This presentation includes the overview of the causes and impact of Chinese slowdown and throws some light on future possibilities which can occur and main concerns to worry about.

1. Slowdown In Chinese Economy
And Its Impact On The World

2. Introduction to the Chinese slowdown
Effects on Chinese economy
Reasons for the slowdown
Effects on Indian and global economy
Recent happenings in the market
Future predictions of Chinese market

4. CHINA 2015: (Govt Actions)
sources: HiddenLevers, Bloomberg

5. China Before Economic Slowdown

6. Reasons for Slump
Real Estate
bubble
Global
Slowdown
Huge Debts
Yuan
Devaluation
Fall in Steel
Prices

7. 1. Real Estate Bubble
Accounts for 25% to 30% of China’s GDP
Extremely low loan rate at 6%p.a
Lucrative domestic investment destination for Chinese
Large number of vacant and under-performing commercial
properties
Defaults by overleveraged real estate developers

8. 2. Global Slowdown
Manufacturing constitutes 59% of GDP.
Reduced Demand from EU, Japan, South
Korea

9. 3. Rising Debts
Total Debt about 250% of GDP
Repayment burden after initial phases
China’s inventory of unsold homes at record high
Property rates fell

10. 4. Yuan Devaluation
Initial Devaluation of currency by the Central Government.
Allowing the currency to follow market leading to pessimism.
Depreciation lead to capital outflows.
Importers were at loss trading with depreciating Yuan
(Renminbi)

11. 5. Fall in Steel Demand
Decline in automobile & construction sector
Largest producer of steel in the world

12. Effects on India

13. Positive Effects:
Cheaper commodity Prices
Cheap commodity prices leading to cheaper imports
Lower input costs & higher profit margins
An attractive alternative to China
Chinese investment in infrastructure in India($60 bn)

14. Negative Effects:
 Chinese demand has decreased
 India’s exports to China has decreased (14.8 to 11.9)
 Cheap Chinese products competing with the domestic industries
of India (Ex: Steel) Sources:
• Business Standard
• Trading Economics
• Ministry of Commerce, India

15. Effects on Global Economy

16. Impact due to
Reduced imports

17. Impact on
Countries

18. China economy grows at slowest pace in 25 years
, 6.9% in 2015 (Source : The Guardian)
ISM’s PMI : 49.5 (Feb ‘16), 48.2 (Jan ‘16)
China sees fiscal deficit at 3% of GDP (Source
: Reuters)
Recent happenings

19. Source: CNN Money

20. Source: TOI

21. Will the slowdown continue?
“Yes. Generally speaking, economic
growth will slow down. But China will
still maintain a sustainable growth rate.”
-Cao Heping, economics professor at
Peking University
Restructuring of the Chinese economy

22. 28.2% 27.1%
15.1% 11.1% 10.7% 10.3% 10.1% 10.0% 10.1% 10.0% 9.0% 8.5%
47.9%
41.3%
45.9% 48.5% 47.4% 46.3% 46.7% 46.6% 45.3% 43.9% 43.5% 40.5%
23.9%
31.5%
39.0% 40.4% 41.8% 43.4% 43.2% 43.4% 44.6% 46.1% 47.5% 51.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
1978 1990 2000 2007 2008 2009 2010 2011 2012 2013 2014 2015
China's GDP composition
Primary Secondary Tertiary
Source – National Bureau of Statistics of China

23. Some macro-economic expectations
Slower GDP growth - Analysts at Barclays
Research forecast 2016 GDP growth to slow to
6%, while UBS analysts have a slightly more
optimistic prediction of 6.2%.
Rate cuts - Barclays Research predicts two 25
basis points benchmark rate cuts in 2016. One
strong reason – deflation pressure
Yuan depreciation - Analysts at Barclays expect
the dollar-yuan exchange rate to drop to 6.8 by
mid-2016. Euro also a key factor.

25. Promising sectors
 Sectors like Food & beverage, healthcare, private education, clean technology,
cloud computing, e-commerce, logistics and telecom and IT expected to
perform well
 McKinsey estimated that China's health care spending will balloon to $1
trillion in 2020 from $511 billion in 2014
 China's private education sector has reached a market size of $102 billion by
2016 from $43.5 billion in 2009 and is expected to maintain pace acc. to
Deloitte
 China's online sales, or "e-tailing," totalled $450 billion in 2014 and is
projected to hit $1.1 trillion by 2020 acc. to Bain & Co.
 Last year, China spent heavily in the sector as clean energy investment hit a
record $67.7 billion, up 20% from the previous year, according to BNEF.
Dollars are expected to continue pouring in
 Large foreign companies that specialize in cloud services are moving into the
China

26. • The trade volume of China with USA is USD 482 billion
• Unemployment rate is decreasing in USA
• Federal Reserve has hiked interest rates
• Development of Asian Development bank has created new
opportunity to China

27. Main Concerns !!
• There are reasons to doubt the sustainability of service sector.
• Forecasted GDP growth of 6-7% is hard to believe
• Accounting policies are not transparent
• The Shanghai Composite Index can not tell the real picture
• Mitigation of the carbon footprints may require restructuring of economy.
• Chinese stock market may not grow
• Inflation will be about 1%

28. Thank You