bmi china business forecast report q4 2014

8/9/2019 BMI China Business Forecast Report Q4 2014

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Published byBUSINESS MONITOR INTERNATIONAL LTD

BUSINESS FORECAST REPORT

Q4 2014www.businessmonitor.com

CHINA

INCLUDES 10-YEAR FORECAST TO 2023

Beijing Treading The Middle Path

ISSN 1744-8778

Published by Business Monitor International Ltd.

Copy Deadline: 12 September 2014


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CHINA

-MACROECONOMIC

DATA

ANDF

ORECASTS

2013e

2014f

2015f

2016f

2017f

2018f

2019f

2020f

2021f

2022f

2023f

NominalG

DP,USDbn

9,200.7

10,162.3

10,969.0

11,873.6

12,907.1

14,028.3

15,244.8

16,560.2

17,991.9

19,552.8

21,248.1

NominalG

DP,EURbn

6,970.2

7,583.8

8,775.2

9,894.6

10,755.9

11,690.3

12,704.0

13,800.2

14,993.3

16,294.0

17,706.7

GDPperc

apita,USD

6,640

7,291

7,826

8,427

9,116

9,864

10,677

11,557

12,517

13,568

14,712

GDPperc

apita,EUR

5,030

5,441

6,260

7,022

7,597

8,220

8,897

9,631

10,431

11,307

12,260

RealGDP

growth,%y-o-y

7.7

7.3

6.7

5.8

5.8

5.8

5.8

5.8

5.8

5.8

5.8

Privatenalconsumption,

%o

fGDP

35.1

35.4

35.9

36.7

37.4

38.2

39.0

39.8

40.6

41.5

42.3

Privatenalconsumption,realgrowth%y

-o-y

8.0

8.4

8.2

8.0

8.0

8.0

8.0

8.0

8.0

8.0

8.0

Governme

ntnalconsumption,

%o

fGDP

13.8

14.0

14.2

14.5

14.8

15.1

15.4

15.7

16.1

16.4

16.7

Governme

ntnalconsumption,realgrowth%y

-o-y

9.0

9.0

8.5

8.0

8.0

8.0

8.0

8.0

8.0

8.0

8.0

Fixedcapitalformation,

%o

fGDP

43.5

42.7

41.9

41.2

40.5

39.8

39.1

38.4

37.8

37.1

36.5

Fixedcapitalformation,realgrowth%y

-o-y

4.5

5.4

4.7

4.0

4.0

4.0

4.0

4.0

4.0

4.0

4.0

Population

,mn

1,385.6

1,393.8

1,401.6

1,408.9

1,415.8

1,422.1

1,427.8

1,432.9

1,437.3

1,441.1

1,444.2

Unemploy

ment,%o

flabourforce,eop

5.0

5.0

5.0

5.0

5.0

5.0

5.0

5.0

5.0

5.0

Consumerpriceination,

%y

-o-y,ave

2.6

2.6

2.8

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

Lendingra

te,%,ave

3.0

3.0

3.2

3.5

3.7

4.0

4.0

4.0

4.0

4.0

4.0

Centralba

nkpolicyrate,%eop

6.00

6.00

5.75

5.75

5.75

5.75

5.75

5.75

5.75

5.75

5.75

Exchange

rateCNY/USD,ave

6.15

6.13

6.23

6.25

6.25

6.25

6.25

6.25

6.25

6.25

6.25

Exchange

rateCNY/EUR,ave

8.12

8.21

7.78

7.50

7.50

7.50

7.50

7.50

7.50

7.50

7.50

Budgetba

lance,

USDbn

-118.8

-91.8

-56.4

-26.2

-2.7

-5.7

-9.4

-13.6

-18.5

-24.2

-30.8

Budgetba

lance,

%o

fGDP

-1.3

-0.9

-0.5

-0.2

0.0

0.0

-0.1

-0.1

-0.1

-0.1

-0.1

Goodsandservicesexports,

USDbn

2,452.4

2,657.9

2,907.5

3,195.5

3,512.4

3,861.2

4,245.2

4,663.8

5,124.3

5,631.1

6,183.3

Goodsandservicesimports,

USDbn

2,240.8

2,498.8

2,799.4

3,094.7

3,421.6

3,783.7

4,184.8

4,629.1

5,121.5

5,667.3

6,272.3

Balanceoftradeingoodsandservices,

USDbn

211.6

159.1

108.1

100.8

90.8

77.5

60.5

34.7

2.8

-36.2

-89.1

Balanceoftradeingoodsandservices,

%o

fGDP

2.3

1.6

1.0

0.8

0.7

0.6

0.4

0.2

0.0

-0.2

-0.4

Currentac

countbalance,

USDbn

224.8

167.8

111.1

97.1

81.3

59.9

32.2

-7.3

-57.6

-125.8

-217.1

Currentac

countbalance,

%o

fGDP

2.4

1.7

1.0

0.8

0.6

0.4

0.2

0.0

-0.3

-0.6

-1.0

Foreignre

servesexgold,

USDbn

3,820.0

3,800.0

3,700.0

3,800.0

3,700.0

3,600.0

3,500.0

3,400.0

3,300.0

3,200.0

3,200.0

Importcov

er,months

20.5

18.2

15.9

14.7

13.0

11.4

10.0

8.8

7.7

6.8

6.1

NationalSources/BMI

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CHINA Q4 2014


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Executive Summary ................................................................................................................................. 5

Core Views ......................................................................................................................................................................................5

Major Forecast Changes ................................................................................................................................................................5

Key Risks To Outlook ....................................................................................................................................................................5

Chapter 1: Political Outlook .................................................................................................................... 7

SWOT Analysis .......................................................................................................................................................... 7

BMI Political Risk Ratings ........................................................................................................................................ 7

Domestic Politics....................................................................................................................................................... 8

Zhou Investigation Raises Stakes For CPC Leadership .............................................................................................................8

T Cunist Party f Cina (CPC) as auncd an fcia instigatin against frr pitbur standing citt br ZuYngkang, t party's st ig pr targt sinc at ast t 1970s. Zu's dwnfa as cnsidrab ipicatins fr t party's tpadrsip ing frward, and suggsts tat Prsidnt Xi Jinping's nging pitica purg as furtr t g.

TABLE: POLITICAL OVERVIEW ..............................................................................................................................................................................8

Long-Term Political Outlook .................................................................................................................................... 9

Major Challenges Over The Coming Decades .............................................................................................................................9

Cina facs yriad cnic, scia and nirnnta cangs r t cing dcads tat cud sriusy tst t CunistParty f Cina's abiity t grn. T bst-cas scnari fr any ntua pitica transitin wud ntai an it-d ibraisatin f tautritarian syst, wi t wrst-cas scnari wud in a int cang f rgi.

Chapter 2: Economic Outlook ............................................................................................................... 13

SWOT Analysis ........................................................................................................................................................ 13

BMI Economic Risk Ratings ................................................................................................................................... 13Economic Activity ................................................................................................................................................... 14

Rebalancing Efforts A Long-Haul Campaign .............................................................................................................................14

Fwing a frcastd 7.3% prfranc in 2014, w xpct ra GDP grwt in Cina t sw furtr in 2015. Tat said, furtrtargtd ntary and sca stiuus asurs ar iky r t cing quartrs as t grnnt ks t art a r acutswdwn, and w bi tat ardr-itting rfr ffrts cud b sd in iu f supprting cnic grwt. As suc, w arupgrading ur 2015 ra GDP grwt frcast t 6.7%.

TABLE: ECONOMIC ACTIVITY .............................................................................................................................................................................. 14

Fiscal Policy ............................................................................................................................................................. 16

Reforms To Stabilise Local Government Borrowing Position ................................................................................................16

T Cins grnnt's rcnt dcisin t aw s ca grnnts t bgin dircty issuing bnds wi incras transparncyand st iky wr brrwing csts fr participating ca grnnts r t nar-tr.

TABLE: FISCAL POLICY ........................................................................................................................................................................................16Monetary Policy ....................................................................................................................................................... 17

Credit Creation Plummets In Sign Of Renewed Economic Weakness ....................................................................................17

A rnwd swdwn in t Cins cny, as idncd by surprisingy w crdit cratin in Juy as w as pr xd asstinstnt grwt, wi kp t Pp's Bank f Cina (PBC)'s ntary picy ratiy s r t nar-t-diu tr. Tatsaid, w d nt xpct t cntra bank t pt fr a bncark intrst rat cut r t cing quartrs, and instad s fciaspting fr igtr tuc asurs tat wi supprt iquidity as w as aiing prprty arkts.

TABLE: MONETARY POLICY ................................................................................................................................................................................18

Exchange Rate Policy ............................................................................................................................................ 18

CNY Facing Downside Pressures Despite Recent Gains .........................................................................................................18

Dspit t Cins yuan's rcnt strngt, w bi tat t currncy is sti unrab t dwnsid frcs r t nar-t-diutr as t Cins cny cntinus t sw. Nrtss, wing t rcnt strngt, w a upgradd ur nd-2014 frcast nt unit t CNY6.2000/USD fr CNY6.3500/USD priusy, and ur nd-2015 frcast t CNY6.2500/USD fr CNY6.4000/USD

priusy.TABle: eXChANGe RATe ....................................................................................................................................................................................19

TABLE: BMI CURRENCY FORECAST ...................................................................................................................................................................19

3Business Monitor International Ltd www.businessmonitor.com

Contents


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Chapter 3: 10-Year Forecast .................................................................................................................. 21

The Chinese Economy To 2023.............................................................................................................................. 21

6.0% Is The New 10.0% ................................................................................................................................................................21

Cina's cnic grwt in t cing dcad wi b uc swr tan in t ast, as t saings rat dcins, t cnicibraisatin prcss sws, and ppuatin grwt fas. Ts dynaics wi rsut in ra GDP grwt araging 6.0% r t nxtdcad as ppsd t t 10.1% arag sn r t past dcad. Priat cnsuptin wi b a ajr utprfrr, araginggrwt f 8.1% and rising in iprtanc as a sar f GDP.

TABLE: LONG-TERM MACROECONOMIC FORECAST .......................................................................................................................................21

Chapter 4: Business Environment ........................................................................................................ 25

SWOT Analysis ........................................................................................................................................................ 25

BMI Business Environment Risk Ratings ............................................................................................................. 25

Business Environment Outlook ............................................................................................................................. 26

Institutions ............................................................................................................................................................... 26

TABLE: BMI BUSINESS & OPERATION RISK RATINGS...................................................................................................................................... 26

TABLE: BMI LEGAL FRAMEWORK RATING .........................................................................................................................................................27

Infrastructure ........................................................................................................................................................... 28

TABLE: LABOUR FORCE QUALITY ......................................................................................................................................................................28

TABLE: ASIA ANNUAL FDI INFLOWS ................................................................................................................................................................29TABLE: TRADE & INVESTMENT RATINGS ..........................................................................................................................................................30

Market Orientation ................................................................................................................................................... 31

TABle: ToP eXPoRT DeSTINATIoNS ................................................................................................................................................................ 31

Operational Risk ...................................................................................................................................................... 33

Chapter 5: Key Sectors .......................................................................................................................... 35

Pharmaceuticals & Healthcare ............................................................................................................................... 35

TABle: PhARmACeUTICAl SAleS, hISToRICAl DATA AND FoReCASTS....................................................................................................36

TABle: heAlThCARe eXPeNDITURe TReNDS, hISToRICAl DATA AND FoReCASTS...............................................................................37

TABle: GoveRNmeNT heAlThCARe eXPeNDITURe TReNDS, hISToRICAl DATA AND FoReCASTS....................................................37

TABle: PRIvATe heAlThCARe eXPeNDITURe TReNDS, hISToRICAl DATA AND FoReCASTS..............................................................37

Telecommunications ............................................................................................................................................... 38

TABle: TeleComS SeCToR moBIle hISToRICAl DATA & FoReCASTS...............................................................................................39

TABle: TeleComS SeCToR WIRelINe hISToRICAl DATA & FoReCASTS ...........................................................................................40

Other Key Sectors ................................................................................................................................................... 43

TABLE: OIL & GAS SECTOR KEY INDICATORS ..................................................................................................................................................43

TABLE: DEFENCE & SECURITY SECTOR KEY INDICATORS ............................................................................................................................ 43

TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS ...................................................................................................................................43

TABLE: FOOD & DRINK SECTOR KEY INDICATORS ..........................................................................................................................................44

TABLE: AUTOS SECTOR KEY INDICATORS .......................................................................................................................................................44

TABle: FReIGhT KeY INDICAToRS .................................................................................................................................................................... 44

Chapter 6: BMI Global Assumptions .................................................................................................... 45Global Outlook ......................................................................................................................................................... 45

Eurozone Downgrade On Poor Q214..........................................................................................................................................45

TABLE: GLOBAL ASSUMPTIONS..........................................................................................................................................................................45

TABle: DeveloPeD STATeS, ReAl GDP GRoWTh, %...................................................................................................................................46

TABle: BmI veRSUS BloomBeRG CoNSeNSUS ReAl GDP GRoWTh FoReCASTS, % ............................................................................46

TABle: emeRGING mARKeTS, ReAl GDP GRoWTh, %..................................................................................................................................47


CHINA Q4 2014


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Core Views As idncd by strng rtric rgarding its cnic grwt targt

in 2014, Bijing is iky t cntinu t ipnt targtd stiuus

asurs in rdr t art a r acut cnic swdwn. As

a rsut f wat w xpct t b a baanc btwn srt-tr

stiuatry asurs and ngr-tr cnic rfrs, w a

upgradd ur 2015 ra GDP frcast t 6.7% fr 6.0% priusy.

At t sa ti, w s t cny aciing a 7.3% rat f

grwt in 2014, rsus ur prius frcast f 7.1%.

T Cins grnnt's fcia instigatin in Zu Yngkang

is a ajr spit fr past prcdnt, and wi iky b t znit f Xi

Jinping's anti-crruptin capaign. T capaign as as srd

as a purg t iinat sti pitica frcs, and w bi tat it

wi pa t way fr Xi t nact r aggrssi cnic rfrs

r t cing yars.

Major Forecast Changes

Fwing t Cins yuan's rcnt apprciatry run, w aupgradd ur nd-2014 and nd-2015 frcasts n t unit t

CNY6.2000/USD and 6.2500/USD, rspctiy, fr CNY6.3500/

USD and CNY6.4000/USD priusy. Tat said, w cntinu t s

dwnsid frcs acting against t currncy, as t PBC ay k

t utiis t currncy as a stiuatry t in t fac f a swing

economy.

Key Risks To Outlook A ky dwnsid risk t ur cnic utk rains antr caps

in xtrna dand, suc as t n tat ccurrd at t igt f

t gba nancia crisis. Tis wud sriusy undrin grwt in

trad-dpndnt industris and astn a fa in t prprty arkt,

ptntiay ading t an utrigt rcssin. Tr is as a risk tat

gratr-tan-xpctd sca and ntary stiuus by grnnt

and t Pp's Bank f Cina cud usr in stagatin.

A ard-anding scnari is as a ky risk in Cina, as faing prprty

prics aid rising dstic dbt s cud st t stag fr a

nancia crisis. Wi w bi tat tis ntuaity wi b artd

r t nxt fw yars wing t t grnnt's cnsidrab

rsurcs, suc an utc cannt b ntiry rud ut. In tis

cas, ra GDP grwt wud sw draaticay.


Executive Summary


7/49


8/49

Brief Methodology

7Business Monitor International Ltd www.businessmonitor.com 7Business Monitor International Ltd www.businessmonitor.com

SWOT Analysis

Strengths T CPC, wic as grnd fr r 60 yars, rains scur in

its psitin as t s pitica party in Cina.

Cina's xpanding cny is giing it gratr cut in intrnatina

affairs, wic wi aw it t buid piticay iprtant tis, spciay

with the developing world.

Weaknesses As wit any tr n-party stat, Cina's pitica syst is inr-nty unstab and unab t rspnd t t widr cangs taking

pac in scity.

Princia grnnts ftn fai t nfrc cntra grnnt

dirctis.

Atug biatra tis a ward in rcnt yars, Cina's ratin-

sip wit Taiwan rains prbatic, wit Bijing rfusing t ru

ut t trat f frc in t nt f a dcaratin f indpndnc

by Taiwan.

Opportunities Cina is actiy xpanding its pitica and cnic tis wit ajr

rging arkts in latin Arica, Africa and t midd east.

A nw gnratin f adrs (t s-cad 'ft gnratin') tk

pwr in 2012. Tis sud nsur t cntinuatin f rfr and

drnisatin.

Threats Grwing crruptin, widning inquaitis, incrasing rura prty

and nirnnta dgradatin a d t an incras in scia

unrst in rcnt yars.

T Cunist Party is facing incrasing factina rifts basd n

idgy and rginais. Wi gratr pitica dbat wud b

wcd by any, intrna rgi sciss cud pr piticay

dstabiising.

BMI Political Risk RatingsCina's srt-tr pitica risk rating f 80.2 rcts t ig dgr f

picy cntinuity and csin wit rgard t t picyaking prcss

assciatd wit n-party ru. hwr, wi tis is a bn in t nar

tr as rctd by t ig scr it acts as a drag n t cuntry's

ng-tr pitica risk rating f 62.9. Indd, t absnc f a strng

cnstitutina frawrk and t tigt cntr r pitica frds urt

Cina's ng-tr rating particuary sarpy.

Chapter 1:

Political Outlook

S-T

Political

Trend Regional

Rank

Global

RankSingapore 94.8 = 1 3Bruni Darussaa 90.6 = 2 8hng Kng 84.0 = 3 15Nw Zaand 84.0 = 3 15Japan 83.5 = 5 17Taiwan 81.7 = 6 23las 80.4 = 7 26China 80.2 = 8 28Kiribati 80.2 = 8 28macau 79.6 = 10 32Austraia 79.4 - 11 34Sut Kra 79.0 = 12 36Sri Lanka 77.1 = 13 39Vietnam 76.9 = 14 40India 76.5 = 15 41maaysia 76.3 = 16 43Piippins 71.3 = 17 64North Korea 69.8 = 18 71Indnsia 68.8 = 19 79Cambodia 64.0 + 20 99

Thailand 62.3 = 21 106Bangads 62.1 = 22 108Butan 61.0 = 23 113Mongolia 60.0 = 24 116Myanmar 56.9 = 25 125Fiji 51.5 = 26 143Tir-lst 50.8 = 27 148Pakistan 50.4 - 28 150Nepal 48.3 = 29 155Papua Nw Guina 44.0 = 30 162Afganistan 39.6 = 31 171Regional ave 69.8 / Global ave 64.1 / Emerging Markets ave 60.4

L-T

Political

Trend Regional

Rank

Global

RankJapan 88.1 = 1 8Sut Kra 84.2 = 2 20Nw Zaand 84.1 = 3 22Austraia 83.0 - 4 25Singapore 80.6 = 5 28Kiribati 77.9 = 6 35Taiwan 75.4 = 7 39hng Kng 72.9 = 8 47India 71.9 = 9 49Mongolia 67.7 = 10 63maaysia 66.7 = 11 67Bruni Darussaa 63.8 = 12 75China 62.9 = 13 82Piippins 62.8 = 14 84Bangads 62.6 = 15 87macau 60.7 = 16 95Sri Lanka 60.2 = 17 97Indnsia 60.0 = 18 98Thailand 59.8 = 19 99Cambodia 59.3 + 20 102Vietnam 57.7 = 21 107North Korea 55.3 = 22 116Papua Nw Guina 53.8 = 23 120Pakistan 53.7 - 24 121Butan 51.0 = 25 133las 50.9 = 26 134Tir-lst 49.8 = 27 142

Nepal 49.5 = 28 143Myanmar 40.9 = 29 162Fiji 38.6 = 30 169Afganistan 20.2 = 31 184Regional ave 62.1 / Global ave 61.3 / Emerging Markets ave 56.0


9/49

Domestic Politics

Zhou Investigation Raises Stakes ForCPC Leadership

BMI VIEW

The Communist Party of China (CPC) has launched an ofcial inves-

tigation against former politburo standing committee member Zhou

Yongkang, the party's most high prole target since at least the 1970s.

Zhou's downfall has considerable implications for the party's top lead-

ership moving forward, and suggests that President Xi Jinping's ongo-

ing political purge has further to go.

The Communist Party of China (CPC) has initiated an ofcial

inquiry into former head of state security and Politburo Stand-

ing Committee (PSC) member Zhou Yongkang, capping a

remarkable fall from grace for a man that was as recently as

2012 among the ve most powerful politicians in China. Zhou

has been under re from the top echelons of the party since at

least mid-2013, and has not been seen in public since October

of last year. The move to ofcially investigate Zhou, who served

as the head of the tremendously powerful Central Politics and

Law Commission from 2007-2012, is an unprecedented step for

the party, marking its most high prole target since at least the

1970s. Zhou will be the rst current or former member of the

PSC to be subjected to such an investigation, which sets a new

standard for culpability among China's top leadership, which

has historically been immune from such campaigns.

Proving the allegations of widespread corruption ('serious dis-

ciplinary violations', in CPC parlance) against Zhou will be for

the party somewhat of a foregone conclusion, as reports indicate

that the government has already seized nearly USD15.0bn in

assets from Zhou's family and close associates. More broadly,

however, the case against Zhou represents a new zenith for

President Xi Jinping's ongoing political purge (see 'Political


CHINA Q4 2014

Crackdown Not A Threat To Broader StabilitySrt-Tr Pitica Risk Rating & Subcpnnts, out of 100

Source: BMI

0

20

40

60

80

100Total

Policy-makingProcess

Social StabilitySecurity/External

Threats

Poli cy Continuity

TABLE: POLITICAL OVERVIEW

Syst f Grnnt Sing-party sciaist rpubic

had f Stat Prsidnt Xi Jinping (sring rst f a axiu tw -yar trs)

had f Grnnt Pri ministr li Kqiang (sring rst f a axiu tw -yar trs)

last ectin Prsidntia and pariantary marc 2013

CPC cngrss Nbr 2012

Cpsitin f Currnt Grnnt Cunist Party f Cina

Ky Figurs T Pitbur Standing Citt acts as t d fact igst dcisin-aking bdy in Cina andcpriss t tp adrsip f t ruing party. Its brs, in rdr f prtc, ar: Xi Jinping(cncurrnty gnra scrtary f t Cunist Party), li Kqiang, Zang Djiang, Yu Zngsng,liu Yunsan, Wang Qisan, Zang Gai

otr Ky Psts Financ ministr lu Jiwi; Frign ministr Wang Yi; Dfnc ministr Cang Wanquan;ministr f Pubic Scurity Gu Sngkun; Cntra Bank Grnr Zu Xiacuan

main Pitica Partis (nubr f sats in pariant) Cunist Party f Cina (CPC): T funding and ruing pitica party f t Pp's Rpubic f

Cina, ws paraunt psitin as t supr pitica autrity is guarantd by Cina's cnstitu-tin and raisd trug cntr f a stat apparatus. T CPC was fundd in 1921 and ca tru a f ainand Cina aftr dfating its ria, t Kuintang (KmT), in t Cins Cii War.

Next Election Prsidntia and pariantary marc 2018

CPC cngrss Autun 2017

onging Disputs onging disput r Taiwans srignty and Tibtan autny; s inr trritry disputswit Asian nigburs, incuding wit Japan r t Snkaku Isands in t east Cina Sa andwit Taiwan, maaysia, t Piippins and vitna r t Spraty Isands in t Sut Cina Sa.

Ky Ratins/ Tratis Cs link Wit ASeAN, WTo br, prannt sat n t UN Scurity Cunci, fundingbr f t Sangai Cpratin organisatin (SCo).

BmI Srt-Tr Pitica Risk Rating 80.2

BmI Structura Pitica Risk Rating 62.9

Source: BMI


10/49

Purge Bolsters Xi's Reform Credentials', April 10 2014). The

rift between Xi and Zhou, a classic power-broker with deep

connections within China's state security apparatus as well as its

top State Owned Enterprises (SOEs), has been well documented,

and Zhou's fallen protege Bo Xilai was widely viewed as a top

challenger to Xi's presidency.

Xi's Power PlayAs such, Xi's ability to coalesce the forces of the party in a

purge against Zhou is an impressive feat, and corroborates

our view that Xi is on his way to becoming a signicantly

more powerful leader than predecessor Hu Jintao. Earlier this

year, reports emerged that former presidents Hu and Jiang

Zemin had both discouraged Xi from pushing further with the

investigation against Zhou out of fear that the prosecution of

such a high prole gure could be destabilising for the party.Now that Xi has succeeded in launching an ofcial investiga-

tion against Zhou, it is likely that he will continue his purge in

order to both further consolidate his power as well as burnish

his anti-corruption credentials, which are integral to his goal of

restoring the credibility of the CPC among the public.

The scale and depth of Xi's campaign strengthens our conviction

that the leader remains set on implementing the broad economic

reform agenda outlined at last year's third plenary session. How-

ever, the controversy surrounding the Zhou Yongkang case, aswell as the considerable amount of time that it has taken to bring

an ofcial investigation against him, suggest that Xi is still in

the process of consolidating his power and clearing the party of

the vested interests that might stand in the way of hard-hitting

and controversial economic reforms, such as a restructuring of

China's bloated and inefcient SOEs, as well as its nancial

sector. For this reason, as well as the potentially negative

growth implications tied to such initiatives, the government is

likely to take its time with the implementation of substantive

economic reforms.

Long-Term Political Outlook

Major Challenges Over The ComingDecades

BMI VIEW

China faces myriad economic, social and environmental challenges

over the coming decades that could seriously test the Communist Party

of China's ability to govern. The best-case scenario for any eventual

political transition would entail an elite-led liberalisation of the authori-

tarian system, while the worst-case scenario would involve a violent

change of regime.

Perhaps the biggest question concerning China's future is whether

the country will eventually move towards a democratic system

of government. This question has received greater attention

following the political upheaval in the Middle East and North

Africa in 2011. China is increasingly an anomaly in that it is

the only major emerging economy that has not yet experienced

a transition to democracy. Other countries as diverse as Russia,Poland, Mexico, Brazil, South Africa, South Korea and Indonesia

all moved away from one-party rule to democracy once they at-

tained a certain level of economic development, suggesting that

China will too. For now, the Communist Party of China (CPC)

derives its legitimacy from delivering rapid rates of economic

growth, which has lifted hundreds of millions of people out of

poverty over the past 30 years. While Chinese state planners

previously regarded an annual real GDP growth rate of 8.0%

to be the minimum necessary to create enough jobs to maintain

social stability, this notion has since been abandoned. Still, theweak global economy presents the most immediate test of the

CPC's governance, and the government will keep a watchful eye


POLITICAL OUTLOOK

Policy Continuity Scores Highlylng-Tr Pitica Risk Ratings

Source: BMI


11/49

on employment levels. Even without the anticipated slowdown,

however, China will continue to face many challenges.

Threats And Challenges To StabilityRising Inequality:As China's economy surged during the 2000s,

inequality widened sharply. Although comparisons between

different organisation's calculated gini coefcients are inex-

act, due to differing methodologies, most observers agree that

inequality is rising. The gini coefcient was estimated at 0.61

in 2010, based on a survey of 8,438 households by the Survey

and Research Center for China Household Finance, a body set

up by the Finance Research Institute of the People's Bank of

China and Southwestern University of Finance and Economics.

This is an exceptionally high gure, far above a government

estimate of 0.41 in 2000, a World Bank estimate of 0.42 in

2005, and a China Academy of Social Sciences gure of 0.54in 2008. Moreover, ongoing revelations that China's politically

connected elites have accumulated vast wealth through corrupt

practices are bound to raise public anger.

Regional Economic Imbalances: The eastern seaboard has

beneted disproportionately from China's rapid expansion. In

particular, there is a relatively wealthy coastal belt consist-

ing of Tianjin, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian

and Guangdong provinces where urban household per capita

GDP was higher than CNY21,000 (the average for urban China)in 2010. Unsurprisingly, these provinces are also where most

of China's industry and foreign direct investment (FDI) are

concentrated. By comparison, rural household per capita GDP

was roughly CNY8,100. Much of the western and interior parts

of China remain poor and underdeveloped. Consequently, the

eastern seaboard provinces are receiving migration inows from

other parts of China, although these were temporarily reversed in

the 2008-2009 slowdown. Although the government has under-

taken massive development plans to address these imbalances,

and new factories are gradually being built further inland, thiswill be a long drawn-out process in a country of China's size.

Employment And Working Conditions:The past decade or so

has seen an increase in labour unrest. Job losses from economic

restructuring have generated some resentment towards the CPC,

which is ofcially a party of the workers. There is also rising

discontent over harsh working conditions, particularly in China's

coal mines, where deaths typically number thousands every year.

Environmental Issues: China's rapid economic growth hascome at the cost of environmental degradation. In 2005, of-

cials acknowledged that more than 70% of rivers and lakes

were polluted. In July 2010, the Ministry of Environmental

Protection stated that 24% of China's surface water was unt

for any purpose, including industrial use. Furthermore, many

parts of China experience water shortages, and these are likely

to increase as urbanisation rates rise. China's cities are also

notoriously polluted as a result of coal power plants. In addi-

tion, villagers have taken to violent protests against pollution or

forced land clearing for new projects. The issue of land seizure

has led to major unrest in the countryside. Chinese leaders are

well aware of the risks to economic growth and social stability

posed by pollution. However, the implementation of tougher

environmental laws is being subverted by vested interest groups

and corruption.

Religions And Ethnicity:Chinese leaders are fearful of the

possibility of religious- or ethnic-based rebellions, which con-vulsed the country in the 19th and 20th centuries. For exam-

ple, the emergence of the Falun Gong sect in 1999 caught the

Chinese leadership by surprise; the popularity of the group was

seen as a threat to the CPC, prompting a harsh (and ultimately

successful) crackdown. Meanwhile, Christianity is reportedly

growing rapidly in China. The government recognises an ofcial

state-sanctioned church, but underground churches and sects

are on the rise. While neither Falun Gong nor Christian groups

pose a direct threat to the government, any crackdown against

them risks creating a broader backlash against the authorities.

China has 18 nationalities with populations of more than 1.0mn,

out of 56 recognised in total. The most well-known minorities

are the Tibetans and the Muslim Uighurs of Xinjiang province.

The Tibetans staged a major uprising in 2008 and may rebel

again in the event of the Dalai Lama's death, as the younger

generation is considered more militant. The Uighurs clashed

with the Han Chinese in July 2009, leaving around 150 dead.

Aside from these two groups, violence has erupted between

minorities and the majority Han population from time to time.The government plays down the ethnicity issue, yet it nonethe-

less has the ability to create instability.

Gender Imbalance:As a result of the one-child policy (adopted

in 1980) and a general bias in favour of sons, China has a pro-

nounced gender imbalance, particularly in the under-30 age

bracket. The Chinese Academy of Social Sciences stated in

2009 that more than 24mn Chinese men of marrying age could

nd themselves without spouses in 2020. A noteworthy book

('Bare Branches: The Security Implications of Asia's SurplusMale Population') points out that such imbalances are potentially

destabilising for societies, since most crimes are committed by


CHINA Q4 2014


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13/49

emulate at the present time.

Worst-Case Scenario: Indonesia-StyleChaosThe worst-case scenario for Chinese politics would be an ex-

tended period during which the growing contradictions within

the economy foster more and more 'incidents of mass unrest'

especially organised unrest to the point that foreign investors

withdraw their capital and the government is forced to carry

out a harsh crackdown. The trigger for accelerated unrest could

come from a full-scale meltdown of the economy or a multi-

year period of growth substantially below what China has been

accustomed to (for example, 5% or less annually). We feel that

both of these developments are unlikely at this stage, but they

cannot be ruled out entirely at the present time.

Were the economy to experience such stresses, the CPC could

nd itself in a similar position to Indonesia's Suharto regime in

1997-1998, when civil unrest caused foreign investors to ee

and eventually toppled the government. Indonesia subsequently

democratised over a six-year period, but real GDP growth has yet

to return to pre-1997 levels and the economy is still considered a

somewhat risky investment destination (although it has received

renewed interest in recent years). An 'Indonesia scenario' in

China would set the latter's growth story back years and could

entail regional separatism or even a military coup. China hasexperienced several periods in its history during which central

government authority has been reduced to only nominal control

over the provinces and warlords have held sway.

Democracy No Quick FixThe above scenarios are not the only paths available to China,

and any transition could incorporate elements of both outcomes.

Overall, though, while a democratic government in China should

be more responsive to popular demands and allow greater politi-

cal transparency, it would by no means provide a rapid panaceafor China's myriad problems. Beyond democratisation, there

would also be the issue of centre-periphery relations would

China remain a centralised state or would it adopt a federal

model that would allow greater autonomy for its provinces?

Furthermore, the political and economic culture resulting from

decades of one-party rule will linger in China, and issues such

as corruption and close links between business and government

will not go away quickly. Finally, in a democratic China, popular

pressures could force the government to go slow on economic

liberalisation, as has happened in many emerging economies.


CHINA Q4 2014


14/49


SWOT Analysis

Strengths Cina as a assi trad surpus and its ug frign xcang

rsrs sr as a ajr cusin against xtrna scks.

Cina's cnic picyakrs ar cittd t cntinuing tir

gradua rfr f t cny.

Weaknesses

Cina's cnic grwt b as d t ajr ibaancs andenvironmental degradation.

T cuntry's dpndncy n instnt t bst grwt as ad

it unrab t a swdwn in crdit grwt. Priat cnsuptin

rains wak at ss tan 40% f GDP.

T cs ratins btwn princia adrs and ca businsss

ar fstring crruptin, aking it ardr fr t cntra grnnt

t nfrc its picis.

Opportunities Cina's cnic grwt is swy bcing r brad-basd, wit

dstic cnsuptin iky t ris in iprtanc is--is xprtsand instnt.

As Cina s up t au cain, it wi dp its wn gba

brand na cpanis, fstring innatin and grwt.

Threats W bi tat w a witnssd a prannt nd t Cina's

dub-digit annua grwt rat.

T cny wi fac difcuty in cntinuing t incras its sar

f t gba xprt arkt and ffrts t up t au cain

wi b fraugt wit prbs.

BMI Economic Risk RatingsCina scrs strngy in ur srt-tr cnic risk ratings, scring

86.0. T cuntry as prfrs w in ur ng-tr cnic risk

ratings, scuring a tp 20 spt wit a scr f 78.1, buyd by Cina's

strng grwt prspcts, w and stab inatinary nirnnt and a

ry scur xtrna psitin. hwr, an r-rianc n cdity

iprts and t anufacturing sctr drag n Cina's ng-tr rating, as

ds t patry aunt f grnnt spnding n at and ducatin.

Chapter 2:

Economic Outlook

S-T

Economic

Trend Regional

Rank

Global

RankSingapore 89.6 = 1 1Sut Kra 89.6 = 1 1Taiwan 86.9 = 3 3China 86.0 = 4 4Piippins 79.4 = 5 6maaysia 79.2 = 6 7macau 77.1 = 7 9Nw Zaand 75.4 = 8 15hng Kng 74.8 = 9 18Thailand 72.5 = 10 24Vietnam 69.8 = 11 31Austraia 68.8 - 12 36Indnsia 64.6 = 13 46Japan 62.5 = 14 52India 62.1 = 15 53Tir-lst 58.1 = 16 63Bruni Darussaa 57.7 = 17 67Bangads 57.5 = 18 68Sri Lanka 56.9 = 19 72Myanmar 52.7 = 20 87

Pakistan 48.8 - 21 94Papua Nw Guina 48.8 = 21 94Mongolia 48.1 = 23 98Cambodia 46.0 + 24 106Nepal 45.2 = 25 108Fiji 43.5 = 26 117las 39.2 = 27 136Kiribati 31.0 = 28 164Butan 26.9 = 29 177Afganistan n/a n/a n/a n/aNorth Korea n/a n/a n/a n/aRegional ave 58.0 / Global ave 51.3 / Emerging Markets ave 47.1

L-T

Economic

Trend Regional

Rank

Global

RankSut Kra 82.1 = 1 2Singapore 81.2 = 2 3China 78.1 = 3 6maaysia 77.5 = 4 8Austraia 74.5 - 5 15hng Kng 74.3 = 6 16

macau 74.1 = 7 17Taiwan 74.1 = 7 17Nw Zaand 73.9 = 9 20Thailand 71.5 = 10 25Japan 69.5 = 11 31Piippins 66.9 = 12 40Indnsia 63.8 = 13 47Vietnam 62.2 = 14 56Bangads 57.5 = 15 69India 56.1 = 16 76Bruni Darussaa 55.2 = 17 78Sri Lanka 54.2 = 18 80Fiji 53.0 = 19 84Pakistan 49.7 - 20 96Nepal 48.2 = 21 102Myanmar 47.5 = 22 105Tir-lst 44.5 = 23 116las 42.5 = 24 119Mongolia 40.8 = 25 130Papua Nw Guina 40.7 = 26 131Kiribati 40.1 = 27 137Cambodia 39.8 + 28 138

Butan 33.8 = 29 162Afganistan n/a n/a n/a n/aNorth Korea n/a n/a n/a n/aRegional ave 55.7 / Global ave 51.4 / Emerging Markets ave 46.9


15/49

Economic Activity

Rebalancing Efforts A Long-HaulCampaign

BMI VIEW

Following a forecasted 7.3% performance in 2014, we expect real

GDP growth in China to slow further in 2015. That said, further target-

ed monetary and scal stimulus measures are likely over the coming

quarters as the government looks to avert a more acute slowdown, and

we believe that harder-hitting reform efforts could be shelved in lieu of

supporting economic growth. As such, we are upgrading our 2015 real

GDP growth forecast to 6.7%.

The Q214 stabilisation of the Chinese economy (see 'Positive

GDP Print Masks Lurking Weaknesses', July 16 2014) is more

a reection of the government's efforts to support short-term

economic growth than it is a reversal in the country's fundamen-

tal economic state. The government has since March enacted a

series of stimulatory measures in order to maintain economicgrowth near its stated target of 7.5%, and Q214's growth print

(7.5% year-on-year [y-o-y]) suggests that these measures have

manifested in a pick-up in broad economic activity.

However, the chosen measures have thus far constituted a light

touch in comparison to past efforts by the Chinese government.

More specically, cuts to reserve ratio requirements (RRRs) at

targeted banks which lend primarily to agricultural and rural

interests, as well as the expediting of some railway projects

represent a considerable degree of restraint relative to Beijing'smassive CNY4trn (USD645.2bn) enacted in 2009, which was

the last time that broad macro indicators such as xed asset

investment growth and industrial production had fallen to the

levels that we have seen over recent months.

Stimulus Effects Increasingly Short-LivedThe transient boost from these stimulus measures appears to be

fading, with high frequency data such as HSBC/Markit's Flash

Purchasing Managers' Index (PMI) in August as well as total new

social nancing in July pointing towards a renewed downturn

(see 'Credit Creation Plummets In Sign Of Renewed Economic

Weakness', August 14). With economic growth for H114 hover-

ing just below 7.5%, we believe that further stimulus measures

will be needed in order to achieve the government's target. Assuch, the question in the near-term is just how aggressive the

government will be in its attempts to re-ignite economic activity

through the end of 2014.


CHINA Q4 2014

Transitory Pick-Up Coming To An EndhSBC/markit Purcasing managrs' Indx (PmI)

Source: BMI, HSBC/Markit, Bloomberg

No End In SightTta outstanding Dbt T GDP, %

Source: BMI, NBS

TABLE: ECONOMIC ACTIVITY

2009 2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Nominal GDP, USDbn 5,069.4 5,952.5 7,200.4 8,116.1 9,200.7 10,162.3 10,969.0 11,873.6 12,907.1 14,028.3

Real GDP growth, % y-o-y 9.2 10.6 7.6 7.7 7.7 7.3 6.7 5.8 5.8 5.8

GDP per capita, USD 3,751 4,377 5,261 5,893 6,640 7,291 7,826 8,427 9,116 9,864

Ppuatin, n 1,351.2 1,359.8 1,368.4 1,377.1 1,385.6 1,393.8 1,401.6 1,408.9 1,415.8 1,422.1

Industria prductin, % y--y, a 11.1 14.4 10.8 7.8 8.3 8.5 8.0 8.0 8.0 8.0

Unpynt, % f abur frc, p 4.3 4.1 4.1 4.1 5.0 5.0 5.0 5.0 5.0 5.0

e/f = BMI estimate/forecast. Source: National Sources/BMI


16/49


17/49

Fiscal Policy

Reforms To Stabilise Local GovernmentBorrowing Position

BMI VIEW

The Chinese government's recent decision to allow some local govern-

ments to begin directly issuing bonds will increase transparency and

most likely lower borrowing costs for participating local governments

over the near-term. That said, their overreliance on land sales and debt

issuances will need to be addressed in order to curtail rising indebted-

ness, and we believe that the introduction of property taxes over the

next two years will aim to achieve this objective.

The Chinese central government has authorised some local

governments to begin directly issuing bonds, in a move that we

believe will be a boon for the maturation of the country's public

debt markets. Despite the fact that local governments were previ-

ously barred from funding themselves via the direct issuance of

bonds, they have nevertheless racked up a substantial quantum of

debt. According to estimates from the National Audit Ofce, local

governments owed approximately CNY17.9trn in outstanding

debt at the end of June, or 30.6% of national GDP. Given their

inability to access traditional bond markets, local governments

have instead opted for more opaque borrowing methods, includ-

ing local government nancing vehicles (LGFVs).

Not only do such methods lead to higher borrowing costs for

local governments as they are forced to raise funds through

somewhat unconventional means, but they also add an additionallayer of convolution to the country's increasingly murky local

debt picture. At the same time, borrowing via these channels

has become more strained over recent quarters, as evidenced by

the National Audit Ofce's report that nine local governments

failed to repay approximately CNY800mn worth of debt in

March of this year. For all of these reasons, we believe that the

move towards a more transparent and conventional debt market

for local governments is a step in the right direction in terms


CHINA Q4 2014

TABLE: FISCAL POLICY2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Rnu, % f GDP 20.6 20.4 20.7 20.9 21.1 21.4 21.8 22.0 22.1

Fisca xpnditur, CNYbn 8,987.4 10,326.5 11,462.5 12,539.9 13,706.1 14,967.1 16,314.2 17,766.1 19,382.8

expnditur, % f GDP 22.3 22.2 22.4 22.2 22.0 21.9 22.0 22.0 22.1

Currnt xpnditur, CNYbn 8,067.6 9,252.4 10,284.5 11,244.4 12,281.4 13,400.9 14,610.3 15,915.9 17,373.0

Currnt xpnditur, % f tta xpnditur 89.8 89.6 89.7 89.7 89.6 89.5 89.6 89.6 89.6

Currnt xpnditur, % f GDP 20.0 19.9 20.1 19.9 19.7 19.6 19.7 19.7 19.8

Capita xpnditur, CNYbn 919.8 1,074.1 1,178.0 1,295.5 1,424.7 1,566.2 1,703.8 1,850.2 2,009.8

Capita xpnditur, % f tta xpnditur 10.2 10.4 10.3 10.3 10.4 10.5 10.4 10.4 10.4

Capita xpnditur, % f GDP 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3

Budgt baanc, CNYbn -677.3 -853.0 -852.1 -730.6 -562.3 -351.2 -163.5 -16.6 -35.8

Budgt baanc, % f GDP -1.7 -1.8 -1.7 -1.3 -0.9 -0.5 -0.2 0.0 0.0

f = BMI forecast. Source: National Bureau of Statistics/ BMI

Not Matching Uplca & Cntra Grnnt Rnus

Source: BMI, China Statistical Yearbook 2013

Local Government Expenditures Soaringexpnditurs (RhS), CNY100n

Source: BMI, China Statistical Yearbook 2013


18/49

of the Communist Party of China (CPC)'s broader economic

reform drive, and that it will bolster macroeconomic stability

going forward. Likewise, access to traditional debt markets will

also help to stabilise China's short-term debt position, as local

governments will be able to more easily roll over existing debts.

Property Tax A Potential SolutionHowever, the reforms will not be sufcient to solve China's

longer-term debt problems. A substantial portion of local gov-

ernment revenue is still derived from land sales (as much as

35% in some cases), a reliance that will become increasingly

tenuous should a real estate correction come to fruition. Mean-

while, although central and local government revenues have

risen relatively apace over the past decades, local government

expenditures have far outpaced central government spending

(see chart). This mismatch will need to be addressed over themedium term in order to prevent local government indebtedness

from growing to unsustainable levels. This will necessitate either

a more direct transfer of revenues from the central government

to local governments, or, more likely, the imposition of property

taxes at the local government level, a stated goal of the CPC that

we believe will be rolled out progressively beginning in 2015.

Monetary PolicyCredit Creation Plummets In Sign OfRenewed Economic Weakness

BMI VIEW

A renewed slowdown in the Chinese economy, as evidenced by sur-

prisingly low credit creation in July as well as poor xed asset invest-

ment growth, will keep the People's Bank of China (PBoC)'s monetary

policy relatively loose over the near-to-medium term. That said, we do

not expect the central bank to opt for a benchmark interest rate cut over

the coming quarters, and instead see ofcials opting for lighter touch

measures that will support liquidity as well as ailing property markets.

New total social nancing (TSF, the broadest measure of money

supply and a proxy for credit creation) in China plummeted in

July to its lowest level since October 2008, dropping to just

CNY273.1bn versus CNY2.0trn in June. The result confounded

consensus expectations for new credit creation of CNY1.5trn,

and represented a remarkable 66.7% y-o-y retreat. We believe

that weakness in credit creation likely suggests that China'stransitory economic pick-up over recent months is losing steam,

and continue to expect a renewed slowdown as H214 progresses.

Our expectations have been corroborated by xed asset invest-

ment (FAI) growth, which despite easing credit conditions in

the months prior to July has failed to witness a pick-up.

Instead, after stabilising over the past three months, FAI growth

hit a fresh 12-year nadir in July at 17.0% y-o-y. Given the state

of China's fast cooling property market, this suggests that the

People's Bank of China's (PBoC) efforts to lower borrowing costs

by providing additional liquidity to credit markets and pushing

banks to provide preferential lending for rst-time home buyers

has so far failed to spur demand for new credit.

Faster Credit Growth A Must To Hit2014 Growth Target

In light of the increasingly credit-intensive nature of Chineseeconomic growth, it is highly unlikely that the economy will

be able to hit the government's target of around 7.5% economic


ECONOMIC OUTLOOK

Hitting Fresh LowsNw Tta Scia Financing (TSF), CNYbn

Source: BMI, NBS, Bloomberg

Lowest FAI In Over A DecadeFixd Asst Instnt, % cg y--y

Source: BMI, NBS, Bloomberg


19/49

growth this year without substantially stronger credit growth. In

consideration of increasingly condent rhetoric from top govern-

ment ofcials (including Li Keqiang) over recent months, this

suggests that the PBoC will continue to ease credit conditions

over the coming months in an effort to achieve this year's target,

most likely by providing additional liquidity to the system and

potentially making broader reserve ratio requirement (RRR) cuts.

As such, we believe that the badly-needed, substantive reform

of China's credit markets is unlikely to take shape until at least

2015, when we expect the government to set a more modest

growth target in line with its longer-term reform objectives.

We remain below consensus on 2014 real GDP growth, with

a forecast of 7.3%.

That said, we do not expect the PBoC to cut its benchmark

interest rate in the near future, as this could endanger broadermacroeconomic stability. Instead, the PBoC will likely opt for

lighter touch measures aimed at keeping liquidity owing and

real estate markets supported.

Exchange Rate Policy

CNY Facing Downside PressuresDespite Recent Gains

BMI VIEW

Despite the Chinese yuan's recent strength, we believe that the curren-

cy is still vulnerable to downside forces over the near-to-medium term

as the Chinese economy continues to slow. Nevertheless, owing to

recent strength, we have upgraded our end-2014 forecast on the unit to

CNY6.2000/USD from CNY6.3500/USD previously, and our end-2015

forecast to CNY6.2500/USD from CNY6.4000/USD previously.

Short-Term Outlook (three-to-six months): Owing to the

Chinese yuan's recent appreciatory trend, we are upgrading

our end-2014 forecast on the unit to CNY6.2000/USD fromCNY6.3500/USD previously. However, we also note that the

People's Bank of China (PBoC)'s daily midpoint trend, as well as

the spread between the spot rate and the CNY's 12-month non-

deliverable forward, suggest another bout of weakness ahead.

Long-Term Outlook (six-24 months):We believe that the

Chinese yuan will remain at the mercy of downside forces

over the coming quarters despite its recent recovery. Although

the CNY has been a surprisingly strong performer over recent

months, strengthening by 1.6% since the beginning of June,fundamental factors continue to point towards weakness. More

specically, the recent slowdown in the Chinese economy, as


CHINA Q4 2014

TABLE: MONETARY POLICY

2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Cnsur pric inatin, % y--y, a 3.3 5.4 2.7 2.6 2.6 2.8 2.7 2.7 2.7

Prducr pric inatin, % y--y, p 3.9 3.2 2.9 2.6 2.6 2.6 2.6 2.6 2.6

Prducr pric inatin, % y--y, a 3.7 3.2 2.9 2.6 2.6 2.6 2.6 2.6 2.6

Wsa pric inatin, % y--y, a 3.9 3.8 3.6 3.0 3.1 2.9 2.7 2.7 2.7

Wsa pric inatin, % y--y, p 4.0 3.8 3.6 3.0 3.1 2.7 2.7 2.7 2.7

M1, CNYbn 26,662.0 28,985.0 31,883.5 35,071.9 38,579.0 42,436.9 46,680.6 50,881.9 54,952.4

M1, % y-o-y 21.2 8.7 10.0 10.0 10.0 10.0 10.0 9.0 8.0

M2, CNYbn 72,585.0 85,159.0 96,229.7 105,852.6 116,437.9 128,081.7 140,889.9 153,569.9 165,855.5

M2, % y-o-y 19.7 17.3 13.0 10.0 10.0 10.0 10.0 9.0 8.0

Central bank policy rate, % eop 5.81 6.56 6.00 6.00 6.00 5.75 5.75 5.75 5.75

Lending rate, %, eop 2.2 3.5 3.0 3.0 3.0 3.5 3.5 4.0 4.0

Lending rate, %, ave 2.2 2.8 3.2 3.0 3.0 3.2 3.5 3.7 4.0

Real lending rate, %, eop -2.4 -0.6 0.5 0.5 0.4 0.8 0.7 1.3 1.3

Real lending rate, %, ave -1.1 -2.6 0.5 0.4 0.4 0.4 0.8 1.0 1.3

3-month money market rate, % eop 2.3 3.1

Real 3-month money market rate, %, eop -2.4 -1.0

3-month money market rate, %, ave 1.8 2.9

Real 3-month money market rate, %, ave -1.5 -2.5

f = BMI forecast. Source: National Sources/BMI


20/49

reected by weak purchasing managers' indices (PMIs) and

an unexpected contraction in credit creation in July, is likely

to elicit further growth supportive measures from the Chinese

government. While the main thrust of these measures is likely

to involve both targeted scal expenditures (specically certain

social and transport infrastructure projects) as well as the ongoingprovision of liquidity for lending markets, the People's Bank of

China (PBoC) may also choose to utilise the CNY as a tool to

boost demand for Chinese exports.

As we wrote previously (see 'CNY: Still At Mercy Of Downside

Risks', June 5), the Chinese yuan became somewhat less com-

petitive against its Asian peers in 2013 as the currency bucked

an acute regional FX sell-off. Although the CNY's early-2014

weakness restored some of this competitiveness, the yuan's recent

recovery from a low of approximately CNY6.2600/USD in May

(the currency is currently trading at approximately CNY6.1480/

USD) has reversed much of these effects. The recent trend seen

in the PBoC's management of the CNY also suggests that the

central bank is looking to set the currency weaker, with the daily

midpoint (around which the currency is allowed to trade in a

range of 2%) breaking below three-month trend-line support

(see chart above).

Technically, the CNY's appreciatory run dating back to early

May has not been nearly as resolute as was its February-Maysell-off, suggesting that the more powerful trend remains to

the downside. Meanwhile, the 12-month CNY non-deliverable

forward (NDF) continues to imply weakness over the coming

year, with the spread between the spot rate and the NDF trad-

ing at a nearly 1-year high. Given the combination of market

expectations for a weaker yuan, as well as an increasingly dovish


ECONOMIC OUTLOOK

Breaking The TrendPBoC Daily CNY Midpoint, CNY/USD

Source: BMI, PBoC, Bloomberg

TABLE: EXCHANGE RATE

2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

CNY/USD, ave % y-o-y -0.9 -4.5 -2.4 -2.5 -0.3 1.6 0.4 0.0 0.0

CNY/USD, ave, PPP 3.96 4.17 4.19 4.23 4.16 4.19 4.32 4.35 4.38

Exchange rate CNY/EUR, ave 8.98 8.99 8.01 8.12 8.21 7.78 7.50 7.50 7.50

CNY/GBP, ave 10.49 10.41 10.06 9.53 10.17 10.02 10.25 10.31 10.44

CNY/ChF, a 6.49 6.76 6.78 6.68 6.41 6.25 6.16 6.11 6.13

CNY/AUD, ave 6.21 6.67 6.53 5.93 5.45 5.04 4.78 4.69 4.69

JPY/CNY, a 594.08 515.46 503.80 600.18 618.91 628.73 637.50 637.50 637.50

f = BMI forecast. Source: BMI/IMF

Yet To Erase Previous Sell-OffExchange Rate, CNY/USD

Source: BMI, Bloomberg

TABLE: BMI CURRENCY FORECAST

Spot 2014 2015

CNY/USD, ave 6.148 6.13 6.23

CNY/EUR, ave 8.5018 8.2142 7.7875

CNY Rate, % eop 6 6 5.75

Source: BMI Last Updated: September 3 2014


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central bank owing to the economy's ongoing slowdown, we do

not expect the CNY's appreciatory trend to hold over the next

12-24 months. As such, despite the fact that we are upgrading

our end-2014 forecast for the unit to CNY6.2000/USD (from

CNY6.3500/USD previously) and our end-2015 forecast to

CNY6.2500/USD (from CNY6.4000/USD previously), this

still implies weakness from current levels.

Risks To Outlook

Risks to our CNY outlook are relatively evenly balanced. Down-side risks are mainly related to PBoC policy, as we continue to

see limited potential for a one-off devaluation that would take

the yuan considerably weaker than our forecast. However, the

central bank is unlikely to pursue such a policy-course unless

economic growth slows dramatically, as it would run counter

to its long-term objective of establishing the CNY as a global

reserve currency. In this vein, the CNY could outperform our

forecast in the event that the government unleashes a substantially

stronger-than-expected stimulus programme, bolstering short-

term sentiment towards the currency in line with a transitoryboost to economic growth.


CHINA Q4 2014

Spread Implying Weakness AheadExchange Rate & 12-Month Non-Deliverable Forward, CNY/USD

Source: BMI, Bloomberg


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The Chinese Economy To 2023

6.0% Is The New 10.0%

BMI VIEW

China's economic growth in the coming decade will be much slower

than in the last, as the savings rate declines, the economic liberalisa -

tion process slows, and population growth falls. These dynamics will

result in real GDP growth averaging 6.0% over the next decade asopposed to the 10.1% average seen over the past decade. Private

consumption will be a major outperformer, averaging growth of 8.1%

and rising in importance as a share of GDP.

The unprecedented growth boom in China over recent decades

has its foundations in the vast improvement made to productivity

through economic liberalisation. A major supportive tailwind

in the form of demographic trends provided additional support,

allowing savings to be accumulated at a rapid rate. Growth in

the coming decade will be much slower than during the last, asthe 'low hanging fruit' of liberalisation has already been under-

taken and further reforms are likely to be slow and piecemeal

as the Communist Party of China (CPC) would be reluctant to

give up too much economic power for fear of losing its politi-

cal dominance. A harshly deteriorating demographic situation

(slowing growth and an ageing population) will further weigh

on economic dynamism, resulting in real GDP growth of 6.0%

over the next decade compared with the 10.1% average of the

past 10 years. Consumption will rise as a share of GDP and, as

a result, services' share of GDP will rise, presenting signicantopportunities in consumer-related elds.

Lower Investment Rate, Slower GrowthIt is widely agreed that to encourage sustainable high rates of

growth in the coming years, China must lower its investment

rate and boost consumption. Looking at historical precedents, it

is clear that an investment share of GDP at nearly 50.0% is too

high. However, it is this high savings and investment rate that

has allowed the economy to grow so fast over the past decade. A

lower rate of savings and investment will mean slower growth.

Regarding the domestic imbalances that have built up as a result

of the high investment ratio, the problem is not high investment

itself but the lack of viability of such investment projects in

theory, there is nothing wrong with a high investment rate if

all the investments make a prot. Excessive state involvement

has resulted in excessive unproductive investment in an all-out

attempt to boost headline growth. This has come at the expense

of private consumption, with the consequences likely to be a

sharp slowdown in growth over the coming years.

Policy Reaction To Coming SlowdownWill Be CrucialPolicies to 'boost' consumption using subsidies, wage hikes

and consumer loans, or persuading consumers to reduce their

savings rate by providing a more comprehensive social security

net, target the symptoms rather than the causes. Broad-based

structural reforms will be needed to rebalance the economy

and avoid a hard landing and, so far, these reforms have been

lacking. We believe the government missed a key chance to

accelerate economic reforms during the global nancial crisis,with the stimulus policy of forcing banks to extend record


Chapter 3:

10-Year Forecast

TABLE: LONG-TERM MACROECONOMIC FORECAST

2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f

Nominal GDP, USDbn 10,142.4 10,874.9 11,770.6 12,793.9 13,904.1 15,108.5 16,410.6 17,828 19,373 21,050.9

Real GDP growth, % y-o-y 7.1 6.0 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8

Ppuatin, n 1,393.8 1,401.6 1,408.9 1,415.8 1,422.1 1,427.8 1,432.9 1,437.3 1,441.1 1,444.2

GDP per capita, USD 7,276 7,758 8,354 9,036 9,777 10,581 11,452 12,403 13,443 14,576

Cnsur pric inatin, % y--y, a 2.6 2.8 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7

Currnt accunt baanc, % f GDP 1.7 1.0 0.8 0.6 0.4 0.2 0.0 -0.3 -0.6 -1.0

Exchange rate CNY/USD, ave 6.13 6.23 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25

f = BMI forecast. Source: National Sources/BMI f=BMI forecast


23/49

loans to state-owned enterprises (SOEs) and local government

investment vehicles representing a step backwards in terms of

its long-term liberalisation drive. In doing so, these policies

have ignited a property and investment bubble that is likely to

burst, ushering in a sharp slowdown and undermining growth

potential in the early part of this decade. It is how Beijing deals

with the impending economic slowdown that will determine

whether China can continue sustaining 7%-plus growth, and

our baseline case argues that positive economic reforms will

be hard to come by.

Efciency Gains Will Be Hard To ComeByAgricultural land reform and the deregulation of the hukou

household registration system provide potential for gains in

productivity by allowing more labour market exibility andfurther freeing up labour for urban migration. There has been

progress on this front, with the Chongqing government initiating

a pilot scheme giving migrant workers who have been working

in the city the right to non-agricultural status, with the aim to

turn 10mn farmers into urbanites by 2020. While progress has

been slow since then, we expect this policy to continue to spread

over the long term, supporting further urbanisation and growth.

The idea of urbanisation as a driver of growth, however, is valid

only insofar as entrepreneurs in cities can generate prots suf-cient to warrant expanding their labour force. Over the long

term, this will depend on the government's willingness to allow

further economic freedom. In this regard, we believe that pro-

gress over the next decade will be much slower than in the past.

Financial Liberalisation UnlikelyPerhaps the most important reform the CPC could make to boost

productivity would be to liberalise the banking system, allowing

interest rates to reect market forces and removing the political

nature of lending, which results in excessive capital going toinefcient state-owned enterprises. The response to the 2008

crisis has made it clear that this will not be forthcoming any

time soon. From a political viewpoint, the CPC would not want

to give up its major lever of economic power and therefore risk

losing its political strength.

Closely related is the outlook for general capital market reform

opening up the capital account and allowing a exible exchange

rate. We have seen some progress here, with greater currency

exibility allowed over the past year and gradual liberalisation offoreign nancial investment (one of the many goals of the 12th

Five-Year Plan is to make it easier for local private investors to

buy into overseas markets, and in January the city of Wenzhou

publicised a trial policy that would allow individual investors

to make direct overseas speculation). We expect further gains

to be made, improving capital allocation. This is by no means

guaranteed, however, as the impending growth slowdown could

raise the potential for a political backlash against this kind of

reform among the party's elite.

SOE Liberalisation Has Run Its Course

As well as allowing price liberalisation and greater external trade,opening up SOEs to private competition was a major factor in

boosting productivity. However, these particular reforms may

have hit a brick wall. Although the CPC relinquished a great deal

of power in removing itself from a large number of industries,

it remains the monopoly force in several key industries. As

with the banking sector, it will be difcult for the CPC to allow

further private-sector involvement into these sectors given the

risk this would pose to its grip on economic power.

Minimum Wage Hikes And SocialSecurity Will Hurt Growth OutlookIn the name of boosting consumption (as well as placating the

working classes), the CPC seems intent on hiking minimum

wages and increasing the size of the social welfare system (for

example, boosting healthcare and pension spending, and ramping

up social housing construction). While these may be desirable

from a social perspective, we do not believe they hold the key to

raising consumption spending; rather, these policies are likely to

reduce labour market exibility and increase the already heavy

tax burden, reducing the ability of businesses to generate prots.In terms of the composition of demand in the economy, these

policies will help to lower the savings ratio and, by extension,


CHINA Q4 2014

Demographic Deterioration China EstimatedPopulation Trends

Tta Ppuatin, n (lhS) & Agd Dpndncy Rati, % (RhS)

Source: BMI, UN


24/49

increase the share of consumption in GDP although they will

do so at the cost of reduced growth potential.

Demographic Dividend ReversingOver the past decade, the working population has risen at an

average rate of 1.26% per year, providing a supportive tailwind

for growth. Over the next decade, we expect this gure to fall

to just 0.71% per year, acting as a direct drag compared with

the previous decade, particularly towards the end of our fore-

cast period when we see the working age population actually

shrinking slightly.


10-YEAR FORECAST

BMI's ng-tr acrcnic frcasts ar basd n a arity f quantitati and quaitati factrs. our 10-yar frcasts assu in st

cass tat grwt ntuay cnrgs t a ng-tr trnd, wit cnic ptntia bing dtrind by factrs suc as capita instnt,

dgrapics and prductiity grwt. Bcaus quantitati frawrks ftn fai t captur ky dynaics bind ng-tr grwt dtrinants,

ur frcasts as rct anaysts' in-dpt knwdg f subjcti factrs suc as institutina strngt and pitica stabiity. W assss trnds in

t cpsitin f t cny n a GDP by xpnditur basis in rdr t dtrin t dgr t wic priat and grnnt cnsuptin,

xd instnt and t xprt sctr wi dri grwt in t futur. Takn tgtr, ts factrs fd int ur prjctins fr xcang rats,

xtrna accunt baancs and intrst rats.


25/49


26/49


SWOT Analysis

Strengths Cina is cntinuing t pn up arius sctrs f its cny t

frign instnt.

Wit its ast suppy f cap abur, t cuntry rains t tp

dstinatin fr frign dirct instnt in t dping wrd.

Weaknesses

Frign cpanis cntinu t cpain abut t pr prtctinf intctua prprty in Cina.

Cins crprat grnanc is wak and nn-transparnt by

Wstrn standards. Tr is a cnsidrab risk fr frign cpanis

in csing t rigt ca partnr.

Opportunities Cina's nging urbanisatin and infrastructur dri wi prid

ajr pprtunitis fr frign instnt in andckd princs

as w as t transfr f skis and knw-w.

T Cins grnnt is giing r prtctin and ncurag-

nt t t priat sctr, wic is t st dynaic in t cnyand accunts fr st f t cuntry's jb grwt.

Threats Cina's grnnt wi bck attpts by frign rs t tak r

assts f natina iprtanc.

Cina is xprincing rising abur csts, prpting s instrs

t turn t capr dstinatins suc as vitna.

BMI Business Environment Risk

Ratings

Wi a ast suppy f cap abur and rapid cnic grwt nsur

tat Cina rains t tp dstinatin fr frign dirct instnt in t

dping wrd, tr sti rains a nubr f crucia ipdints fr

frignrs wising t d businss witin t cuntry. Ts srtcings

ar undrscrd by ur businss nirnnt ratings, wic ra

tat buraucracy and ga frawrk ar t biggst drag n Cina'sra scr f 59.4, wi t cuntry as rains uncptiti wit

rgard t its tax nirnnt. Wi rfrs ar nging, w sti xpct

aningfu prgrss t rain gradua.

Chapter 4:

Business Environment

Business

Environment

Trend Regional

Rank

Global

RankSingapore 80.0 = 1 1hng Kng 78.7 = 2 2Austraia 78.0 - 3 3Nw Zaand 75.7 = 4 8Sut Kra 71.1 = 5 18maaysia 68.6 = 6 21Japan 67.8 = 7 22macau 62.0 = 8 36Taiwan 61.9 = 9 37Thailand 61.7 = 10 39China 59.4 = 11 47Bruni Darussaa 57.8 = 12 48Vietnam 53.1 = 13 66Sri Lanka 51.3 = 14 73Fiji 49.6 = 15 80Piippins 48.5 = 16 82Mongolia 47.9 = 17 86India 46.0 = 18 96Cambodia 40.4 + 19 110Indnsia 40.2 = 20 112Papua Nw Guina 40.0 = 21 114Bangads 38.3 = 22 124Pakistan 37.2 - 23 129Kiribati 35.9 = 24 135las 34.4 = 25 139

Butan 33.7 = 26 143Nepal 30.0 = 27 156Tir-lst 27.9 = 28 163Myanmar 20.9 = 29 181Afganistan 19.9 = 30 182North Korea 18.7 = 31 184Regional ave 49.6 / Global ave 47.2 / Emerging Markets ave 42.2


27/49

Business Environment Outlook

IntroductionWhile a major destination for foreign direct investment (FDI),

the attractiveness of China as a top FDI destination is being

threatened by rising wage demands and an uneven playing eld

between local and foreign rms. Furthermore, the commanding

nature of China's economy means bureaucracy remains a key

obstacle to doing business within the country, while the legal

framework is still weak despite two decades of reform.

Institutions

Legal FrameworkChina operates a civil law system that includes some commonlaw elements, although relatively less emphasis is placed on legal

precedent. Two decades of reform have resulted in a number

of changes in institutions, laws and practices. A formal legal

system has resulted in a nationwide court system comprising

3,000 basic courts and some 200,000 judges. The courts are

divided into courts of general jurisdiction and the courts of

special jurisdiction. In 1979, economic courts were established

as part of China's Supreme People's Court and three levels of

provincial courts. The economic courts enjoy jurisdiction over:

contract and commercial disputes between Chinese parties; trade,

maritime, intellectual property and insurance; other business

disputes involving foreign parties; various economic crimes

including theft, bribery and tax evasion.

There is also an administrative legal system, which adjudicates

more minor criminal cases.

Judges are often vulnerable to corruption, political control and

the pressures of guanxi (connections based on family or local

ties). Their appointment, promotion and removal are all at the

discretion of local government and Communist Party of China

(CPC) leaders rather than the Supreme People's Court or pro-

vincial high courts. Both the judges and the litigants who appear

before them are subject to the inuence of local protectionism.

Legislation is frequently inadequate, with numerous conicts

between national and local norms; and a proliferation of regula-

tions, interpretations and other edicts often producing incoher-

ence and inconsistency. Laws and regulations in China tend to

be far more general than in most OECD countries, and therefore

need more specic implementing rules and measures.


CHINA Q4 2014

TABLE: BMI BUSINESS & OPERATION RISK RATINGS

Infrastructure Rating Institutions Rating Market Orientation Rating Business Environment

Afganistan 21.8 20.1 17.9 19.9

Austraia 80.3 85.8 68.1 78.0

Bangads 40.5 35.2 39.1 38.3

Butan 28.8 43.3 29.0 33.7

Cambodia 37.4 31.8 52.0 40.4

China 66.0 56.6 55.7 59.4

hng Kng 71.1 84.2 80.7 78.7

India 47.4 41.8 48.8 46.0

Indnsia 37.1 31.2 52.3 40.2

Japan 76.4 77.1 49.8 67.8

las 39.2 28.7 35.3 34.4

maaysia 60.1 74.9 70.9 68.6

madis 42.7 43.7 41.3 42.6

Nepal 29.4 29.9 30.8 30.0

Nw Zaand 69.3 92.7 65.3 75.7

Pakistan 33.4 37.0 41.1 37.2

Piippins 48.6 36.8 60.1 48.5

Singapore 71.1 84.2 80.7 80.0

Sut Kra 63.0 79.1 71.3 71.1

Sri Lanka 54.3 51.8 47.9 51.3

Taiwan 56.1 68.2 61.4 61.9

Thailand 61.0 56.8 67.2 61.7

Vietnam 58.2 39.0 62.2 53.1

Source: BMI. Scores out of 100, with 100 representing the best score available for each indicator


28/49

Even government arbitration, which many foreign businesses and

Chinese turn to in an effort to avoid the vagaries of the courts,

sometimes suffers from the same types of pressures that distort

judicial justice. Prosecutors, who are supposed to guard against

such illegal conduct, are usually too weak politically, and China's

current legal and regulatory system can be opaque, inconsistent

and often arbitrary. Implementation of the law is inconsistent.

Although China is a member of the International Centre for

the Settlement of Investment Disputes and has ratied the UN

Convention on the Recognition and Enforcement of Foreign

Arbitral Awards, it places strong emphasis on resolving disputes

through informal conciliation and mediation.

Property Rights

Chinese law states that all land is owned by 'the public'. Indi-viduals are not permitted to own land. However, both Chinese

nationals and foreigners can hold long-term leases for land use.

They can also own buildings, apartments and other structures

on land, as well as personal property.

Intellectual Property RightsChina lacks effective protection for intellectual property rights

(IPR). In spite of some reforms under its WTO commitments

China has committed to full compliance with the WTO Agree-

ment on Trade-Related Aspects of Intellectual Property Rights

(TRIPS) enforcement is poor and penalties, in the rare cases

they are applied, are insufcient to act as proper deterrents.

Trademark and copyright violations are widespread. Lack of

coordination among public bodies undermines attempts at

enforcement. There is also wide variation in the application of

IPR protection.

CorruptionCorruption is prevalent, and anti-corruption efforts are obstructed

by weak or non-existent monitoring mechanisms. Embezzlement

and nancial mismanagement have been identied by numer-

ous audit reports. The use of guanxi is widespread in the upper

echelons of business. Many of those who come under investiga-tion are able to deploy their connections to avoid prosecution.

However, anti-graft efforts have improved signicantly under

President Hu Jintao, who has made tackling rampant corruption

one of his top priorities. January 2008 saw sports magnate Yu

Zhifei jailed for embezzlement and the launch of an investigation

against the former head of oil giant Sinopec, Chen Tonghai, while


BUSINESS ENVIRONMENT

TABLE: BMI LEGAL FRAMEWORK RATING

Investor Protection Score Rule Of Law Score Contract Enforceability

Score

Corruption Score

Afganistan 1.9 20.1 17.9 19.9

Austraia 78.9 85.8 68.1 78.0

Bangads 59.1 35.2 39.1 38.3

Butan 14.8 43.3 29.0 33.7

Cambodia 31.5 31.8 52.0 40.4

China 64.4 56.6 55.7 59.4

hng Kng 93.7 84.2 80.7 78.7

India 61.5 41.8 48.8 46.0

Indnsia 53.9 38.7 64.7 50.8

Japan 80.7 77.1 49.8 67.8

las 14.0 28.7 35.3 34.4

maaysia 80.1 74.9 70.9 68.6

madis 24.3 43.7 41.3 42.6

Nepal 41.8 29.9 30.8 30.0

Nw Zaand 94.6 92.7 65.3 75.7

Pakistan 46.4 37.0 41.1 37.2

Piippins 36.4 36.8 60.1 48.5

Singapore 96.2 87.1 81.2 80.0

Sut Kra 68.5 79.1 71.3 71.1

Sri Lanka 63.2 51.8 47.9 51.3

Taiwan 67.2 68.2 61.4 61.9

Thailand 53.7 56.8 67.2 61.7

Vietnam 24.4 39.0 62.2 53.1

Source: BMI. Scores out of 100, with 100 representing the best score available for each indicator


29/49

in 2007 there were two of China's most high-prole anti-graft

cases the sacking and arrest of Shanghai's former CPC boss

Chen Liangyu and the execution of Zheng Xiaoyu, the former

head of the food and drug watchdog. During a month-long

leniency offer, almost 1,800 ofcials confessed to corruption,

according to the CPC watchdog, the Central Commission for

Discipline Inspection.

Red tape is a major issue for investors. Given that many laws are

dened in very general terms, it is often left to the bureaucracy to

make decisions. With a lack of accountability, this process pro-

vides opportunities for corruption, while numerous bureaucratic

obstacles stymie the easy acquisition of licences. According to

World Bank data, 20 separate procedures are required to enforce

a contract, which takes an average of 180 days.

Infrastructure

Physical InfrastructureAs one of the fastest-developing economies in the world, China

has an insatiable appetite for infrastructural development. BMI

valued the country's construction industry at USD300.7bn in

2010, and expects the industry to be wor

bmi china business forecast report q4 2014

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