Kissinger Institute on China and the United States Woodrow Wilson International Center for Scholars

Kiyoyuki Seguchi The Canon Institute for Global Studies May 30, 2013
1

Xi Jinpings Historic Mission

To Avoid the Middle Income Trap

Japan, Korea, Taiwan, Singapore and China?

Policies for avoiding the Middle income trap

Privatization of SOE
Reduction of excessive equipment

Solution

Marketization

Financial liberalization

Political leadership
Reducing income gap Improving the environment Correcting the corruption
3

Democratization

Anti-corruption campaign

The Eight-item Regulations

1.Sentences : Short and easy to understand 2.Foreign business trip of VIP : Observance of rules 3.Security for VIP : Dont be too much 4.Broadcasting : Cut meaningless news of VIP 5.Publishing books : Allowed publishing only 6.Austerity of daily life spending 7.Prohibition of excessive entertainment 8.Meetings : Effectiveness
4

Ripple Effect of Distrust of Government

Explosion of ordinary peoples anger against corruption of leaders of the communist party and officials of the government

Refusal of donation for the earthquake in Sichuan Province through the governmental organization and the Red Cross
Serious criticism against the former premier Wen Jiabao
5

Real GDP Growth

Y to Y % 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

SourceCEIC
6

CPI
CPI 20.0 % food others

15.0

10.0

5.0

0.0

-5.0

Source : CEIC

Increase of employee in urban area and real GDP growth rate

Thousand people 14,000 12,000 10,000 8,000 8.0 6,000 6.0 4,000 2,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 4.0 2.0 0.0 increase of employee in urban area GDP growth rate % 16.0 14.0 12.0 10.0

Source:CEIC

Balance of Trade
100 million USD 3500

3000

2500

2000

1500

1000

500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source : CEIC 9

Contribution Rate to GDP by Component

% 150.0 Consumption Investment Net Export

100.0

50.0

0.0

-50.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source : CEIC

10

Increasing Income level of the Major Cities

After GDP per capita reaches 10 thousand USD, Consumers Behavior change. Major cities of which GDP per capita reached 10 thousand USD
The year when GDP Major cities and their population per capita (10,000 person, on 2010 basis) Reached 10,000 USD 2007 2008 2009 2010
Suzhou638Wuxi467Shenzhen1,037
Guangzhou806Shanghai2,303Hangzhou689 Ninbo574Erdos152Baotou220

Sub total of each citys population 2,142 4,744 2,909 1,529

Beijing1,962Dalian586,Changzhou361

Tianjin1,299Huhhot230
Wuhan837Shenyang720Changsha652 Qingdao764Nanjing632Tangshan735 etc.

2011
2012 2013

6,495
1,067 4,216

Jinan(607), Yangzhou(460)
Nantong(765), Zhengzhou(963), Fuzhou(649) etc.

200713 Total
Source : CEIC

Total population of the all major cities

23,102
11

Price level of Automobiles Volume Zone

2010 2012 Around 50 thousand RMB Around 100 thousand RMB (Shanghai Around 150 thousand RMB)

SUV around 200 thousand RMB are also popular.

12

Expansion of Market for Japanese Companies

2008 Nominal GDPJapanChina Population of major cities of which GDP per capita reached 10 thousand USD Profit per sales ratio 10093 68.9 mil. people

2013 100160 231.02 mil. people 3.4 times as large as 2008 higher

lower

Japanese goods are high quality but a little too expensive. Japanese goods are a little expensive but high quality.

13

FDI to China by countries100 million USD

Total Japan Taiwan Korea US Germany

90

(right scale)

(left scale for each country)

1600 1400 1200 1000

80
70 60 50

800 40 600 30 20 10 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

400 200 0

Note : Data of 2013 is calculated by Y to Y growth rate of the total amount of 4 months from January to April. Source : CEIC

Feature of the 4th boom of Japans FDI to China

Aiming at Domestic Market (Focusing Inland Area) Increase of Service Sector Increase of Reinvestment of Return in China
15

Perspective on the win-win development between Japan and China China is lacking in advanced technology and sophisticated service. Japan is lacking in vigor of the domestic market.
If Japan and China cooperate each other complementally, both countries can enjoy sustainable and harmonious development.
16

Win-Win Relation between Japan and China

Increase of Japans FDI to China
Short termIncrease of employment and tax revenue in China Long termImprovement of Chinas technology level

Increase of return of Japanese companies and domestic employment in Japan

Enhancement of Chinas competitiveness

Stability of trade and fiscal balance

Increase of business chances of Japanese companies in China

Expansion of the Chinese domestic market

17

18