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May 23, 2007

China Economy until 2015 and beyond

China may allow the yuan to appreciate at 7.5% per year which would be faster than the 5.5% rate allowed since September, 2006 The yuan has moved from 8.27 to 7.6 since it was floated in July 2005.


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China GDP stood at 20.94 trillion yuan (USD2.7 trillion) at the end of 2006.


Color coded view of the current economy of China's provinces. richer provinces are darker green, poorer are lighter green and transition to yellow.

Projected China's economy with a 7.5% annual strengthening of the yuan. With the current 11% growth rate easing to 8%.

YearGDP(yuan)Yuan per USDGDP trillionUSD
200620.947.82.7
200723.247.43.1
200825.576.93.7
200928.126.44.4
201030.666.05.2
201133.115.56.0
201235.765.16.9
201338.624.88.1
201441.714.59.4
201545.044.110.9


Guangdong, a southern chinese province near Hong Kong, is projected to have a 4 trillion yuan economy in 2011 This would be USD722 billion at the projected exchange rate of 5.5. This is in the range of the current size of the Australian or Mexican economies.

The Energy Information Adminstration (EIA) has to project economic growth in order to project future energy usage. They have scenarios which project China to grow as follows (PPP is in trillions of USD) The World Bank has the PPP equivalent of 1.8 Yuan equal to one USD in 2003. The 7.5% appreciation rate would have the Yuan converge to that PPP rate in 2027-2029. According to the EIA projection China will have a larger economy (PPP) than North America (USA, Canada and Mexico) in 2015. A slight extrapolation of the EIA numbers shows China's economy exceeding the USA + OECD Europe in 2035. China would be larger than India and the USA combined in 2030.

YearLow PPP ChinaLow USHigh PPP ChinaHigh USHigh World
201012.812.413.213.273.9
201517.213.818.715.692.4
202022.515.725.618.5114.7
202528.417.433.922141.3
203035.319.344.325.8173.6



Current GDP per capita of China's provinces. The darker the red the higher the GDP per capita.

China would be moving up to 22,000 to 30,000 per capita PPP by 2030. The US would be at 50,000 to 60,000 per capita PPP. The Japanese yen appreciated from 360 yen to the USD in 1971 up to 83 yen to the USD in 1995. More than a 400% increase and an almost solid appreciation before floating between 90 and 140 yen to the USD.

China will be the largest trading nation and will move up to 25% of the world economy in 2030. The Yuan will be on par with the Euro and the USD as reserve currencies.

I think Taiwan will cut an economically prudent deal within 8 years with China. I think it is in both of their best interests. A slightly tighter coupling than the European Union arrangement makes sense.

3 comments:

Anonymous said...

Hi,

I was wondering, what it the percentage of Taiwanese who feel Chinese?

bw said...

I do not think it is a matter of feel chinese or not. Although I do think the vast majority consider themselves ethnically chinese. The issue has been taiwanese nationalism and a significant number who are ethinically Taiwanese. However, my statements on a likely deal being cut goes to four points.

1. Once the current anti-china leader is gone the likely replacement in his own party and the current opposition leader are pro-china talks. I see the political tide going to a deal being made in the 2008-2012 term of the next Taiwan leader, but give it another term in case talks go slow.
http://www.iht.com/articles/ap/2007/04/09/asia/AS-GEN-China-Taiwan.php

2. China and Taiwan are already joined at the economic hip. the politics and bureaucracy that makes it more difficult for Taiwanese executives and managers to run china operations needlessly introduces costs and delays

3. Taiwan's economy is shrinking as a percentage of a combined China/Taiwan economy. The sooner Taiwan can cut a deal the more leverage that they have.

4. Since I am projecting China to be bigger than Japan and Germany combined by 2015, it seems clear that all of Asia will be in a China dominated EU like trade block.

bw said...

http://en.wikipedia.org/wiki/Republic_of_China_presidential_election,_2008

Former KMT Chairman and Taipei Mayor Ma Ying-jeou has stated that Taiwan should form a common market with China and establish direct transportation links.

A 5/10/2007 poll released by the United Daily News shows Ma's lead over Hsieh at 43% to 28%

The DPP candidate is Frank Hsieh
http://en.wikipedia.org/wiki/Frank_Hsieh

http://www.boston.com/news/world/asia/articles/2007/05/07/taiwan_ruling_party_picks_hsieh_to_run_for_president/

Taiwan's ruling Democratic Progressive Party has picked former Premier Frank Hsieh, who is seen as more eager to improve ties with arch rival China, to run for the presidency next year

As premier, Hsieh sought engagement with China and a gradual opening of economic links.