China: The Untapped Freighter Market A China USA perspective Marco Bloemen, YDL Management Consultants E: marco@ydl.nl T:+31-3465-64244
Scope of this presentation Macro-economic figures China - USA Air Cargo Developments Sector Analysis Regional Differences Conclusions
China s role in world the economy is growing with roughly the same people Macro-economic shares in population, GDP and world exports for 1998, 2002 and estimated for 2007 1998 2002 2007 world population 20.9% 20.6% 20.3% GDP (market exchange rates) 3.2% 4.0% 4.2% GDP (at PPP) 10.6% 12.6% 15.2% world exports 3.4% 5.2% 7.9% Source: EIU
China is the 4 th US trading partner 120 Top 10 U.S. trading partner countries in Q1 2003 100 96.84 80 In $US billions 60 40 37.60 41.46 56.24 20 8.64 11.25 11,33 14.45 18.89 23.33 0 Italy Taiwan France Korea U.K. Germany China Japan Mexico Canada January - March 2003. Source: U.S. Census Bureau
but with the largest trade deficit for the USA Top five countries with which the U.S. has a trade deficit (first three months of 2003) China Japan Canada Mexico Germany 0.00-5,000.00 In $US millions -10,000.00-15,000.00-20,000.00-16,366.69-14,490.72-10,841.40-8,563.44-25,000.00-24,670.34-30,000.00 January - March 2003. Source: U.S. Census Bureau
First 3 months of 2003 trade deficit larger than full year 1993 U.S. trade balance with China 1985-2003 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003-20,000-40,000 In $US billions -60,000-80,000-100,000-120,000 January - March 2003. Source: U.S. Census Bureau
Average hourly earnings in the U.S. are 22 times higher than in China 16 U.S. versus China hourly wage comparison 1998-2001 14 12 12.79 13.17 13.62 14.15 In $US per hour 10 8 6 U.S. China 4 2 0.46 0.52 0.56 0.60 0 1998 1999 2000 2001 Source: Bureau of Labor Statistics and The Economist
US GDP (using PPP) per capita only 8 times higher than China s Per capita GDP (PPP PPP) comparison for 2002 40,000 35,000 30,000 25,000 In $US 20,000 15,000 36,300 10,000 5,000 Source: CIA World Fact Book 0 U.S. 4,600 China
FDI substantial and consistent, primarily deployed in manufacturing Total realized FDI in China 1983-2002 60.0 50.0 40.0 In $US billions 30.0 20.0 10.0 Source: Department of Commerce 0 1983 1986 1989 1992 1995 1998 2001
USA accounts for roughly 30% of China air exports China air exports to the world in 2001 in tons Exports FROM Legend All partner countries 30.86% Americas Asia Pacific Europe Other 32.57% 7.28% 29.29% Source: YDL Trade Database
but, only caters for 16% of Chinese air imports China air import from the world in 2001 in tons Imports INTO Legend All partner countries Americas Asia Pacific Europe Other 48.48% 15.93% 1.80% 33.79% Source: YDL Trade Database
Imbalance between Europe and China is 2,5 to 1 westbound Europe - China air trade in tons 1997-2002 Air Weight, metric tons (Kg 000's) Legend Exports FROM Europe Imports INTO Europe 350,000.000 300,000.000 250,000.000 200,000.000 150,000.000 100,000.000 50,000.000 0.000 1997 1998 1999 2000 2001 2002 Source: YDL Trade Database
while USA - China air trade imbalance is close to 7 to 1 USA - China air trade from 1994-2002 in tons Air Weight, metric tons (Kgs x 1000) Legend Exports FROM the U.S.A. Imports INTO the U.S.A. 500,000.000 400,000.000 300,000.000 200,000.000 100,000.000 0.000 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: YDL Trade Database
Chinese air exports to USA pick up strongly, while imports stay flat China air trade with USA from January 2000 until July 2003 per quarter in tons Air Weight, metric tons (Kg x 1000) 160,000.000 Legend Exports FROM the U.S.A. Imports INTO the U.S.A. 140,000.000 120,000.000 100,000.000 80,000.000 60,000.000 40,000.000 20,000.000 0.000 2000 Q 1 2000 Q 3 2001 Q 1 2001 Q 3 2002 Q 1 2002 Q 3 2003 Q 1 2000 Q 2 2000 Q 4 2001 Q 2 2001 Q 4 2002 Q 2 2002 Q 4 2003 Q 2 Source: YDL Trade Database
LAX, SFO, CHI & NYC primary growth markets for US imports US air imports from China per destination US region from 1994-2002 Air Weight, metric tons (Kg x 1000) 500,000.000 Legend Atlantic Northeast Atlantic Southeast Midwest North Midwest South Pacific Northwest Pacific Southwest Separated Regions 400,000.000 300,000.000 200,000.000 100,000.000 0.000 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: YDL Trade Database
Market exhibits seasonal peaks in October & November and troughs through January-March USA - China trade per month in 2000-2002 2002 in air tons Air Weight, metric tons (Kg x 1000) 60,000.000 Legend Exports FROM the U.S.A. Imports INTO the U.S.A. 50,000.000 40,000.000 30,000.000 20,000.000 10,000.000 0.000 2000-Jan 2000-Mar 2000-May 2000-Jul 2000-Sep 2000-Nov 2001-Jan 2001-Mar 2001-May 2001-Jul 2001-Sep 2001-Nov 2002-Jan 2002-Mar 2002-May 2002-Jul 2002-Sep 2002-Nov 2003-Jan 2000-Feb 2000-Apr 2000-Jun 2000-Aug 2000-Oct 2000-Dec 2001-Feb 2001-Apr 2001-Jun 2001-Aug 2001-Oct 2001-Dec 2002-Feb 2002-Apr 2002-Jun 2002-Aug 2002-Oct 2002-Dec 2003-Feb Source: YDL Trade Database
Consumer and fashion goods and high tech are largest and fastest growing air export commodities Top 4 commodities from China to USA by air in tons from January 2000 to July 2003 per quarter Air Weight, metric tons (Kg x 1000) Legend 45,000.000 High Technology 40,000.000 Machinery parts. Components, supplies & manufactures n.e.s. Consumer Fashion Goods 35,000.000 Consumer personal & household goods 30,000.000 25,000.000 20,000.000 15,000.000 10,000.000 5,000.000 0.000 2000 Q 1 2000 Q 3 2001 Q 1 2001 Q 3 2002 Q 1 2002 Q 3 2003 Q 1 2000 Q 2 2000 Q 4 2001 Q 2 2001 Q 4 2002 Q 2 2002 Q 4 2003 Q 2 Source: YDL Trade Database
80% of US air exports to China are production-related related US exports to China per major commodity type from 1994-2002 Air Weight, metric tons (Kg x 1000) 80,000.000 70,000.000 60,000.000 50,000.000 Legend High Technology Machinery parts. Other manufactures nes. Industrial raw materials & consumables Chemicals & Products Capital Equipment & Machinery Land Vehicles & Parts Consumer personal & household goods Secure or Special Handling Live Animals Temperature or Climate Control Consumer Fashion Goods 40,000.000 30,000.000 20,000.000 10,000.000 0.000 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: YDL Trade Database
Regional Differences: Income Income gap East ($4,000) vs West ($200) China Salaries difference between Hong Kong and Mainland China (US$) Hong Kong Mainland Head of Government 34,807 266 Professor 16,287 453 CEO 15,975 2,865 Controller 11,022 2,457 Manufacturing Director 10,150 1,866 Sales Director 8,454 1,524 Systems Engineer 3,774 746 Source: Asiaweek Salaries Survey 2000
New regional markets emerging along the coastline China: Air Trade with USA, Air Cargo tons, 2002 I IMPORTS TO CHINA E EXPORTS FROM CHINA In thousand tons Less than 5 50 to 60 5 to 10 60 to 70 10 to 20 20 to 30 70 to 80 80 to 90 Ningbo 30 to 40 40 to 50 90 to 100 Shenzhen Source: YDL Analysis
Some vehicle production moving westbound, but limited Production facilities of international vehicle manufacturers in China Heilongjian g Xinjiang Jilin Inner Mongolia Liaoning Hebei BEIJING Tianjin Tibet Qinghai Gansu Sichuan Ningxia Shaanxi Shanxi Henan Hubei Shandong Jiangsu Anhui Shanghai Zhejiang CHRYSLER Yunnan Guizhou Guangxi Hunan Jiangxi Fujian Guangdon g Hong Kong Taiwan Hainan Source: Austrade
Conclusions: China USA freighter market: untapped? China black cat, white cat strategy does not benefit US air export trade (Europe is!) Imbalance air trade will even expand as Chinese exports rise Seasonality effects enlarge in absolute terms Fashion and High tech expected to keep showing strong growth Shanghai catchment area will grow faster than rest of China New regional export markets on the rise
不入虎穴, 焉得虎子 If you don t go to the tiger s cave, how can you catch the tiger s son Chinese proverb