Briefings - 124. page

Xinhua recently reported that, according to official numbers released by the National Bureau of Statistics, China’s October manufacturing PMI fell to 49.2 percent. Affected by the frequent domestic spread of Covid, China’s purchasing manager index has declined and the foundation for the economic recovery and development needs to be further strengthened. Statistics show that both production and demand have slowed down. The production index and the new order index were 49.6 percent and 48.1 percent respectively, down 1.9 and 1.7 percentage points from the previous month. The prosperity of manufacturing production and of market demand both declined as well. Large corporations have kept expanding, while the pressure on small and medium-sized enterprises has increased.

At the same time, Caixin released its official Chinese Manufacturing PMI numbers for October. Caixin‘s PMI is a well-respected economic indicator monitored globally by financial institutions. Caixin’s China Manufacturing PMI recorded at 49.2 for October. It was thus in contraction territory for the third consecutive month, indicating that manufacturing figures continued to decline. The demand side of consumer goods and investment goods has been particularly insufficient. International demand also continued to decline. Some companies reported that foreign trade transportation has been encountering difficulties. Employment continues to shrink, and the purchasing price index of manufacturing companies has risen by more than three percent since September. Due to the sluggish market demand, companies have shown a strong willingness to reduce prices to promote better sales. Most companies reported that the government’s Covid control policies have caused transportation delays.

Sources:
(1) Xinhua, October 31, 2022
http://www.news.cn/fortune/2022-10/31/c_1129089205.htm
(2) Caixin, November 1, 2022
https://pmi.caixin.com/2022-11-01/101958657.html

As the 20th Chinese Communist Party (CCP) Congress came to an end on Sunday October 23, Xi Jinping, the Party’s general secretary, not only won his third term as expected, but installed his cronies and supporters in the Standing Committee of the Politburo, the CCP’s highest authority. The result has worried many executives of the foreign companies that operate in China.

In an interview with the Voice of America, Joerg Wuttke, president of the European Union Chamber of Commerce in China, was pessimistic about the future of the Chinese economy. Wuttke is considered to be one of the most knowledgeable Westerners about China. He went to China in 1982 and has lived there on and off for 33 years.

He stated, “It’s definitely a surprise. I had a completely different line-up in mind (of the new leadership). I had of course the Prime Minister Li Keqiang as the head of parliament. I thought about two candidates for Prime Minister. I know both candidates quite well. It was a surprise to see that basically all of them were rooted out. Also, of course, the visual realization that president Hu Jintao was sent out of the room has already painted a picture that an era is gone. We have a greater clarity now that it is obviously Xi Jinping who is calling the shots to an extent which we did not see before. He has aligned a group of people that are totally loyal to him. We have basically left this sphere of achievements and meritocracy. It’s all about loyalty. We have to see where this group of people are leading China.”

“My struggle is I am trying to be realistic in order to give it a taste of which direction this might go. Obviously, Monday (October 24) was a very pessimistic market reaction, and reflects what many of my colleagues are thinking. But again, we have not entered the space in which we know where we are heading.”

“I am a child of the 90’s. I have been here about 30 years. I grew up in the opening up mode of Deng Xiaoping. My first party Congress I witnessed personally was in 1982, where Deng Xiaoping was trying clearly to integrate China and open up. Maybe at the tail of my career in China, I have to witness China actually closing up again to some extent. So, in a way it’s a full circle, which is, of course, disappointing. But at the same time, its their country; it’s their choice.”

“So many of them (the business leaders) put their operation on auto pilot. We have not seen companies moving away, and I don’t expect this. But we have noticed this –  that new investment and new additional activities from those companies that normally would come up in China has been rerouted to other regions. So we see more interest in Thailand, Southeast Asia, India, but even close to home in Turkey and eastern Europe, for the simple fact that executives can fly there in and out easily.”

“They have also realized that the world bank has predicted China will grow this year at 2.8 percent, and rest of Asia 5.3 percent. These leaders follow the money. Hence there will not be an exodus of European business out of China, but we will definitely see an underachiever given the potential of this economy.

Source: Voice of America, October 28, 2022
https://www.voachinese.com/a/voa-interview-joerg-wuttke-china-party-congress-20221028/6810661.html