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China’s Local Governments, Including Capital City of Beijing, Face Fiscal Challenges

For years, debt-ridden Chinese local governments have been facing lots of fiscal challenges. During the recent “Two Sessions,” Wu Sufang, the Beijing city government’s Finance Bureau Chief asked for the central government to step up its support. On March 7, Wu publicly stated that Beijing is facing a “slowdown in the growth of its fiscal revenue,” and 2019 is the “tightest year for a balanced budget.”

Wu added that the centrally-administered state-owned enterprises and their branches, the financial industry, and high-tech enterprises are relocating (outside of Beijing). This is having a major impact on Beijing’s industrial growth and fiscal revenue.

An article in the official media pointed out that the primary reason for the difficulty with Beijing’s finances is the “cleaning up of Beijing’s migrant population.” Starting in late 2017, Beijing launched campaigns to evict the migrant population. The decline in Beijing’s population has led to the relocation of industries such as manufacturing, retail, wholesale, transportation, and warehousing. The consequence was that the GDP and the tax revenue decreased.

The second reason is the housing market. The central government’s crackdown on real estate speculation affected Beijing’s official land sales revenue and real estate investments have declined. The third reason is China’s effort to cut taxes to keep the economy from further going south.

Source: Central News Agency, March 19, 2019

Nearly One-third of China’s Cities See Shrinking Population

The population of nearly one-third of China’s cities is shrinking. This is based on a study that the research team at Tsinghua University in Beijing conducted between 2013 and 2016. The South China Morning Post said in a report that, through satellite, researchers had monitored the light density of more than 3,300 Chinese cities and counties.

Long Ying, a city planning scholar at Tsinghua University, led this study. Long said that the population of 938 cities in China has shrunk. This was more than any other country in the world. One interpretation of the results could be that the economic engine of nearly one-third of China’s cities is slowing down. Official statistics show that China is facing huge economic and demographic challenges.

Source: Central News Agency, March 19, 2019

LTN: China’s February Mobile Phone Sales Dropped to Three-Year Low

Major Taiwanese news network Liberty Times Network (LTN) recently reported that, according to China’s Ministry of Industry and Information Technology, in February, China’s domestic mobile phone market suffered a year-over-year decline of 19.9 percent. This is the lowest point in three years. China’s February handset shipment volume was 14.51 million; 96.4 percent were 4G phones. The 4G market declined by 20.2 percent, year-over-year. When combining January and February total sales, the year-over-year decline was 15.1 percent. Market analysts generally agreed that this is a clear sign that the Chinese mobile phone market has become significantly saturated. Before new technologies like 5G and foldable cellphones are widely available, growth seems to be very limited. In the first two months of this year, the Chinese market had 73 new mobile phone models. This was a year-over-year reduction of 42.1 percent. This means the mobile phone vendors are also taking a conservative approach and hoping new technology may bring new opportunities.

Source: LTN, March 12, 2019

Top Lawmaker: China’s GDP Not Credible Due to Data Fraud

According to Yin Zhongqing, deputy director of the Financial and Economic Affairs Committee of the National People’s Congress (NPC), the total amount of all local GDP added together is greater than the national GDP due to data fraud.

“There is a discrepancy between regional and national GDP figures and it has negatively affected the credibility of the government,” said Yin at a press conference on March 10 during the second session of the 13th NPC. “Some local governments tend to cook their books, inflate some statistics, or conceal some data to stand out from the competition.”

According to Yin, a number or factors contribute to data fraud. First, people do not comply with the law and data fraud persists despite repeated crackdowns. Second, local governments, businesses, and residents are overburdened with data calls from different government agencies. Third, many government agencies apply different standards, resulting in inconsistencies in the data collected. Fourth, punishment over data fraud is “too light.” Fifth, a lot of statistical indicators are still defined according to the planned economy and do not reflect actual development.

Source: Beijing News, March 10, 2019

Largest Apple Supplier Foxconn Recorded Four Year Low on Revenue

Major Taiwanese newspaper, China Times, recently reported that Apple’s largest supplier, Foxconn, headquartered in Taiwan, just announced its February revenue numbers, which showed a month-over-month decline of 35.85 percent and a year-over-year decline of 4.39 percent. This is the lowest point in four and one-half years. Foxconn pointed out that the primary causes of the decline were the U.S.-China trade war and weak orders from Apple. According to the latest supplier list that Apple released, Foxconn remains the largest supplier with 35 manufacturing locations. Further looking into the February Foxconn report, the computing products category is still satisfactory, but consumer electronics and communications equipment were below expectations.

Source: China Times, March 8, 2019

China February Exports Reached Three Year Low

BBC Chinese recently reported that China’s February total exports suffered a year-over-year decline of 20.7 percent. This is the lowest point in three years. China’s imports declined by 5.2 percent. These numbers brought down the Asian stock markets significantly. Some suggested that the numbers might be the result of the Chinese New Year. However, most economists expressed their belief that the general expectation was a decline of 4.8 percent. The reality was five times worse than the expectation. Even with the seasonal impact factored in, the official numbers were quite negative. Some researchers indicated that the U.S. Tariff is having an impact on exports to the U.S. globally. Although the U.S.-China trade talks are still on-going, yet the uncertainty kept bringing doubts to the market. Currently the global market demand is still weak. Even if President Trump and President Xi quickly reach an agreement, China’s export outlook remains very bleak.

In the meantime, according to the China Automobile Dealers Association (CADA), China’s February domestic passenger vehicle sales recorded a year-over-year decline of 18.5 percent and a month-over-month decline of 45.4 percent.

1. BBC Chinese, March 8, 2019
2. East Money, March 9, 2019