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12 FYP by Mind Map: 12 FYP
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12 FYP

FORECASTS

Salary

Average manufacturing salaries will triple in 5 years

Salaries are going to rise 15-20%, Is the party over?

Andy Xie 400% increase over 10 years for unskilled / semi-skilled

Shift in position of Govt. Labour Bureaus, Unions, WAS:, keep salaries low, suppress "trouble makers", TO BECOME:, neutral, even support demands for higher salaries

RMB exchange rate

Free float would force RMB +10-20%, Exported product from China will get more expensive, benefits extraction, harms labor intensive, Chinese to have less RMBs, Margins are already low, will force companies out of business, Hu Jintao sanoo näin, less exports, more focus on domestic market, more competition in domestic market, Imported products will become less expensive in China

3-5% percent one-time correction coming soon

China Is On The Brink Of A Huge Yuan Revaluation

Consumer

trends, more emphasis, services, salaries get higher, more money to spend, social security works better, no need to save so much, more consumption (vs saving)

opportunities for developing incredible and highly profitable consumer businesses will explode

segments, extraordinary growth in premium consumer businesses, JL: maybe even so in in mid tier segment?, much larger, more brutal and dynamic mass consumer markets.

Inflation

prices go up, stimulus package heats the economy, energy prices go up

increase in household income

bubbles

real estate, housing, commercial

internet, renren ipo

Locations

Go central, go west

go t2, t3, t4

Industries

Transport, Rail system investment next 10 years will be less than last 10 years, CCTV

Energy, Shortages (central and west will suffer more), Energy, Diesel

services, the government will aggressively promote service consumption, incentives

BUSINESS ISSUES

12 FYP

Perspectives, Global economy, = looks bad, regions, Europe, US, Revolutions, Oil prices up, New global recession, no good news, new recession, China will look good anyway, compared to rest-of-the world, real terms, Chinese economy, domestic market, service market, consumer market, overall, Industries, Demand drivers, Industrial policies, Catalogue for the Guidance of Foreign Invested Industries, Catalogue of "indigenous innovation" products, What's a good province for industry X? (link), Not the whole truth: 50% of laptops is made in Kunshan - even IT manufacturing is not top priority., Trends, Competition, Finnish advantage, Forest industry, Timber, Construction, Location, BJ, SH, SZ vs Others, Other, McK 22 clusters, HSBC: 93 cities > 5M; 177 cities > 3M, East vs. West, West, Wage bands, Exolus, Energy supply?, electricity, China Law Blog, diesel, North vs South, North, Finnish advantage, Climate, Forest, Winter tires, Joulupukinmaa, Russia?, Financials, Costs, Wages will go up, Exchange rate, RMB revaluation, Volume/Value of exports from China goes down, Volume/Value of imports to China go up

Is this an opportunity or a threat?, Opportunity, More demand, Industries, Well-being, Environment, Health care, energy, environmentqlly sound methods for energy production, alternative energy, agribusiness, retail and ecommerce, IP intensive industries, service and service support, Consumer consumption, retail, Retail sales in biggest cities (link), services, health care, urban population 2005-2025 income bands (link), total 500M ==> 800M, segments, top: 50M ==> 200M, middle: 50M ==> 500M, low: 400M ==> 100M, Q: Where to sell?, A1: Consumption (see slide), total retail sales, retail sales per capita, A2: not in one city, but in 100 cities, but in 22 clusters (link), Chinese go abroad, Do business with Chinese abroad, Get financing from Chinese, Sell your business to Chinese, They are looking for, Brands to sell with in China, Technology, Market access, existing solid customer base, Finland: too small, Access to Western Europe, Access to Russia via Finland: ???, Logistics flow ==> Russia via Finland, Threat, Cross-industry, Costs, supplies --, foreign--, chinese-, labor +++, Sales price level --, up, Demand, down, Competition, Market share --, Chinese competitors favored, Other entry barriers, policy, regulations, cultural, indigenous innovation policies, Industries

So what?

LINKS

Brunswick Group

China Law Blog

KPMG

McKinsey

What will happen in China 2011?

Understanding China's Growing Love For Luxury

fast-track

slides in flickr

Public procurement / "indigenous innovation"

US-China Business Council, Provincial and Local-Level Indigenous Innovation Catalogues 02-2011

US China economic and security review comission, 2010 Report to Congress

Kauppapolitiikka, Kiinan julkiset hankinnat Euroopan näkökulmasta

EuCham China, European Business Experiences Competing for Public Contracts in China

STOP THE PRESS:, USCBC Special Report: China Delinks Innovation and Procurement Policies (May 10, 2011):

YOUR REACTIONS

COMMENTS THAT MUST BE SAID

AmCham 2011 Whitepaper / Survey / n~300, Conclusions, Issues / Challenges, "Chinese Business as usual", Bureaucracy, Laws, regulations, interpretation, Contracts, IPR, Corruption, HR constraints, Management, Worker, COMMENT: No issues with profitability, Operation margin, 60% better, 20% same, 20% worse, 2% much worse

QUESTIONS YOU WANT ANSWERED

Industrial policy documents, docs, doc 1: strategic / important industries in 12th FYP, doc 2: Catalogue for the Guidance of Foreign Invested Industries, encouraged, restricted, prohibited, doc 3: Catalogues of "indigeneous innovation" products, STOP THE PRESS:, USCBC Special Report: China Delinks Innovation and Procurement Policies (May 10, 2011):, MinterEllison (link), WSJ (link), levels, national, local, favors Chinese companies, How these docs relate to each other?, Which industries/sectors of doc1 are in doc2?, foreigners favoured, encouraged, foreigners not favorured, restrcted, prohibited, discriminated against

Central planning is not effcient, Wasted effort, Ghost towns, Dateline, High-speed railroads, Economist, Risk, Economic risk, Will there be a correction?, yes, US, Soviet Union, no, growth will continue for ever, useless stuff will become useful, can hide the problems, problem can b managed in the future, too, Project risk, Foreign suppliers always get their money, right?, Have foreigners participated in ghost towns projects?

indigenous innovation, Have you seen these catalogues?, Would you decide market entry without checking and understanding these catalogues?, These catalogues are no longer used to discriminate against foreigners

Big changes in China in the last 15 years and 15 years to come, right?, What changes have taken & will take place in "Kansainvälistymis" support structures to reflect these changes?, As is, manufacturing, focus on few locations, large enterprises, large projects - Iisakin kirkkoja, large investments, large government support & investment, heavy planning, takes long time, To be?, smaller companies, scalable business models, large number of small projects, pieniä kappeleita, just do it, start next monday, expand to one new city per month, lean entry modes, plan less - do more, sell fast, try fast, expand fast, fast-reacting, flexible partners

Permission to ACT differently?, ref: mindspace / Aalto / Ansi Tuulenmäki & Co, website, book, conventional wisdom, Align your business to the FYP industrial priorities, YES, Growth, Everyone is doing the same, tough competition, in-between, other industries, NO, forbidden / restricted, Is it possible to enter anyway?, Chinese business environment is full of barriers for foreigners, re:Barriers, bureaucracy, red tape, corruption, YES, you need guanxi, =industry / sector specific, takes a long time, NO, How break the barriers quickly?

EXTRA BONUS Qs, Finland exports 2010, to China, % of value by large enterprises?, % of value by SMBs?, ref: USA: 33%, 33 BUSD, number of exporting companies?, large, small, ref USA 27.742, to Rest of the world, % of value by large enterprises?, % of value by SMBS?, ref: USA 31%, Finland China Whitepaper 2011 Survey Results, Wouldn't it be interesting to know the same info for Finnish that AmCham made for Americans?

THE PLAN

PROBLEMS

Industrial, Resource constraints: energy and raw materials., Weakness in capacity for domestic innovation., Production structure is not rational: too much heavy industry, not enough service., Agriculture foundation is thin and weak., Obstacles to scientific development continue to exist and are difficult to remove.

Social, Mismatch in investment and imbalance in consumption., Income disparity, Poverty, Basically 60% of the population is employed in agriculture, doing the work that could be done by 5% of the population, distribution of that wealth is unfair and unhealthy., tends to be inter-regional rather than intra-regional., Urban/rural development is not coordinated., Employment system is imbalanced., Social contradictions are progressively more apparent.

Solution, Economic development, Solves all problems, Development must be “scientific,” practical (unconstrained by ideology), human centered, and sustainable.

GOALS

Industries, Nine key manufacturing industries, Seven strategic industries, Energy saving and environmental protection (clean energy technology), Next generation IT, Bio-technology (pharma and vaccine manufacturers), High end equipment (airplanes, satellites, high speed rail, power plants, manufacturing technology), New energy (nuclear, wind, solar), New materials (rare earths, nano technology, carbon fiber and related), New energy autos and related (electric and hybrid cars, batteries)

Balancing, from investment toward consumption, from foreign demand to domestic demand, public, consumer, increase wages

Implementation, Local government to create plans, The ability of the central government to exert it's will on what happend at local level is often exaggerated

Consequences, More demand, Chinese receiving subsidies