A bull in the China shop? Urbanisation Rate (%) 3 China Australia 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1980 2011 Relative Performance of Capital Markets 4 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 USA Australia China Exchange Rates (Yuan against AUD & USD) 4 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 USA Australia China Nov 2003 Nov 2004 Nov 2005 Nov 2006 Nov 2007 Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2002 The China shop scenarios 5 Scenario 1: Slowdown due to property market melt- down or financial disturbance, China GDP down 6%. Scenario 2: Recession in the advanced economies (global GDP forecast at 3 ppts below baseline). In this scenario, commodity prices would fall by 25%. Australian GDP 2.5 ppts below baseline by end of second year at which point Australia would be in technical recession. Luck As JFK said in 1964, luck is the collision of opportunity and preparation. If you haven’t already positioned your business to access the potential of Chinese growth (directly or indirectly) now is the time to consider your strategy and model the potential impact. If your business is already exposed to Chinese trade, do you have plans in place to accommodate short term reductions in volumes? Market Capitalisation ($Trillion) 4 China $13.6 USA $12.7 Australia $1.2 Sources: 1) IMF; 2) DFAT China factsheet; 3) World Bank Database; 4) Bloomberg; 5) NAB China’s significance to Australia 1 Total exports globally: $313.3B Total exports to China: $76.8B Resources $57.2 Services $5.7 Education $4.0 Personal Travel $0.7 Other $9.2 Iron ore exports to China: $43.4B Capital investment in China: $17B Australia’s significance to China (GDP $Trillion) 1 1 - USA $15.1 2 - China $7.3 3 - Japan $5.9 4 - Germany $3.6 12 - Australia $1.5 Capital investment in Australia: $19B 1 PER 14X PER 17X PER 11X