The provincial capital is continuing to restructure its economy amid a slowdown in foreign trade, which is having a knock-on effect on the manufacturing sector. Services are growing robustly, investment is surging, and retail sales are holding steady, latest official economic data shows.
Unlike heavily tech-developed Shenzhen, Guangzhou is struggling to hold its manufacturing sector in positive territory amid a slump in external demand for traditional exports and an ongoing decline in one of its pillar industries – vehicles. However, e-commerce and the broader digital economy are pushing up growth in services, and even Guangzhou’s vehicles industry is starting to see the longer-term positive effects of a switch to New Energy Vehicles.
From January to August, the city’s total industrial output value rose 3.1% to RMB 1.2 trillion, up slightly over January-July. This was despite vehicle manufacturing falling by 3.3% YoY. The two other “pillar industries” – electronics and petrochemicals – rose 3.6% and 1.1% YoY, respectively, which was up fractionally over the Jan-Jul period. Gas production and supply (+44%), general equipment manufacturing (+9.3%), and electric power production and supply (+7.2%) kicked in as well.
Services showed how the economy of this large city continues to be restructured. From January to July, “above-scale” services jumped 13.5% to RMB 678.218 billion, while “other” services came in at RMB 280.937 billion, up 17.1%.
None of this would likely be happening, however, if the government wasn’t pumping the demand side of the economy. Fixed asset investment, driven by public-works spending, grew rapidly. From January to August, overall investment grew 21.6%, with infrastructure leading the way at +27.7%, followed by industrial (24.1%) and real estate development (18.6%). Of this, the state’s investment soared 56.5% while the private sector’s grew 29.1%. What’s missing? The part that shall not have its name spoken. It begins with an F.
It wasn’t just railways that got the public money, however: investment in education increased by 3.1 times, investment in public administration, social security and social organizations increased by 1.3 times, and investment in health and social work increased by 1.2 times.
Consumers continued to show resilience. From January to August, total retail sales rose 8.1% YoY to RMB 649.767 billion, flat compared to January-July. However, the goods they purchased were not exactly indicators of confidence. Gold and silver jewellery sales were up 36.7% (investment in stocks and property being a poor alternative?), while Chinese and Western medicines were up 35.6% (what’s going on, it’s still warm outside?). Two staples rose at lower, albeit comfortable, rates: Cosmetics products (above a designated size) were up 13.9%, while communication equipment was up 9.9%.
Imports and exports continue to grow, but with the arrow flattening. From January to August, total trade was RMB 629.02 billion, up 2.8%, but 0.5 percentage points slower than Jan-Jul. Exports were still stuck in the red, down 4.2% to RMB 328.67 billion yuan, albeit 0.6 percentage points higher than in Jan-Jul. Imports continued to grow, up 11.7% to RMB 300.35 billion, but 0.6 percentage points lower than Jan-Jul.
More specific data points were provided to illustrate how the economy is being restructured. These included:
- Integrated Circuits: +1.5 times
- Tablets: +1.4 times
- New Energy Vehicles: +1.1 times.
- Smartphones: +33.9%
- Lithium-ion batteries +26.9%
- 5G base stations: +25.2%
- Bio-pharmaceuticals: +25.2%
- Medical equipment: +19.0%.
- Satellite-navigation devices: +16.2%
- LCD screens: +14.6%
In retail sales:
- Online merchandise sales: +11.5%
- Online accommodation and catering sales: + 26.3%
- Bonded logistics: + 29.9%
- Cross-border e-commerce: +45.6% (imports +157%)