Category Archives: Economy

Jiangmen has fastest-growing sector

Shenzhen may get all the headlines, but it is Jiangmen that boasts the fastest-growing tech sector, according to provincial data. At least, that is when it comes to numbers of startups: no fewer than 601 new hi-tech enterprises were registered in Jiangmen last year.

It is a drop in the bucket: Guangdong has 11,431 hi-tech enterprises. Still, 1,240 of those now hail from Jiangmen. It is not only an honor to make the list; there is money in it, too. Hi-tech enterprises officially acknowledged by the government enjoy preferential income tax policies that kicked in at the start of last year and will run until the end of next year, so the gate is maintained tightly.

The city government has been actively encouraging growth in the sector. Most of these are small and medium-sized enterprises and the government has set up incubators to help them, with subsidies for R&D.

Read more in Chinese.

Imports drop in May as US trade falls sharply

It would seem that the US-China trade war is having it hardest impact on sales of U.S. goods in China, not the other way round. The country’s trade surplus surged last month to its highest level this year, as imports fell 8.5% YoY to $172.2 billion, led by a whopping 26.8% fall in imports from the U.S.

The overall import number marked the steepest decline in three years and was well ahead of consensus forecasts for a 3.5% drop.

Exports, on the other hand, appear to be holding up. They edged up 1.1% year-on-year to $213.9 billion in May after a 2.7% decrease the month before. That beat economists’ median forecast of a 3.9% decline. It was despite exports to the U.S. falling 4.2% year-on-year to $37.7 billion. They now account for around 18% of China’s overall exports.

The overall surplus swelled to $41.7 billion in May, the highest since December and more than triple April’s $13.8 billion. It was up 67.5% from a year earlier.

Guangdong’s trade figures have not yet been released, but the province’s share of the national total have been rising so far this year. However, May was the month when Shenzhen-based Huawei Technologies was put on the US blacklist, so all eyes will be on the provincial data when it is released.

Read more at Caixin Global.

Hong Kong’s gloomy outlook for exports

Hong Kong’s Trade Development Council has lowered its forecast for the city’s export growth this year from 5% to 2%, citing the China-US trade war having had a strong impact already.

Confidence is falling among the TDC’s members, apparently, with 54.7% of interviewed exporters worried that the trade war would hurt their business; 41.3% said they had already seen orders drop.

More than 50% of exporters are seeking new markets outside the US.

Read more in Chinese.

Guangdong firms boost R&D spending

Guangdong’s listed A-share companies raised their investment in R&D by nearly 20% last year, to more than RMB144.3 billion. In so doing, they increased their share of R&D spending by all listed A-share companies by four percentage points to 19.82%.

Telecom equipment maker ZTE, which was nearly bankrupted a year ago by US sanctions, ranks top among the province’s listed companies and 7th among all A-share companies, investing RMB10.9 billion in R&D last year. (Huawei Technologies is not publicly listed.) Others that invested more than RMB5 billion in R&D include Foshan’s Media Group, Shenzhen’s BYD, Zhuhai’s Gree Electric, and Huizhou’s TCL Corp.  As a percentage of income, IT companies invest the most, at an average of 11.3%.

Guangdong has 615 listed companies with a total market cap of RMB10.62 trillion, accounting for 18.22% of all A-share companies. They generated income of RMB1.61 trillion in Q1, up 12.41% from the previous quarter, with profits up 25.28% to RMB161.73 billion.

Read more in Chinese.

China eases funding curbs on key projects

Hard on the heels of weak trade data showing a sharp fall in imports, the central government is easing restrictions on local governments’ borrowing for major infrastructure investments.

According to Caixin Global, local governments will be allowed to use proceeds from special-purpose bonds to raise project capital for major and strategic investments in highways, railways, electricity and gas projects. Citing a document issued by the central government, Caixin says it also encourages local authorities and financial institutions to expand funding sources for major projects through market-based financing methods “as long as they follow the rules”.

Special bonds must be used for projects that are proven to make certain returns on investment, according to the statement. Local officials should strengthen risk controls for special bond issuance and project management, it added.

China previously prohibited local governments from using any borrowed money as project capital put up by investors for initial investment in infrastructure to curb local debt surges.

Read more.

Guangdong ranked third in highest average wages

Guangdong residents earn the third-highest salaries on average in the country, just behind Beijing and Zhejiang province, reports China News.

Average wages for all workers, non-private and private, in Guangdong were RMB88,636 and RMB58,258 respectively, reports China News. Non-private includes state-owned enterprises, township collective enterprises, joint ventures, joint-stock companies, foreign-invested firms, and companies with investment from Hong Kong, Macau and Taiwan.

Shenzhen, however, was way above this, with an average annual wage for urban non-private sector workers of RMB110,304 and RMB63,635 for private sector employees.

The highest average annual wages are in the financial and information technology sectors, followed by scientific research and technical service sectors.

The salaries cited refer to pre-tax wages and also includes personal income tax withheld and social insurance and housing provident fund benefits that are paid by individuals.

Read more (in Chinese).

Russia, Latin America boost trade

Guangdong’s recovering foreign trade numbers have been somewhat surprising since the start of this year. The downturn in US-China relations and the imposition of trade tariffs had been expected to hit China’s biggest exporting province the hardest. And yet trade was still up – barely, at 0.8% YoY in the first four months, but still not as bad as had been feared.

Two reasons for this have been revealed by sources within the Guangdong Customs Department recently: Russia and Latin America.

From January to April this year, trade with Russia jumped 26.5% to RMB19.74 billion. Most of that was exports, at RMB18.5 billion. This is only a fraction of the province’s overall exports, at RMB1.2 trillion, but it is enough to move the needle.

Latin American trade was much larger, and not all of it was exports. According to the Customs data, from January to April, Guangdong traded goods worth RMB92.18 billion yuan from Latin American countries, up 10.3% year-on-year. Exports were RMB64.51 billion, up 6.9%; imports were RMB27.67 billion yuan, up 19.2%. 

Guangdong governor focuses on big picture

Guangdong’s governor, Ma Xingrui, gave a press conference today at which he said the province’s GDP is expected to grow to more than RMB10 trillion this year. It is the way this will be achieved, rather than the number, that jumped out at us, however. He said the province will continue to “open up its market to the outside to strengthen its competitiveness”, and his No. 1 priority for the coming year is to build the Greater Bay Area by “finding solutions for cross-border issues, meeting international trade rules and facilitating the easy flow of capital, talents, goods and information within the GBA”.

Priority #2 to #5 were more interesting for a domestic audience: propelling innovation, investing more in the countryside, promoting Lingnan culture, and protecting the environment.

Priority #6 was more intriguing: To optimize the rule of law and internationalization, build a good business environment, and create the most secure, stable, fair, and legal environment in the country.

Roll on, Governor. Let’s see what comes next.

Read more (in Chinese).

Shenzhen, Guangzhou to add 180,000 license plates

Guangzhou and Shenzhen will add 100,000 and 80,000 car licenses, respectively, over the next 18 months, in a move widely seen as an economic stimulus measure amid a challenging external environment.

Shenzhen will provide 20,000 via license lottery and the remaining 60,000 will come via bidding concerning automobiles that meet China’s Phase 4 national emission standard. The additions raise the city’s total quota to 120,000.

Half of the 100,000 new plates in Guangzhou will come via bidding and half will come through lottery.

The two cities began to limit excessive growth of automobile inventories via a license plate quota in 2012 and 2014, respectively. Consumers must apply for local plates by a lottery system or auction. The pair are the first to loosen restrictions and other cities could follow suit.

Read more (in Chinese).

Rising incomes boost Guangdong’s finances

Provincial data on public and private finances paint a picture of frugal, hardworking people who are also not afraid to spend. The US-China trade war might take a wrecking ball to the economy in the coming months, but if it does, there are good reasons to believe that Guangdong will have a better chance at getting through it than most other economies facing similar external pressure.

Indeed, despite having to turn on the infrastructure taps from January to April, which resulted in a 14.8% jump in government expenditures, Guangdong still saw government revenue grow 5.8% to RMB445 billion.

And while outstanding loan balances at the banks jumped in the same period, 16.4% to RMB15.4 trillion, deposits also grew 9.9% RMB 21.8 trillion. This was driven by household deposits, which increased 15.3%.

Savers are not panicking. Retail sales continue to grow at above-GDP rates. Meanwhile, consumer prices rose by 2.3%, an increase of 0.1 percentage points over the first quarter and just the kind of number policymakers like to see. Producer prices remain under pressure, rising by 1.0%, but that is at least an increase of 0.1 percentage points over the first quarter.