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Introduction to China & India
Population, Wealth, Distribution and is it ‘and’ or
‘or’?
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Population FactsNational Populations 2010
13301180
310
62
0
200
400
600
800
1000
1200
1400
China India USA UK
millions
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Population Growth In 1979, concerned about population growth,
the Chinese Communist Party brought in a policy of ‘One child per family’; India has no equivalent
Broad population predictions:China India
20091,330m 1,175m 20301,465m 1,465m 20501,400m 1,593m
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The China growth storyTotal GDP, in constant US $s 1978-2010
0500000
1000000150000020000002500000300000035000004000000450000050000005500000
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
$ms
ChinaIndiaBritain
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Why is China growing so fast?
Huge investment levels (40%+ of GDP each yr for 20 yrs); Chinese investment in fixed assets is nearly 5 times higher than India’s
Spending on construction is nearly 8 times higher in China
Literacy level is much higher: 33% illiterate in India; 6% in China
… so the huge rural workforce can find jobs
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What changed in China in 1990/91?
A freeing up of market access and the private sector; a major policy change to welcome FDI (foreign direct investment, e.g. Volkswagen and KFC)
Govt. policy change to hugely increased capital spending, especially infrastructure
… probably influenced by the political pressure for change after 1989 Tienanmen Square protests (brutally suppressed)
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Inward Foreign Direct Investment (Source: Unctad)
0100002000030000400005000060000700008000090000
100000110000120000
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
$millions
ChinaIndia
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Economy basics (2009/10 figs)
China India UKGDP per capita $3,735 $1,055 $35,000
GDP at PPP ($s) $6,700 $3,200 $34,200
Annual GDP growth 9-10% 7-8.5% 2-2.5%% of workforce onthe land 39.5% 52% 1.4%% in service sector 33.2% 34% 80.4%
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China – world’s biggest car market
Annual automobile sales, by country
02468
101214161820
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M. cars
ChinaIndiaUSA
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Extraordinary growth potential% of h/holds
with a car
% of households with a bike
Number of households
Car sales 2010 (ms)
% change since 2009
China 4.1 73.3 385m 18.1 30%
India 2.9 51.1 218m 1.75 25%
USA 88.1 44.6 117m 11.6 9%
Brazil 35.6 12.8 54m 3.5 14%
*Euromonitor 2010
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Can China Outstrip America?
US$ PPPtrillions
2009 2019 2029 2039
UK $2.12 $2.71 $3.47 $4.45India $3.68 $7.24 $14.24 $28.01America $14.12 $19.10 $25.67 $34.50China $8.82 $20.88 $49.43 $117.02Assumed growth: UK = 2.5%; US 3%; China 9%; India 7% (exc currency ch.)
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Composition of China and India Economies 2009/10
0%10%20%30%40%50%60%70%80%90%
100%
India Pop India GDP China Pop China GDP
TertiarySecondaryPrimary
Secondary China, Tertiary India
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The Chindia problem (western perception)
Both have huge populations Both are growing sustainedly rapidly Both have extraordinarily low wage rates Both have massive rural populations Both seem scary from a Western
viewpoint … for jobs and for security A two-horse carriage about to overtake
the west
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But isn’t it China versus India?
Definitely that’s how India sees it … … and China is starting to look
beyond overtaking America China and India are hugely different
at the moment … … and it seems likely to stay that way While China dominates secondary,
India may come to dominate tertiary
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From the UK perspective: The business opportunities must be
a core focus: Chinese middle classes ($8,000-$25,000
income) were close to zero in 1995, 87 million in 2005 and estimated at 320 million in 2015! (Source: American Express)
Indian middle classes amounted to 5 million in 1995, 50 million in 2005 and an estimated 200 million in 2015 (Source: The Economist)
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World's biggest GDPs 2009 and 2050; source: PwC
0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000
US
Japan
Germany
UK
Mexico
Nigeria
2009 GDP 2050 GDP
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Different consumers
China, India and America
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Distribution of Consumer Spending 2009**Source: Euromonitor 2011
0%10%20%30%40%50%60%70%80%90%
100%
USA China India UK
Other
Housing & Household
Health Goods
Education
Clothing
Food&drink
Leisure
Transport
Hotels and eating out
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Actual $ spending in 3 categories 2009
0250500750
1,0001,2501,5001,7502,0002,2502,5002,7503,0003,2503,500
USA China India
$bill
ions
LeisureHealth GoodsFood&drink
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Trends in Consumer Spending in China (1990-2009)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 2000 2009
OtherHousing & HouseholdHealth GoodsEducationClothingFood&drinkLeisureTransportHotels and eating out
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Annual per capita spending on toilet paper 2009 (Source: Euromonitor 2011)
25.06
4.8
0.010
5
10
15
20
25
USA China India
US$s
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Growth Potential in the East
Carbonated soft drinks - annual per capita 2009 (Source: Euromonitor 2011)
118.81
60.22
6.71.13
0102030405060708090
100110120
USA UK China India
US$
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Grocery distribution channels 2009 (Euromonitor 2011)
0%10%20%30%40%50%60%70%80%90%
100%
USA China India
Others
Butchers,greengrocer etcSmall groceries
Supermarkets
Hypermarkets
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Potential & Environment
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Ease of Doing Business (2011)**World Bank: Doing Business, published November 2010
China India UKCompany formation
38 days 29 days 13 days
Cost to start up
4.5% of p.c.income
56.5% of p.c.income
0.7% of p.c.income
Minimum capital
118% of p.c.income
188% of p.c.income
0% of p.c. income
Closing a business
1.7 years 7 years 1 year
Recovery 36.4% 16.3% 88.6%
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Supermarket Opportunities
UK China IndiaMarket share of Top 5 Grocers
82.6%* 13.4%** Under 1%
*No 1 retailer is Tesco with a 31% share; source Kantar Worldpanel, 12 weeks to Nov 2010
**No 1 retailer is Walmart with a 3.6% share; source Kantar Worldpanel 24 wks to September 10th 2010
No overseas company is allowed to invest in a ‘multi-brand retailer’, ie Zara or Marks & Spencer OK; Tesco NO.
At present, retailers such as Walmart, Tesco and Carrefour are opening Cash & Carry (wholesale) businesses in India; waiting for when the grocery market is liberalised/deregulated.
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China Potential for UK Fashion
In 2009 Mulberry repositioned itself as a maker of young, luxury (£600) leather bags
In 2009 and 2010 it saw that many of its customers in London & Tokyo were from China … so it opened its first Beijing store
… and plans 20 more by 2015 … It has increased capacity by 30% at its
Somerset factory but looks to open another Burberry also there, but Primark? Topshop?
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And the environment?Tonnes of CO2 Total CO2 per cap. p.a. M tonnes
India 1.25 1,400China 4.75 6,300UK 9.3 560US 20.0 6,000Russia 11.8 1,700World 4.5 30,000Source: Energy Information Administration 2009, see http://tonto.eia.doe.gov
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Conclusions China is set fair for many more years of
sustained growth at 8-11%p.a. India will continue to grow rapidly, but
more cyclically; it needs to invest in education and transport – but perhaps can’t afford it
China is the horse to win the race – Britain has missed out so far, but growth in food and fashion sales provide bright prospects.
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