Demystifying China’s Mega Trends The Driving Forces That Will Shake Up China and the World To Margaret, Edwyn and Arthur Demystifying China’s Mega Trends The Driving Forces That Will Shake Up China and the World By Chi Lo Senior Economist, Hong Kong United Kingdom – North America – Japan – India – Malaysia – China Also by Chi Lo When Asia Meets China in the New Millennium – China’s Role in Shaping Asia’s Post-Crisis Economic Transformation, Pearson Prentice Hall, 2003 The Misunderstood China – Uncovering the Truth behind the Bamboo Curtain, Pearson Prentice Hall, 2004 Phantom of the China Economic Threat – Shadow of the Next Asian Crisis, Palgrave Macmillan, 2006 Understanding China’s Growth – Forces that Drive China’s Economic Future , Palgrave Macmillan, 2007 Asia and the Subprime Crisis – Lifting the Veil on the Financial Tsunami , Palgrave Macmillan, 2009 China after the Subprime Crisis – Opportunities in the New Economic Landscape, Palgrave Macmillan, November 2010 Thinking the Inevitable: China’s Superpower Aspiration in the New Paradigm , Enrich Professional Publishing, March 2012 The Renminbi Rises: Myths, Hypes and Realities of RMB Internationalisation and Reforms in the Post-Crisis World, Palgrave Macmillan, July 2013 China’s Impossible Trinity: The Structural Challenges to the ‘Chinese Dream’ , Palgrave Macmillan, July 2015 Emerald Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2017 © Chi Lo, 2017 Reprints and permissions service Contact: permissions@emeraldinsight.com British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78714-410-1 (Print) ISBN: 978-1-78714-409-5 (Online) ISBN: 978-1-78714-722-5 (Epub) Contents List of Abbreviations Preface CHAPTER 1 A Bird’s-eye View on China’s Mega Trends CHAPTER 2 Future Growth: More Than a Binary Outcome CHAPTER 3 Demographics: What Else before Hitting the Wall CHAPTER 4 The Beginning of the End of Excess Capacity CHAPTER 5 The ‘Debt Bomb’ and Deleveraging Dilemma CHAPTER 6 Capital Account Liberalisation, Realities versus Myths CHAPTER 7 The Great Emigration of Chinese Capital CHAPTER 8 The Belt and Road Strategic Plan CHAPTER 9 Renminbi Gran Turismo CHAPTER 10 The Future of the Renminbi Bibliography Index List of Abbreviations AIIB Asian Infrastructure and Investment Bank AREAER Annual Report on Exchange Arrangements and Exchange Restrictions BAR Belt and Road Strategy BoP Balance of Payments BIS Bank for International Settlements CDB China Development Bank CFIUS Committee on Foreign Investment in the United States CIC China Investment Corporation CNH Offshore Renminbi (Chinese yuan) in Hong Kong CNPC China National Petroleum Corporation CNY Onshore Renminbi (Chinese yuan) CPI Consumer Price Index EPMI Emerging PMI for seven new industries with strategic importance EU European Union EXIM Bank Export Import Bank of China FDI Foreign Direct Investment FTZ Free T rade Zone G3 Group of T hree Countries – Japan, Europe and the United States GDP Gross Domestic Product GFC Global Financial Crisis LGFV Local Government Financing Vehicle M&A Mergers and Acquisitions MNCs Multinational Corporations MoF Ministry of Finance MPC Marginal Propensity to Consume NDB New Development Bank NDFI Non-depository Financial Institutions NDRC National Development and Reform Commission NPL Non-performing Loans O DI Overseas Direct Investment PBoC People’s Bank of China PMI Purchasing Manager Index PPI Producer Price Index PPP Public-Private Partnership Scheme Q DII Qualified Domestic Institutional Investor Q FII Qualified Foreign Institutional Investor R&D Research and Development RQ FII Renminbi Qualified Foreign Institutional Investor SAFE State Administration of Foreign Exchange SASAC State-owned Assets Supervision and Administration Commission SDR Special Drawing Rights SO E State-owned Enterprises SEZ Special Economic Zone TSF T otal Social Financing UNCTAD United Nations Conference on T rade and Development UNESCO United Nations Educational, Scientific and Cultural Organization Nevertheless, these handicaps have not deterred China from trying to build a network for boosting the renminbi’s international standing Its starting point is Africa, where it has been providing political party training to African countries, notably Ethiopia, Sudan, Namibia and South Africa, since the turn of the millennium The political party training programmes aim at educating African political parties on China’s experience in economic development and political governance Through inviting the African political elites to lectures in China at a Chinese education or training institution, to field trips visiting Chinese local governments and provinces and meetings with local officials, farmers and business leaders, and through conducting cultural exchange programmes, Beijing hopes to familiarise the African participants with Chinese traditions and culture, and political and economic systems Crucially, understanding the multi-party system and democratisation in African countries, Beijing’s political party training programmes target not only the ruling parties but also the opposition parties in order to balance the training for both sides of the government This symmetric training approach also extends to Africa’s future political leaders Young generation elites under the age of 40 who hold positions of director or equivalent in their governments receive special attention and resources for training from Beijing This type of training has grown fast For example, between 2011 and 2015 China trained more than 200 young political leaders from different African states through the African Political Party Leaders training programme under the Sino-African Young Political Leaders Forum In 2015, Beijing announced a major initiative to invite 1,000 young African leaders to China for training by early 2018, greatly boosting the scope and scale of the training programme Through such an ideological push in Africa, China is in fact promoting its development and governance experience in the continent Though China argues that the training programmes are only designed for exchanging views and experience rather than imposing the Chinese model on African countries, its approach does constitute building Chinese cultural and educational capacity in Africa which underlies the incentives of building a Chinese empire and an international currency By attracting African political party members to experience China’s economic success in person and by systematically training them on China’s path to economic development, Beijing is consciously trying to entice African political parties to absorb, assimilate and imitate the Chinese model The profound psychological and political impact on the choices and preferences of African political elites will help create an African cadre with thinking and values that are similar with those in China All this amounts to establishing cultural and educational dominance, as discussed above, and China is using Africa as a starting point to build its sphere of influence in the developing world From a renminbi internationalisation perspective, this geographically expansive and institutionally systematic strategy will help pave the ground for these nations to accept and use the renminbi for wider trade and investment transactions in the future It is a Matter of Credibility All this analysis boils down to building international credibility for the renminbi, which China still lacks (Lo, 2013, Chapter 10), so as to get the world’s buy-in for accepting the renminbi as a global reserve currency Economically, China cannot fix its problems by simply pulling the right combination of existing policy levers It must embark on a broader and deeper process of structural and policy reforms, and it must be willing to swallow the bitter pill of slower short-term growth for the sake of long-term goals Politically, China must also come to terms with the gap between how it wants to be perceived and how the world actually sees it It should take a lesson from business and recognise that many of its actions and affiliations on the global stage pose serious risk to its reputation which, in turn, is creating resistance to accepting it and its currency as responsible elements in the global system Consider the view of an international observer on the development in the South China Sea China is seen bullying its southern neighbours by arguing that it was simply protecting its ‘core interests’ in the various disputes But from China’s perspective, it is an aggrieved partner in the region The Chinese argued, for example, that they had reined in their fishing fleet to avoid conflict with the Vietnamese, but only to see that the Vietnamese aggressively claimed the relinquished waters There is no doubt that China can easily elbow out the Vietnamese, the Filipinos, the Malaysians, the Indonesians and any other Southeast nations in case of territorial disputes, assuming no international reaction to its actions Southeast Asia is only a fraction of China’s size and wealth But this does not necessarily make China stronger in the region The Southeast Asian nations will remain China’s neighbours for the rest of their future Though their knives may be short, their memories of what China does to them are certainly long This summaries the perception gap between China and the rest of the world Many Chinese think that their country is being criticised unfairly for its assertiveness in the South China Sea But is certitude worth the price of distrust and condemnation by everyone else? It is a basic social truth that happiness and harmony are far more important than the empty comfort of being convinced that you are right The point is very clear, if China cannot gain the world’s trust, it will not be able to build credibility for the renminbi to become a global reserve currency The Renminbi’s Medium-term Outlook In a nutshell, despite the fading influence of the G3 currencies in the global monetary system and Brexit that weakens global confidence in the major currencies, it is unlikely that the renminbi will gain a global reserve currency status anytime soon That time will come, but only in the longer-term when China has implemented sufficient economic and social reforms to acquire an exorbitant privilege for the renminbi Provided that China keeps up with its reform momentum, the renminbi can still sit in the centre of a regional Asian financial system Just as the City of London acts as a financial intermediation for Europe’s capital flows, Hong Kong can be the financial intermediation for Asia’s capital flows Asia is increasing its linkages with the renminbi gradually by cutting its linkages with the US dollar and the euro (Lo, 2013, pp.158–161) This secular trend of the rise of the renminbi will continue to unfold to support it to eventually become a global currency You can run, but you cannot hide from the renminbi Like it or not, the renminbi is going to shake up the global financial markets and their underlying economies Formerly, this strategy was called One Belt One Road (or OBOR) See note in Chapter The Special Drawing Rights, or SDR, is an international reserve asset, created by the International Monetary Fund in 1969 to supplement official reserves in its member countries As of March 2016, 204.1 billion SDRs (equivalent to about USD285 billion) had been created and were allocated to members SDRs can be exchanged for freely usable currencies The value of the SDR is currently based on a basket of five major currencies: the US dollar, euro, the Japanese yen, pound sterling and Chinese renminbi (the latter was included in the basket in October 2016) Currency war is, in essence, rounds of competitive devaluation when a country seeks to gain a competitive advantage over other countries by devaluing the exchange rate of its currency against other currencies The term was coined by former Brazilian Finance Minister Guido Mantega in 2010, when he opined that a currency war broke out in the aftermath of the US subprime crisis This view has since been echoed by many other government officials, analysts and the financial media from around the world Brexit is an abbreviation for ‘British exit’, which refers to the 23 June 2016 referendum by British voters to exit the European Union (EU) Withdrawal from the EU has been a right under Article 50 of the Treaty on European Union of EU member states since 2007 The process for the UK’s withdrawal is uncertain under EU law – Article 50, which now governs the withdrawal, has never been used before, though Greenland left the EU in 1985 Unless extensions are agreed, the timing for leaving under the article is two years from when Britain gives official notice, but this official notice was not given immediately following the referendum in June 2016 The assumption is that during the two-year window new agreements will be negotiated, but there is no requirement that there be new agreements Bibliography ABC News (2016) Ausgrid lease: Treasurer Scott Morrison blocks sale to Chinese, Hong Kong bidders ABC News, August 11 Retrieved from http://www.abc.net.au/news/2016-08-11/scott-morrison-sale-of-ausgrid-to-chinese-consortium-blocked/7720530 AEI (2016) China Global Investment Tracker American Enterprise Institute Retrieved from https://www.aei.org/china-globalinvestment-tracker/ Agenor, P.-R., Canuto, O., & Jelenic, M (2012, December 21) Avoiding middle-income growth traps Vox CEPR’s Policy Portal Retrieved from http://voxeu.org/article/avoiding-middle-income-growth-traps Aghion, P (2015, July 30) What is the link between innovation and social mobility World Economic Forum Retrieved from https://www.weforum.org/agenda/2015/07/what-is-the-link-between-innovation-and-social-mobility/ Aghion, P., Akcigit, U., Bergeaud, A., Blundell, R., & Hemous, D (2015) Innovation and top income inequality Centre for Economic Policy Research Discussion Paper No 10659 Aghion, P., Akcigit, U., & Howitt, P (2014) What we learn from Schumpeterian growth theory In P Aghion & S Durlauf (Eds.), Handbook of economic growth (Vol 2B, pp 515–563) Amsterdam: Elsevier Bade, R., & Parkin, M (2009) Foundations of microeconomics (6th ed.) 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Economics and Finance, Hong Kong Zhang, L., Huang, J., & Rozelle, S (2002) Employment, emerging labour markets and the role of education in rural China China Economic Review, 13, 313–328 Index Afghanistan, 188 Alibaba, 35, 148 AMC Entertainment, 168 American Enterprise Institute, 167 Anbang, 163, 167 Angola, 170 Animal spirits, 43, 74, 142 loss of, 75–80 regaining, 81–84 Argentina, 42, 223 Armenia, 188 ASEAN (Association of Southeast Asian Nations), 193, 196, 216 A-shares, 141 Asian Development Bank (ADB), 22, 196 Asian Infrastructure and Investment Bank (AIIB), 21, 22, 174, 178–179, 184, 198–201, 203, 223, 233, 241 Asia versus Anglo-Saxon net saving positions, 113 Ausgrid, 181 Australia, 114, 159, 168, 181, 214, 215 Baidu, 35 Balance of payments (BoP), 109–110, 158, 162 Bangladesh, 191 Bangladesh–China–India–Myanmar (BCIM) economic corridor, 190, 194 Bank for International Settlements (BIS), 106, 107, 109, 111, 117, 118, 161, 217 Banking crisis, 119–122 Bank lending, to private sector, 115 Bank loan and shadow banking flows, 130 Bank of Communications, 217 Basic balance, 157 Bass, K., 105, 106 Belarus, 188 Belgium, 69 Belt and Road (BAR), 22–24, 156, 179, 180, 183–184, 223, 232, 233, 236, 237 capital linkage and, 195–196 China and, 184–185 east–west route politics, 187–189 exaggerated fears, 199–201 limits, 196–199 Mekong sub-region and, 192–195 network, 186 North–South land route and, 189–191 North–South sea route and, 191–192 strategic importance of, 185–187 Bond swap, 124–125 Bo Xilai, 15 Brazil, 21, 159, 170, 180 Brexit, 235, 239, 240, 245 Brunei, 193, 216 Budget Law (2014), 133 Buy-on-dip strategy, 229 Caixin manufacturing Purchasing Manager Index (PMI), 45 Cambodia, 159, 193, 195, 196, 216 Canada, 13, 159, 168, 174 Capacity utilisation rates, 87 Capital account, 3, 31, 38, 114, 118, 119, 121, 123, 205, 206, 212, 214, 219–221, 229, 233, 234, 239 Capital account liberalisation, 21, 135–137, 225 with Chinese characteristics, 139, 151–153 inflow channels, 139 outflow channels, 139–140 two-way flow channels, 140–142 debunking of myths and, 148–151 FTZs and incentive compatibility and, 142–144 potential capital flight and, 144–146 reason for, 137–138 stock connect schemes and, 146–148 Capital accumulation, 84, 85 Capital flight, 31, 99, 122, 136, 156 versus capital outflows, 160–163 potential, 144–146 Capital flows, 135, 137, 144, 145, 150, 153, 156, 175, 209, 212, 220, 236, 241, 245 See also Capital inflows; capital outflows Capital inflows, 5, 110, 137, 138, 157, 161, 209, 229 Capitalism, Socialism and Democracy (Schumpeter), 98 Capital misallocation, 37, 74, 89, 106, 121 Capital outflows, 4, 110, 136, 138, 144–145, 155–157, 205 versus capital flight, 160–163 and Chinese ODI, 172–174 changing face, 167–169 first signs of, 157–159 future of, 175–179 overseas expansion drivers and, 163–167 See also Capital flows Central Asia, China’s trade with, 189 Chad, 173 Chanos, J., 105 ChemChina, 163 China Development Bank, 162, 223, 228 China Development Forum (2016), 40 China Energy Conservation and Environmental Protection Group, 128 China EXIM Bank, 223 China Internet Watch, 18 Chinalco, 168 China Mobile, 148 China National Building Materials Group, 128 China National Cereals, Oils and Foodstuffs Corporation (COFCO), 128 China National Petroleum Corporation (CNPC), 173 China National Pharmaceutical Group Corporation (Sinopharm), 128 China–Pakistan economic corridor, 192 Chinese Dream, 20, 22, 25, 38, 199, 205, 231, 235–236, 238 Chinese imports over-invoicing estimates, 146 Chinn-Ito index, 149 Chongqing, 197 CNOOC, 168 Coal and steel industries profitability, 94 Committee on Foreign Investment in the United States (CFIUS), 181 Consumers, by income groups, 16 Consumption, 1, 3, 9, 12, 16–18, 20, 23, 27, 31, 32, 34, 39–41, 43, 73, 102, 138, 158, 175, 178, 184, 186, 201–203 domestic, private, 2, 202 See also Demographics Corporate debt and systemic risk, 125–128 Corporate liability to asset ratio, 125 Creative destruction, 98 Currency war, 234 Dalian Wanda, 168 Debt burden, 32, 34, 36, 108, 109, 118, 119, 123, 124, 132 Debt components, 126 Debt-deflation spiral, 36 Debt-servicing and efficiency problems, 116–117 Debt swap programme, 119, 123, 124, 132–133 Debt-to-equity ratios, of industrial firms, 127 Debt-to-GDP, for non-financial sector, 107 Decentralisation, 15, 91–92 Deficit country, Deleveraging process, 105–107 banking crisis and, 119–122 and China’s debt in perspective, 107–111 corporate debt and systemic risk and, 125–128 debt bomb and, 111–114 debt problem solution and, 117–119 debt-servicing and efficiency problems and, 116–117 financial structure and, 114–116 privatisation and, 129–130 risk premium repricing and, 122–125 SOE reform with mixed ownership and, 128 Democratic Republic of Congo, 170 Demographics, 47–48 ageing population and, 58–59 consumption to rise with ageing and, 51–53 demographic tax and, 49–51 early retirement and demographic tax and, 68–70 incentive compatibility problem and, 70–72 inflection point, 56–57 labour income and, 62–63 medium-term remedy, 63–65 reverse migration and, 65–68 rising asset demand and, 54–55 unwilling consumer and, 59–62 Deng Xiaoping, 29, 43 Denmark, 69, 170 Dependency ratio, Devaluation, of currency, 4–6, 31 Diminishing marginal returns on investment, 164 Dim sum bonds, 228 Domestic tourists, 19 Economic growth, 2, 11, 28, 32, 36, 39, 42, 50, 52, 62, 65, 66, 68, 71, 106, 123, 125, 126, 137, 144, 174, 222 Economic, liberalisation, 2, 15, 39, 43 Economic rebalancing, 60 Ecuador, 24, 170 Ethiopia, 243 Eurasian Economic Union (EEU), 188 European Central Bank, 213 European Union (EU), 80, 235 Excess capacity, 73–75, 164 animal spirits loss of, 75–80 regaining, 81–84 incentive problem and, 102–103 market forces alignment and, 92–95 reform in old days and, 99–100 SOE and, 87–91 structural problem and, 80–81 suffering from, 86–87 supply-side reform in Chinese style and, 96–99 under capitalisation and, 84–85 Xi’s supply-side reform reality and, 100–101 zombies slaying and, 95–96 Exchange rate, 2–4, 12, 30, 108–109, 121, 122, 135, 138, 145, 151–153, 157, 160, 161, 165, 179, 180, 198, 210, 211, 222, 224, 226, 228, 229, 234, 236 Export breakdown by value, 13 Exports to China, as percent of China’s total imports, 216 FAW Car Co., 103 Fertility rate of population, 10, 49 Financial account, 109 Financial liberalisation, 53, 57, 64, 125, 128, 137, 149, 202, 205, 222–225, 227 Finland, 118 Five-Year Plans, 12, 16, 40–42 Fixed asset investment, 117–118 Fixed cost, 92, 93 Foreign debt, 31, 108–112, 118, 161, 196 Foreign direct investment (FDI), 1, 2, 109, 140, 155, 157, 158, 170, 199, 242, 243 Restrictiveness Index, 180 Foreign savings, 112–114 France, 69, 168 Free-trade zones (FTZs), 136, 140–142, 145–146 and incentive compatibility, 142–144 Fujian Province, 197 Future growth, 27 G3 currencies, 240 failure of, 233–235, 245 Gabon, 173 Galapagos syndrome, 34, 35 GDP components and growth contribution, The General Theory of Employment, Interest and Money (Keynes), 43, 74 Germany, 13, 69, 84, 85, 168, 213–215 Ghana, 173 Gini coefficient, 143 Glencore Xstrata, 169 Goldman Sachs, 106 Great Financial Crisis (GFC), 28, 31, 34, 105, 222, 233 Greenfield investment, 166 Greenland, 235 Gross fixed capital formation, 75, 76 Gross international investment, 159 Group du Louvre, 166 Growth expectations structural decline, 82 Growth structure, changing, 12–16 Harmonious society model, 14–15 High-tech industries, growth of, 44–45 Hong Kong, 18–19, 56, 141, 149, 168, 193, 197, 207–209, 214–217, 219, 226, 242, 245 CNH–CNY premium driven renminbi deposit growth in, 211 foreign currency deposits, 210 Hong Kong Monetary Authority, 226 Household consumption, annual per capita, 17 Hu kou (household registration) system, 8–10, 65–67, 71 Impossible Trinity, 135, 138, 151, 153 Incentive compatibility, 142 and FTZ, 142–144 India, 6, 21, 85, 180, 190, 191 Indonesia, 6, 193, 196, 216 Inner Mongolia, 197 Insurance premium, 178 Internationalisation process, 21 International Monetary Fund (IMF), 171, 233 Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), 138, 149 Internet users and penetration rate, 177 Investment, 1, 9, 12, 16, 21–24, 29–32, 35–36, 41, 48, 51, 52, 55–59, 62, 71, 78–79, 86, 93, 96, 109–113, 124, 137, 139–141, 147–148, 183– 185, 189, 192, 194–199, 201–203, 206, 207, 209–210, 217–219, 227–229, 232, 237, 240, 242, 244 domestic, 2, 5, 132 excess, 2, 5, 39, 81, 84, 88, 201–202 fixed asset, 117–118 overseas direct investment (ODI), 155, 156, 158, 163, 164, 166–174, 180–182, 197, 198 private, 74–77, 81, 82, 97, 101, 129, 141, 201 returns, 15, 83 state, 2, 23 See also Capital outflows Iran, 159, 188 Japan, 13, 19, 32–38, 50, 52, 63, 84, 85, 149, 168, 174, 185, 196, 206, 217, 218 Jin Jiang group, 129, 130, 166 Jin Liqun, 200 Kazakhstan, 188 Keiretsu model, 34 Keynes, J M., 43, 74 Kuka, 181 Kunming, 194 Kyrgyzstan, 188 Laos, 189, 193–195, 216 Liability-to-asset ratios, 86 Liberalisation, 29, 221 capital market, 33 economic, 2, 15, 39, 43 financial, 53, 57, 64, 125, 128, 137, 149, 202, 205, 222–225, 227 of interest rate, 91, 131, 132, 224 See also Capital account liberalisation Life Cycle Theory, 48, 52, 53, 57 Li Keqiang, 40 Li Yuanchao, 15 Loango National Park, 173 Local government financing vehicle (LGFV) debt, 123–124, 130 Louvre Hotels Group, 166 Luxembourg, 69, 216 Macau, 197 Macquarie Bank, 106 Malaysia, 17, 185, 193, 216 Mantega, Guido, 234 Marginal propensity to consume (MPC), 53, 202–203 Maritime Silk Road, 191 Market forces, 75 alignment of, 92–95 May, Theresa, 181 Mekong Basin, 190 Middle East, strategic importance of, 186 Middle-income trap thesis, 39, 41–42 debunking of, 43 Midea, 181 Migrant workers, 65–68 MMG, 169 Moody’s, 106 MSCI Emerging Market Index, 229 Mutual Fund Recognition scheme, 141 Myanmar, 190, 193, 194, 216 Namibia, 243 Nanjing Cenbest, 169 National Development and Reform Commission (NDRC), 98, 165 National income accounting, Net international investment position, 113 New Development Banks (NDB), 21–22, 233, 241 New normal, 28 Nexen, 168 Nigeria, 24, 149 Non-depository financial institutions (NDFIs), 120, 122 Non-performing loans (NPL), 132 Norway, 13 Offshore RMB deposits, 208, 222 One Belt One Road (OBOR) See Belt and Road (BAR) One-child policy, 8, 10, 11 Online sales growth, 177 Operating profit, 93, 94 Overseas direct investment (ODI), 155, 156, 158, 159, 163, 164, 166–174, 180–182, 197, 198 Pakistan, 191, 192, 238 People’s Bank of China (PBoC), 4, 94, 122, 124, 131, 140–141, 145, 151–152, 165–166, 213, 220–223, 226, 227 Per-capita living space, 80 Peru, 169 Philippines, 6, 193, 216 Ping An Insurance, 150 Privatisation, 97, 107, 125, 128–130 Profit-to-sales expense ratio, of enterprises, 116 Public–private partnership (PPP) scheme, 128, 129, 132 Qualified Domestic Institutional Investor (QDII), 139, 140 Qualified Foreign Institutional Investor (QFII) scheme, 139, 141 R&D spending, comparison with, 14 Reagan, R., 97 Reaganomics, 97, 98 Renminbi (yuan), 1–6, 21–22, 31, 136, 137, 140–141 cash pool, 165 clearing banks of, 214 effective exchange rate, 165 future of, 231–232, 240–244 Chinese Dream role, 235–236 credibility, 244–245 empire building for global renminbi, 237–238 future currency demand, 236–237 global reserve currency, 238–239 G3 currencies failure, 233–235 medium-term outlook, 245–246 internationalisation, 20–22, 136, 138, 140, 142, 148, 151, 179, 185, 186, 205–207, 231, 236, 237, 240, 244 and demand for money theory, 209–210 downgrading of, 221–223 in Europe, 213–214 new monetary order fostering, 220–221 obstacles, 210–212 offshore pool as key, 214–217 portfolio investment implication, 227–229 pushing into South Korea, 217–220 slowdown signs in, 223–227 Renminbi Qualified Foreign Institutional Investor (RQFII), 141, 217 Replacement fertility rate, 49 Return on assets (ROA), 126–128 Reverse migration, 65–68 Rio Tinto, 168 Risk premium repricing, 122–125 Russia, 21, 180, 188, 189, 197 Savings, 11, 17, 21, 51, 61–63, 67, 68, 119, 124, 202, 209, 240, 241 domestic, 5, 29, 31, 111, 113, 114, 118 excess, 2, 39, 48, 63 falling, 6, 52 foreign, 113, 114, 118 See also Capital inflows high in, 5, 58, 59, 112, 114, 179 national, 2, 5, 111–112 urban, 48, 59, 61 Schumpeter, Joseph, 98 Service trade deficit, 158 Shanghai–Hong Kong Stock Connect scheme, 141, 147, 148, 150 Shanghai Stock Exchange, 141 Shenzhen–Hong Kong Stock Connect scheme, 141, 147, 148, 150 Shenzhen Stock Exchange, 141 Shuanghui International, 168 Silk Road Fund, 183, 233, 237, 241 Singapore, 84, 149, 185, 193, 215, 216 Sino-African Young Political Leaders Forum, 243–244 Sino-Japanese deal, 218 Sinoma & Technology Co., 103 Sinopec, 173 Smithfield Foods, 168 Soho China, 167 Somalia, 170 Soros, George, 105 South Africa, 21, 159, 170, 243 South Korea, 13, 17, 19, 84, 118, 185, 206, 214, 215 Special Drawing Rights (SDR), 222–223, 233, 241 Special Economic Zones (SEZs), 142, 143 Sri Lanka, 191 State Development and Investment Corporation, 128 State-owned Assets Supervision and Administration Commission (SASAC), 130 State-owned-enterprises (SOE), 22, 31, 32, 34, 43, 82, 86, 95, 101–103, 106–107, 122, 127–129, 131–133, 155, 167–169, 171, 172, 195 corporate liabilities and, 125–126 credit-fuelled investment of, 76 declining share, in industrial sector, 99 and excess capacity, 87–91 loss-making, declining share of, 100 productivity, 15 reform with mixed ownership, 128 return on equity of, 129 Stock connect schemes, 141, 146–148 Stock market capitalisation, 114 Straits of Malacca, strategic importance of, 187 Structural rebalancing, 176 Sudan, 170, 243 Supply-expansion model, 81, 143 Supply-side reform in Chinese style and, 96–99 of Xi, in reality, 100–101 S.W.I.F.T system, 21, 233, 241 Swiss National Bank, 213 Syngenta, 163 Taiwan, 56, 80, 197, 214, 215, 216, 218 Taiwan Stock Exchange, 56, 57 Tencent, 35, 148 Thailand, 17–19, 159, 189, 193, 194, 216 Thatcher, M., 97 Thatcherism, 97, 98 Tibet Mineral Development Co., 103 Total social financing (TSF), 122 flows components of, 115 versus GDP growth, 123 Tourist destinations, 19 Trade balance with countries, having offshore RMB centre, 219 Trade deficits, 215, 217–218 Trade surplus, 4, 5, 114, 159, 160, 214–215 Transatlantic Trade and Investment Partnership (TTIP), 185 Trans Pacific Partnership (TPP), 185 Transparency International, 170, 171 Turkey, 188, 189 Two-child policy, 8, 10–11 Ukraine, 235 Under capitalisation, 84–85 Union Pay, 243 United Kingdom, 31, 75, 84, 95, 97, 118, 149, 181, 213, 217, 235 United Nations Conference on Trade and Development (UNCTAD), 12 United Nations Educational, Scientific and Cultural Organization (UNESCO), 13 United States, 13, 18, 20, 22, 23, 31, 37, 42, 50, 56, 57, 63–65, 75, 84, 91, 95, 97, 114, 118, 149, 168, 169, 174, 176, 180, 181, 185, 200, 236, 241 Urbanisation and demographics, 6–12, 65, 80 Urban saving rate and consumption, 61 Variable cost, 92–93 Venezuela, 24, 170, 171 Vietnam, 6, 185, 193, 195, 196, 216 Waldorf-Astoria Hotel, 167 Wang Yang, 15 Wen Jiabao, 39 WH Group, 168 Workforce, shrinking, Working-age population growth, 50 World Bank, 54, 172, 174, 196 World Trade Organisation, 39, 126 Xi Jinping, President, 14–16, 20, 22, 23, 25, 27, 30, 38, 40, 59, 66, 73, 74, 75, 77, 81, 86, 90, 92, 96, 103, 117, 128, 164, 183, 197, 199, 202, 205, 231, 236, 238 financial liberalisation under, 224–225 supply-side reform reality of, 100–101 Xinjiang, 196 Xinxing Cathy International Group, 128 Yuan See Renminbi (yuan) Yunnan/Guangxi gateway, 194, 197 Zambia, 173 Zhang Gaoli, 40 Zhou Xiaochuan, 106 Zhou Yongkang, 15 Zhu Rongji, 32, 40, 90, 99, 126 Zombie firms, 93, 116, 117, 122 slaying of, 95–96, 121, 133 .. .Demystifying China s Mega Trends The Driving Forces That Will Shake Up China and the World To Margaret, Edwyn and Arthur Demystifying China s Mega Trends The Driving Forces That Will Shake Up. .. clarify some of the important issues stemming from China s mega trends and open up new angles for further debates and research on the driving forces that will affect the Middle Kingdom and the global... assess the evolution of the mega trends through theoretical and empirical analyses It captures the new mega trends and reassesses the prevailing trends by examining the structural forces behind them,