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29111311 Haidir Afesina29111328 Hendra Winata

29111329 Mita Listyatri29111338 Andek Prabowo29111344 Aprian Eka Rahadi29111384 Chairunnisa Mirhelina29111387 Franciscus Xaverius Kresna Paska29111393 Agung Indri Pramantyo

CHINA and

Its Neighbors in

2005

MM5005 Business Economics

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Economy

Analysis

Milestone

Challenge

AnalysisRecomme

ndation

Facts

Outline

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Facts#

In 2003, China became

an Asian economic powerhouse

with GDP of US$1.4 trillion

andthe 2nd largest recipient of FDI worldwide

make them the leading among developing economies

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Y= C + G + I + (X-M)

Economic

Growth

Domestic

Consumption

Investment

Government

Spending

Export - Import

GDP Formula

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Facts#

In 2003, China became

the world`s 7th largest economy

using market exchange rates

butthe world 2nd largest economy

using purchasing power purity rates

Per capita income in 2003 was US$1,100 (market

exchange rates) butUS$ 4,995 (ppp)

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Challenge

ECONOMIC GROWTH

GDP DOMESTIC CONSUMPTIONGOVERNMENT SPENDINGINVESTMENTNETT EXPORT (EXPORT IMPORT)

11,963 RMB BILLION = US$ 1.4 TRILLION

Worlds 7thLargest Economy

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Challenge

hundreds ofmillion

people liftedout of

poverty

U.S.$ 1.100

Its NEIGHBORS

COUNTRYHINA

FORCE MOVE

CONTINUE PRE-EXISTING PATH

vs

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Porter`s Diamond Analysis

Firm

Strategy

Rivalry

DemandCondition

Related

SupportingIndustries

Factor

Condition

Chance

Government

Growth population

Highest

Saving Rates in 2003

Low technology

Become Globe`s factory

(low & light manufactured)

Communist Politics

Policy: cut tariffs, WTO

Benefits for investor

Growing

economy

attracts

FDI

Domestic

Company

Expand

overseas

Invest on

technology

Skills and

knowledge

Supporting

Infrastructure

(supplier andraw material)

Emerging economyEconomy in transition

Private sector economy

Environmental problem issue

The RMB is stable

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Facts#

China became an export oriented country

especially on textiles, machinery and electronic products

by making substantial cuts in import barriersthat attracts international trade

And make them the world`s 4th leading exporter

And3rdleading importer in 2003

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People

High

population

Low

skilledNeed jobs Low wages

Attract investor

(save labor cost)

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RMB (Yuan)

Chose not to devaluate, even they can

set it higher

Trusted as international trade currency

Use USD in trading

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Neighbors Analysis

Region

ASEAN

FDI as Growth

engine for the region

High Labor

but cheap wages

Easy andcheap raw material

FDI will be shifted to China

The Shanghai Five

Cooperation on

security, military

and economic

Resources and intermediate

goods

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Facts#

China avoided the worst of Asian economic crisis in

1997-1999 due to

its closed capital account,large foreign reserve position,

the austerity programed introduced in 1993

andmassive public expenditures

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Macro Economy Social Culture

Chinese people areeverywhere around the world

High GDP

Mostly people

in the rurals

Government

is rich

People are poor

Need money and

jobs

Entreprenuer &

family business

Expand

Work harder to live Hard worker to be rich

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Macro Economy Market

Growth in 2003Auto sales : 500.000 (1997) 2 millionsMobile telephone : 13.8 million (1997) 269 millionHome mortgages : US$2 billion US$142 billion

High DomesticConsumption

Industrial Marketincrease

High

Domestic Demand

High Growth

POTENTIAL MARKET

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Internal

Support

Political

Influence

Global

Support

Strong

GovernmentSupport

Economic

Condition

Growth

Macro Economy - Political Legal

Communist party(political power)

Economiccontrol

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Macro Economy - Technology

Fast Adopt & Customize

Innovation R&D

MyPad vs iPad

Source: Intelligent report, 2005

Compettitve flexibility

Internationalization of R&D

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Recommendations

Innovation in technology

Invest in Knowledge and Education

(build highly education system and competitive)

Try to develop other industry to attract other FDI

Eg. Tourism