
Changing Mix of Export • Export of machinery & electronics products as % of total export: = 57.3%
What Sets China Apart? • The largest population; • The largest manufacturing nation; • The largest trading nation; • The largest energy user; • (The largest polluter;) • The largest foreign exchange reserve; • The largest creditor to the USA;
What Sets China Apart (2)? • Largest mobile phone market (1.2 BN +); • Largest internet market, with 800 MN + mobile internet users; • Largest automobile makers and buyers (20 MN + ); • High-quality and fast-expanding infrastructure; • Building the fastest and largest high-speed rail network in the world; • Building more than half of all the new nuclear power stations in the world;
What Sets China Apart (3)? • One single market, with no or minimum internal trade barriers; • Approximately 7 MN college graduates every year; • Soft landing? Hard landing? Good landing? • Growth momentum to continue for many years to come; • The highest growth rate among all the major economies;
What Sets China Apart (4)? • One ruling party • With 87 MN party members, CPC is all-pervasive and controls all important aspects of China; • Fierce intra-party competition; emphasizing “intra-party democracy”; • Meritocracy; emphasis on “governance”; • Distinctively different political system, but with high government efficiency and mobilizing capacity, almost unmatched in the world.
What Is China Today? • Communism? • Socialism? • Authoritarianism? • Totalitarianism? • Capitalism? • Elite Capitalism? • State Capitalism? • Socialism with Chinese Characteristics? • No pre-existing label captures all the fast-moving changes of China today; • Maintaining the one-party rule on the one hand, but embracing changes and innovation and transformation on the other hand.
OECD re China OECD announced that: • By 2016, China’s GDP will surpass USA. • By 2060, China’s GDP will be 28% of the world.
What China Cares Most? • Maintaining stability at home (anti-corruption); • Keeping peace abroad; • Comprehensive and deepened reforms; • Opening to the world (two-way globalization); • Growth and development as top priority; • Further improving productivity (innovation); • Further improving people’s lives; • War on pollution; • Shifting to green development; • Achieving the Chinese dream.
Doubling GDP in 5 Years The Chinese GDP doubled in five years: • GDP in 2007: Rmb 24.66 Trillion Yuan; • GDP in 2012: Rmb 51.9 Trillion Yuan
To Double the GDP in 10 Years In November 2012, China decided to double its GDP of 2010 by 2020. • 2010 = Rmb 39.80 Trillion • 2013 = Rmb 56.88 Trillion (US$ 9.31 Trillion) • 2020 ≈ Rmb 80 Trillion
Mega Trends • Industrialization • Modernization • Urbanization • Globalization
China and the World In the coming five years (2014 to 2018): • China will import US$10 Trillion+ goods and commodities; • And will invest US$500 Billion+ overseas; • 400 to 500 Million Chinese tourists go abroad.
The New Paramount Leader? • Xi Jinping as the Trinity Leader • Party Secretary General; • President of the People’s Republic; • Chairman of the Central Military Commission; • Chairman of the National Security Council; • Chairman of the Leading Group on Comprehensive and Deepened Reforms; • Chairman of the Cybersecurity Leading Group; • And so on and so forth. • One of the Seven? • One above the Six?
How Xi Looks at China? • “China is getting closer and closer to the center of the world stage.” • As if being the 2nd largest economy is still not at the center of the world stage. • What should be the reasonable conclusion?
Mega Trends in Energy in China • Oil: Demand is increasing fast. Need to add 200 to 300 million tons to oil consumption by 2020; • Gas: Government hasordered gas consumption to double in five years; • Coal: Consumption needs to go down: down to 65% in 2014. • Nuclear: Will go up. 26 new nuclear power stations are being built. Increase to 5%, or even to 10%? • Hydro: How much more can it grow? • New & Renewable: We have to keep faith and spare no efforts. But, alas, how much can they really contribute to China’s staggering energy demand? • The great variables: • Shale gas: When and how can they be developed en masse? • Shale gas as a bonus and an insurance policy. • Improving energy efficiency: How to improve? How much to improve?
Achilles’ Heel: Oil Import • China’s oil consumption: • 500 million tons in 2013; • Oil import at 300 million tons; • Total oil consumption to increase to above 700 million tons by 2020. • Dependence on oil import has reached 58%+ in 2013. • Dependence on oil import expected to go up to above 70% by 2020. • Potential dangers: • Maritime security for oil shipping; • Safety and security of cross-border oil & gas pipelines; • Major jump in imported oil & gas price; • Insufficient strategic reserves.
New Achilles’ Heel: Gas Import • China’s gas consumption: • 2013: 167.6 Billion cm (an increase of 13.8% over 2012); • 2020: ≈ 350 Billion cm. • At present • Natural gas = 5.9% of China’s energy production in 2013. • Only about 14% of China’s populations use natural gas. • Dependence on gas import: • Import @ 31.6% of total gas consumption in 2013. • Total import in 2013 @ 53 trillion cm.
The Known Known Factor • Regardless of many unknowns and uncertainties in the O&G sector in the world, the most important known known factor is China’s continued demand for O&G, and its continued dependence on O&G imports.
America’s Energy Independence • China will benefit from America’s EI; • With America achieving EI, China will attract the O&G that America will no longer import from the rest of the world, including the Middle East, Africa and Latin America.
More Russian O&G Going East? • The recent developments in Ukraine and Crimea may cause repercussions for years to come. • The sanctions imposed on Russia by the western countries may create dynamics for more Russian oil and gas to go east. • This may further strengthen the energy cooperation between China and Russia for the long term.
China’s Ultimate Goals • 20% of global economy • 12.6% in 2013 (official exchange rate). • 15.3% in 2013 (ppp). • 20% of global trade • Total foreign trade in goods in 2013 @ US$4.14 trillion; about 11% of global trade. • 20% of IPR • China surpassed USA in 2011 as the largest country in the world in new patent applications. • 20% of Fortune 500 companies • 95 in 2013 (Mainland China, Hong Kong and Taiwan).
China in the Coming Decade • Xi Jinping will emerge increasingly as a strong leader, eventually becoming a paramount leader. • China will be the largest economy in the world, with about 20% of the global economy; and about 20% of global trade. • China will be the largest importer of O&G, and will continue to invest in mega deals in O&G throughout the world. • Rmb will become a major reserve currency. China will settle major imports and export in Rmb. • China will have greater democracy and transparency and better governance and rule of law than today.
Ukraine As the Watershed? • The dust raised by the Ukraine crisis may take years to settle; • The prospect of a confrontation between Russia and USA / the West is increasingly real; • USA / the West cannot afford to confront both Russia and China at the same time for the long term; • Washington may not like China that much, but it may have to dislike Russia more, at least for a few years; • The realities on the ground seem to maximize China’s geopolitical leverage and are increasing the prospect that China will be able to surpass the USA by “abstention”, not by “confrontation”; • Be friends with all (almost)! Be enemies with none (almost)!
China and Iceland • Iceland in the Chinese = Ice Island; • China’s FTA with Iceland: the first with an European nation; • The currency swap agreement; • Of great attraction to China: Iceland’s fishery; geothermal; glaciers; fjords; white night in the summer; clean air; clear water; volcanic sceneries; • CNOOC in Icelandic offshore; • Mr. Huang Nubo and the 99-year lease; • Gateway to the Arctic region.
What If? • Attracting 100,000 Chinese tourists or more (currently at 10,000) to Iceland? • Attracting Chinese wealth to Iceland? • Selling Icelandic water to China? • Selling more Icelandic fish to China? • Direct flight between China and Iceland? • Becoming a globalization center for China (covering both sides of the Atlantic): training; R&R; logistics; search & rescue; etc.
China Can Learn From Iceland • Environmental protection; • High quality of life; • Transparency; • Stability; • Social harmony; • Green development (hydro; geothermal); • Etc.
Thank you! Victor Z. Gao, Esq. gaovictor@hotmail.com (86) 1390 136 1250