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Coface SA — Coface 2023 Country Risk Conference, Hong Kong
14 slides from Coface SA's conference presentation, May 18, 2023
Slide 1: Coface Country Risk 2023, Hong Kong
coface Pe 2023 COUNTRY RISK 18 MAY 2023, HONG KONG
Slide 2: China's reopening brings relief but difficult economic transition ahead
CHINA’S REOPENING BRINGS RELIEF BUT DIFFICULT ECONOMIC TRANSITION AHEAD B E R N A R D AW C H I E F E C O N O M I S T, A S I A PA C I F I C , C O FA C E
Slide 3: Three horse carriages of China's growth: export drag in 2023
THREE HORSE CARRIAGES OF CHINA’S GROWTH EXPORT DRAG IN 2023 Net exports help drive GDP over past four years China goods export growth slows amid weaker global demand % y/y or percentage points $ trillions, 12-month trailing sum 15 4 Net Exports Investment Ukraine- Russia war Consumption Real GDP 10
Slide 4: Consumption recovery solid but momentum may peter off
THREE HORSE CARRIAGES OF CHINA’S GROWTH CONSUMPTION RECOVERY SOLID BUT MOMENTUM MAY PETER OFF China retail sales and services output China consumer confidence remain weak Most urban depositors still aim to save % y-o-y Index % 40 140 70 30 130 Willingness to save 20 60 120 10 110 50 0 100 Consumer c
Slide 5: Investment growth dependent on infra spending
THREE HORSE CARRIAGES OF CHINA’S GROWTH INVESTMENT GROWTH DEPENDENT ON INFRA SPENDING Infrastructure to be main driver of FAI growth PBOC Entrepreneur survey PBOC Entrepreneur survey % y-o-y Diffusion index Diffusion index 25 80 60 19.6 20 15.7 70 50 15 10.0 8.1 5.9 5.1 60 40 10 7.2 5.1 5.4 2.9 4.9
Slide 6: China's 2023 growth faces pressures: scarring effects of pandemic
CHINA’S 2023 GROWTH FACES PRESSURES SCARRING EFFECTS OF THE 3-YEAR PANDEMIC Coface's China GDP growth forecast PMI signal robust services rebound, but manufacturing stalls Annual average, % Output/Activity monthly changes, sa, Dec 2019 = 100 12 150 145 10.4 140 9.4 9.7 140 140 10 7.9 8.4 130 7.8 7.4
Slide 7: Long-term growth challenges
LONG-TERM GROWTH CHALLENGES
Slide 8: Shrinking workforce, ageing population; rebalancing towards consumption
SHRINKING WORKFORCE, AGEING POPULATION REBALANCING TOWARDS CONSUMPTION GAINS NEW URGENCY China population - two turning points Household consumption grows over the decades Billions (left); % of total population (right) but not as fast as exports, investment Index (1990:100) 1st 1.5 2010 2nd 75% 3500
Slide 9: Diminishing capital returns and high corporate debt
DIMINISHING CAPITAL RETURNS AND HIGH CORPORATE DEBT SOE AND SUPPLY SIDE STRUCTURAL REFORMS Declining returns to investment in China Credit to non-financial corporations up Private holding share in total investment falls Incremental Capital Output Ratio (ICOR) sharply after GFC since 2015 % of GDP %
Slide 10: Productivity slowdown: future TFP growth depends on R&D, FDI, labour shift
PRODUCTIVITY SLOWDOWN FUTURE TFP GROWTH DEPENDS ON R&D, FDI, LABOUR SHIFT China’s R&D spend rises quickly but still Falling FDI Net Inflow into China for 20 years FDI Regulatory Restrictiveness Index lower than Korea, Japan and USA % of GDP Index % of GDP OECD average 0.7 5 Non-OECD average 5 Korea
Slide 11: Policy priorities: 2024 is 'the year of reform'?
POLICY PRIORITIES 2024 IS ‘THE YEAR OF REFORM’? STABILISE THE BOOST ENHANCE POTENTIAL ECONOMY CONSUMPTION GROWTH Neutral fiscal stance Raise personal income, Reform state-owned but accommodative improve social safety net, enterprises (SOE), raise monetary policy. provide consumption retirement age i
Slide 12: Follow Coface's company page on LinkedIn
TO GET OUR LATEST ECONOMIC ANALYSIS FOLLOW COFACE'S COMPANY PAGE ON LINKEDIN
Slide 13: Thank you
_ THANK YOU FOR TRADE
Slide 14: Disclaimer
DISCLAIMER This powerpoint presentation is a marketing communication emanating from The Coface Group is under no obligation and does not undertake to provide Coface Group. updates of these forward-looking statements and information to reflect events that Unless otherwise stated, references to the “G
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