Documentation Brochure - Hamburg Summit

A Shift towards Domestic ConsumptionRonnie C. Chan (right), Hang Lung Group, analyses China’s potential for further growthRonnie C. Chan, Chairman of theHang Lung Group, a leading HongKong property developer, provided a verycasual answer to the question ofwhether China’s growth is unlimited bysaying “I’ve got no idea, but it will be allright over the next few years. I aminvesting, and the return on investmentis really good”. In the process, it is vitalthat the population tales a long termview and provides for the nextgeneration, following the precepts ofConfucius.The businessman also sees twomajor challenges for the country, however.Oil and raw material supplies willbecoming increasingly difficult toobtain, due to the rapid growth,spiralling prices and increased internationalcompetition, which could in turnlead to serious international conflicts.China will also face not only ecological,but also huge social problems, largelydue to millions of people migratingfrom within the country to the southeasterncoastal regions. Chan added, “Ifwe solve the social problems, then theeconomy will continue to see stronggrowth.”The background for this forecast isfairly simple: China’s economy has benefitedin the last few years from strongexports, and, generally speaking, fromglobalisation. “But further strong growthwill endanger jobs in the EU”, MichelRocard, former Prime Minister of Franceand member of the European Parliament,warned. Rocard explained that “thecapacity to absorb Chinese exports in theEU will not correlate with the Chinesepossibilities to export.” For this reason itis vital that domestic demand in China isramped up.Chan is very optimistic in this regard,as “consumption in China will grow by20 to 30 per cent annually”, he predicted.Most of the panellists agreedwith him, including Dr. Ulrich Weber,Manager at Airbus: “We are quite confidentthat in the long term there is ahuge market for aircraft.” Increasingincomes means that more and morepeople will be using aircraft for businessor private trips.Dr. Richard Hausmann, President andCEO of Siemens in China and Chairmanof the German Chamber of Commerce inChina, foresees growing import demand,due to the major infrastructure problems.“China was once seen as a sourceof cheap labour. But most products soldby Siemens in China originate fromGerman and European plants.”One requirement for increasingdomestic consumption and imports is amore flexible monetary policy, permittingfurther upvaluation of the renminbi.“China has to manage the currency issueand the government needs to increase itsflexibility”, David Tak-kei Sun, ManagingPartner at the consulting firm Ernst &Young in Hong Kong, stressed. Businessesoffering products to meet local demandshould also receive support from thelocal government. The panel agreed withthe conclusion provided by moderatorSteffen Klusmann, Editor-in-Chief atFinancial Times Deutschland: China’slong-term prospects remain quite solid,but there will be a shift towards domesticconsumption.