The China Analyst

SeptemberApril 20142013 І www.thebeijingaxis.com/tca China’s Continued Quest for Natural Resources China in the Developed World Features China’sFeeding Increased a Billion: PresenceChina’s Transforming in the Developed Agricultural World Sector TheChinese Growing Mining Global Firms In infuence the Year of Chineseof the Horse: Consumers a Trot, a Canter or a Gallop? China’sChinese Transformation: Super Majors: Tilting Implications the Global for GlobalOil and Supply Gas Playing Chains Field International Advisory and Procurement Research and Analytics Sales Strategy STRATEGY Activation Formulation Strategy AND Implementation MANAGEMENT CONSULTING Customised and practical strategy and management consulting solutions for companies seeking to optimise international growth and proftability Worked with more than 50 industry leaders spread across 6 continents and in over 10 diferent industries Conducted more than 80 projects in the last 5 years, of which 30 were emerging market growth strategies Conducted more than 30 China/Asia strategic engagements in the last 2 years Over 50% of engagements are with repeat clients Supported more than 10 companies in the last 2 years to set up and launch their operations in China Integrates a multicultural team www.thebeijingaxis.com The Middle Kingdom’s Growing Appetite With slower economic growth of 7.7% in 2013, the story of China’s contribution to global demand for commodities is still far from over. In March 2014, China unveiled its long-awaited plan to have approximately 60% of its more than 1.3 billion people living in urban areas by 2020 in a bid to boost economic growth and efciency. These new urbanites will demand greater quantities of disposable goods, electronics and white goods to furnish their new dwellings – ushering in a new wave of consumption. China will undeniably experience some growing pains as it begins to rebalance, yet the country will continue to grow – and from a larger base than when GDP was expanding at a double-digit pace. Multinationals who have not yet entered (or succeeded in) the Chinese market should note the scale of the opportunity in the Middle Kingdom and readjust their long-term strategy accordingly. China’s % of global resource consumption Coal Steel AluminumCopper Gold Oil 2% of China’s population consumes 25% of global luxury goods 1,066 metric tons of gold were imported in 2013, 1.2 billion the world's largest mobile phones were in circulation in China in 2013 GOLD GOLD $1.6 trillion was the overall market value of China's e-commerce market in 2013 54,720 children are born every day in China 50% of the world’s pork 197 mn is eaten in China increase in urban dwellers 2000, highest globally 240 mn vehicles 97 million registered by 2012 122 Chinese traveled billionaires abroad in 2013 in 2013, compared to 0 in 2000 Source: Various; The Beijing Axis Analysis The At the Highest Level China Underscoring China’s commitment to sustained economic reform, Chinese Analyst Premier Li Keqiang mentioned the word “reform” a remarkable 77 times in his opening speech at the National People’s Congress, China’s annual rubber April 2014 stamp legislative assembly held this past March in Beijing. Published by The Beijing Axis The delegates of the National People’s Congress global value chain will assure steadily rising 3806 Central Plaza revealed a GDP growth target of “around” 7.5% for demand for mineral products and advanced 18 Harbour Road Wanchai 2014 while prioritising mining technologies. As the mining industry Hong Kong, PRC other key socio- cools from its 2012 boom, resource nationalism, Tel: +86 (0)10 6440 2106 economic issues. Over an increase in price volatility, higher operating Fax: +86 (0)10 6440 2672 the past year, Beijing costs and declining mineral grades will increase www.thebeijingaxis.com has repeatedly pledged risk and complexity in the global mining sector. Publisher to tackle corruption, As resource constraints continue to arise, Chinese Kobus van der Wath reduce production mining frms will continue their trek into deeper [email protected] from key polluting mineral deposits domestically and abroad. industries – aluminium, Advisor cement, glass and Trends in China’s fnance and banking sectors will William Dey-Chao steel – and increase be instrumental in demonstrating the direction [email protected] consumer spending the Chinese economy will take. The rapid growth Senior Manager levels. of shadow banking, along with its inherent risk, Barbie Co demonstrates the Chinese economy’s need for [email protected] The Chinese government also hopes to continue a more transparent and accountable financial implementing reforms by opening state- system. Editor dominated industries up to private, and even Daniel Galvez foreign investment, coerce banks into becoming It is against this backdrop that China’s [email protected] more market-sensitive and further ease exchange policymakers will continue to dictate the pace Associate Editor rate controls. Beijing hopes these structural and of change through their policy of coordinated Tim Quijano fnancial reforms will unlock additional sources of reform, which will continue to initiate remarkable [email protected] economic growth and improve the efciency and opportunities both in the Chinese market and market-sensitivity of the Chinese economy. abroad. Designer Qing Lei In line with China’s increase in consumption, In the April 2014 edition of The China Analyst, we [email protected] China’s agricultural sector will undergo structural outline the implications of China’s continued quest To view the contents of previous changes starting in 2014. China’s State Council for natural resources as the country redefnes itself editions of The China Analyst, see recently announced plans to abandon the once more through the implementation of key Previous Editions on page 35. To country’s 95% grain self-sufciency policy, which economic reforms. subscribe free of charge to The China Analyst, please visit www.thebeijingaxis. has been in place since the days of Maoism. This is com or www.thebeijingaxis.com/tca. expected to result in rapid growth in the amount I trust that our readers will enjoy this edition of of imported foods consumed locally. Moreover, The China Analyst and, as always, I welcome your For advertising opportunities, please the population’s continued shift toward a more feedback. contact Barbie Co at barbieco@ thebeijingaxis.com. protein-rich diet will further strain global food supply chains. Genetically modifed foods, greater mechanisation and market-oriented central Kobus van der Wath policies can lead to greater efciency in China’s Founder & Group Managing Director agricultural sector. The Beijing Axis [email protected] Increasing consumption at all levels in China will also lead to growth in demand for oil and minerals. Though China has recently become the world’s largest importer of oil, China’s per capita DISCLAIMER oil consumption lags well behind the levels of This document is issued by The Beijing Axis Ltd. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections the developed world, which demonstrates room and estimates are subject to change without notice. This document is for information purposes only, and solely for private for further growth. As China’s consumption of oil circulation. The information presented here has been compiled from sources believed to be reliable. While every efort has been made ensure that the information is correct and that the views are accurate, The Beijing Axis cannot be held responsible has ballooned, China’s state-owned oil and gas for any loss, irrespective of how it may arise. In addition, this document does not constitute any ofer, recommendation or enterprises have developed into global players solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past representing key collaboration opportunities for performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as international firms, especially in areas such as rise. The Beijing Axis, and/or a connected company may have a position in any of the investments mentioned in this document. tapping unconventional resources. China has also All readers are advised to make their own independent judgement with respect to any matter contained in this document. hinted at opening up the Chinese market to more Copyright notice: Copyright of all materials, text, articles and information contained herein resides in and may only be foreign participation. reproduced with permission of an authorised signatory of The Beijing Axis. Copyright in materials created by third parties and the rights under copyright of such parties is hereby acknowledged. Copyright in all other materials not belonging to third parties and copyright in these materials as a compilation vests in and shall remain copyright of The Beijing Axis and should not China’s interest in advancing its climb up the be reproduced or used except for business purposes on behalf of The Beijing Axis or save with the express prior written consent of an authorised signatory of The Beijing Axis. All rights reserved.

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