challenges facing china over the next decade" by marvin cunningham

Challenges Facing China Challenges Facing China over the Next Decade"over the Next Decade"

By Marvin Cunningham By Marvin Cunningham

China Cost Structure 2006-2012China Cost Structure 2006-2012

China 2012

Expenses68%

Labor32%

China 2006

Labor10%

Expenses90%

Copyright © 2012 Long-Stanton

Skilled Labor Cost 2006-2012Skilled Labor Cost 2006-2012

02

46

81012

1416

1820

Welder ProductionManager

QualityManager

GeneralManager

2006

2008

2010

2012


Questions #1Questions #1

What % of China’s population is covered by What % of China’s population is covered by its one-child policy?its one-child policy?

A.A. 35%35%

B.B. 55%55%

C.C. 73%73%

D.D. 95%95%


Demographics: The Key to Demographics: The Key to Everything (China Census Data)Everything (China Census Data)Official population is now 1.37B13.25% of the population is over the age of 60, in 2000 it was 10.3%Nearly 50% now live in urban areas, 2000 it was 36%The population is on track to hit 1.5 B in 2030-3516.6% of the population is under the age of 14, in 2000 it was 22.9%

Question #2Question #2

What is the monthly Social Security payment What is the monthly Social Security payment to the average retired worker in Chinato the average retired worker in China

A.A. $39$39

B.B. $87$87

C.C. $124$124

D.D. $188$188

How Does This Affect Your How Does This Affect Your Business Business

Who will be your customers and where will they Who will be your customers and where will they live live

A direct impact on government policiesA direct impact on government policies– Social Welfare Programs (reform of Hukou Social Welfare Programs (reform of Hukou

registration system)registration system)– Internal Migration (slowing and reversing as elderly Internal Migration (slowing and reversing as elderly

move back to the village)move back to the village)– End of one child policyEnd of one child policy– Guns VS Butter debate (Military 6%/Social 24% of Guns VS Butter debate (Military 6%/Social 24% of

government spending) government spending)

The Environment Over the Next The Environment Over the Next Decade (7 Key Industries)Decade (7 Key Industries)

Clean Energy VehiclesClean Energy VehiclesEnergy conservation & environmental Energy conservation & environmental protection industriesprotection industriesAdvanced energyAdvanced energyNew MaterialsNew MaterialsBiotechnologyBiotechnologyAdvanced ITAdvanced ITHigh value added manufacturing High value added manufacturing

Beijing December 2Beijing December 2ndnd to 5 to 5thth 2011 2011

Green Energy Playbook Green Energy Playbook

Will it be EnoughWill it be Enough

Threats to food supplyThreats to food supply

China is losing 15,000km a year to erosionChina is losing 15,000km a year to erosion

Between 1996 & 2005 China lost 19.8 Between 1996 & 2005 China lost 19.8 million acres of farm land (6%), to million acres of farm land (6%), to development.development.

In 1978 China consumed 8 million tons of In 1978 China consumed 8 million tons of meat, in 2012 it consumed 71 million tons.meat, in 2012 it consumed 71 million tons.

262 million migrant workers not on the 262 million migrant workers not on the farm.farm.

The Pig PictureThe Pig Picture

Buying Water: World Land GrabBuying Water: World Land Grab

Water CrisisWater Crisis

$62 billion being spent on South-North Water $62 billion being spent on South-North Water Transfer project.Transfer project.The Great Green WallThe Great Green WallBy 2030 China is expected to have a shortage of By 2030 China is expected to have a shortage of 120 million acre feet (2.6 times municipal use in 120 million acre feet (2.6 times municipal use in 2009)2009)73.8% of water in 8 provinces (including Beijing 73.8% of water in 8 provinces (including Beijing & Shanghai) is no longer safe for Humans or & Shanghai) is no longer safe for Humans or Fish/Wildlife.Fish/Wildlife.95.6% of China’s energy production relies on 95.6% of China’s energy production relies on waterwater

How Does This Affect Your How Does This Affect Your BusinessBusiness

Companies that serve the “Green” Companies that serve the “Green” industries can expect long term industries can expect long term government supportgovernment supportWater intensive industries will be pushed Water intensive industries will be pushed out of China. China will look to import out of China. China will look to import these productsthese products– Paper Paper – Food commodities of all kindsFood commodities of all kinds– Energy Intensive industriesEnergy Intensive industries

Question #3Question #3

What is China’s true Urbanization rateWhat is China’s true Urbanization rateA.A. 35%35%

B.B. 51%51%

C.C. 60%60%

D.D. 70%70%

Urban to Rural MigrationUrban to Rural Migration

In 2012 China was 51% Urban & 49% Rural In 2012 China was 51% Urban & 49% Rural (real urbanization rate is 35%)(real urbanization rate is 35%)– By 2020 estimates put the Urbanization rate at 60% & By 2020 estimates put the Urbanization rate at 60% &

by 2050 75%by 2050 75%– Government plans to spend $6.5 Trillion to bring 400 Government plans to spend $6.5 Trillion to bring 400

million people into Cities over the next decademillion people into Cities over the next decade

Migrant work population 262 million, average Migrant work population 262 million, average age 37.2 age 37.2

Will high Urbanization rates really materialize? Will high Urbanization rates really materialize?

Assuming Urbanization Occurs Assuming Urbanization Occurs QuicklyQuickly

More wage workers, generally means more More wage workers, generally means more consumption of goods and services.consumption of goods and services.Fewer people in rural areas would:Fewer people in rural areas would:– Lead to consolidation of land holding and more Lead to consolidation of land holding and more

productive use of farmland.productive use of farmland.– Higher food prices/farm incomes Higher food prices/farm incomes

Gap in age and education levels would riseGap in age and education levels would riseHigher inflation ratesHigher inflation ratesHigher debt loads for urban governments, Higher debt loads for urban governments, leading to cuts in urban investment & servicesleading to cuts in urban investment & services

Assuming Urbanization Does not Assuming Urbanization Does not Occur QuicklyOccur Quickly

Labor costs in cities increase at a faster rate.Labor costs in cities increase at a faster rate.

More people in rural areas would:More people in rural areas would:– Keep land holdings smallKeep land holdings small– Depress food prices and farm income.Depress food prices and farm income.

Help control inflation ratesHelp control inflation rates

Lower debt load on urban governments, allow Lower debt load on urban governments, allow for higher levels of urban services.for higher levels of urban services.

Widen the economic & social gap between Widen the economic & social gap between urban and rural areas.urban and rural areas.

How Does This Affect Your How Does This Affect Your BusinessBusiness

The rate of urbanization affects the types The rate of urbanization affects the types of products that China will demand.of products that China will demand.If Urbanized: If Urbanized: – Farm equipment, food (especially meat), Farm equipment, food (especially meat),

plywood, paper, customized products and plywood, paper, customized products and servicesservices

If RuralIf Rural– High tech automation, larger homes, more High tech automation, larger homes, more

commodity products, & larger transportation commodity products, & larger transportation networksnetworks

How China will keep the growth How China will keep the growth comingcoming

Removal of the Hokou Family Registration Removal of the Hokou Family Registration System, will allow people to access social System, will allow people to access social services where they live. They will spend services where they live. They will spend more and save less.more and save less.

Rebuilding Housing Stock: Average house Rebuilding Housing Stock: Average house lasts 25 years.lasts 25 years.

Retooling Factories for Productivity & Retooling Factories for Productivity & CustomizationCustomization

Challenges Facing China Challenges Facing China over the Next Decade"over the Next Decade"

By Marvin Cunningham By Marvin Cunningham

[email protected]

513-720-3959513-720-3959

challenges facing china over the next decade" by marvin cunningham

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