China growth vs. reform Prospects and challenges

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China Research
China growth vs. reformProspects and challenges
February 2014
Dr. Zhi Ming ZHANG (???) Managing Director, Head
of China Research The Hongkong and Shanghai
Banking Corporation Limited 852 2822
4523 zhimingzhang_at_hsbc.com.hk
View HSBC Global Research at http//www.research.
hsbc.com Issuer of report The Hongkong and
Shanghai Banking Corporation Limited Disclosures
and Disclaimer This report must be read with the
disclosures and the analyst certifications in the
Disclosure appendix, and with the Disclaimer,
which forms part of it
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Chinas growth dynamics

• Cyclical rebound vs. structural challenges
• Recent growth deceleration vs. stabilization
• Quantity vs. quality of growth
• Rising growth dependency on credit
• Growth, rising property risk and RMB exchange
  rate
• Whats unique about Chinas shadow banking?
• Road ahead
• We need to properly manage the dynamics between
  growth, reform and stability
• President XI Jinping

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Chinas reform ambition vs. roadmap

• Comprehensive and aggressive targets set for
  2020
• The Party announced a 60-measure comprehensive
  reform initiative 3rd plenum last November
• Covers financial (interest rate capital
  account) and SOE reform
• Roadmap or milestone yet to be specified
• China (Shanghai) Pilot Free Trade Zone (FTZ)
• Reform challenge
• Vested interests Local province governments vs.
  Beijing SOE vs. POE
• Emphasis placed on domestic policy
• Ability and willingness to allow short-term
  setbacks
• Whats on the new leaderships mind?

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China vs. Europe

• Chinas strategic priority
• The European advantage strategic partner or
  competitor?
• Where does the US fit in?
• Incentives to open markets and reform service
  sector
• Ensure China remains active in political
  dialogue
• Chinas aggressive investment abroad
• Still at early stage China now vs. Japan in the
  80s
• What does China want?
• Investment return, access to resource and
  technology technical know how
• What role is there for Europe to play in
  supporting Chinas going out strategy?