Economy/Resources - 13. page

During the 5-day May Day holiday in China, consumption appeared to be sluggish. While the number of domestic tourists increased by 7.6% compared to the same period last year, the average spending per tourist was relatively low, at 113 yuan ($16.5) per day, lower than the 151 yuan in 2019 before the COVID-19 pandemic.

A report by economist Zhong Zhengsheng analyzed consumption during the holiday in three areas: domestic tourism, outbound tourism, and movie box office receipts. The report stated that the long holiday provides an important window into domestic demand in China.

Domestic tourism saw 295 million tourist trips and a total spending of 166.89 billion yuan, up 12.7% year-on-year. Adjusting for the shorter 4-day May Day holiday in 2019, however, tourist trips recovered to 128% of 2019 levels, but average spending per tourist was only 88.5% of 2019.

For outbound tourism, Chinese tourists going to Singapore, Japan, Thailand, the U.S., South Korea, Vietnam, Malaysia, Australia, Myanmar and Indonesia accounted for 60.7% of all outbound travelers.

China’s movie box office revenue was 1.5267 billion yuan during the holiday, up 0.4% from last year but only 91.4% of the 2019 daily average when adjusted for the shorter holiday that year.

Source: Central News Agency (Taiwan), May 7, 2024
https://www.cna.com.tw/news/acn/202405070308.aspx

Major Taiwanese news network Liberty Times Network (LTN) recently reported that CICC (China International Capital Corporation), the leading firm in China’s securities industry, is cutting the base salary of investment banking employees by up to 25 percent. This move is expected to affect more than 2,000 employees. In addition, CICC is also considering cutting headcount in Hong Kong’s offshore investment banking department. The market believes this reflects a weak IPO market in China and Hong Kong, with investment banking operations under tremendous pressure.

CICC is China’s largest investment bank. Last year, it cut employee bonuses by as much as 40 percent in response to Beijing’s call for “common prosperity.” Now, only a year later, CICC is cutting salaries by another quarter. CICC’s largest Chinese competitor, CITIC Securities, has also reportedly lowered the salary of its investment banking department, cutting base salaries by 15 percent, with some employees seeing cuts of up to 20 percent. According to London Stock Exchange Group (LSEG), funds raised by Chinese companies through initial public offerings (IPOs) fell sharply by 80 percent year-over-year in the first quarter of this year.

Source: LTN, April 29, 2024
https://ec.ltn.com.tw/article/breakingnews/4656258

Recently, Chinese media have frequently talked about the new “low-altitude sector” becoming a new growth engine for China’s economy. The term “low altitude” refers to low-altitude flight technology, including drones and electric vertical take-off and landing vehicles (eVTOLs). The following is a combined summary of two reports, by Xinhua and People’s Daily, respectively.

The low-altitude economy is a typical representative of new productive forces [within the Chinese economy]. This year, the “low-altitude economy” was mentioned in the central government’s work report. It will definitely reach a trillion-yuan-level (US $140 billion) industrial scale.

The low-altitude economy can use drones in many applications. These include “dropping take-out food from the sky,” sowing and fertilizing farmland, and delivering goods to the mountains. Electric Take-off and Landing (eVTOL) aircraft is one of the hottest fields. A 5-seat eVTOL recently conducted a flight from Shenzhen to Zhuhai crossing over both land and sea … reducing travel time [between the two cities] from 2 hours on the ground to 20 minutes in the air.

Many Chinese cities are building up their low-altitude economies. In April of this year Harbin City officially began construction of its large-scale industrial park for production of unmanned helicopters. The city will build a large-scale unmanned helicopter research institute, a “conversion base” for transforming manned aircraft into unmanned aircraft, and an unmanned aircraft production base. The city’s new facilities are expected to achieve an annual output value of 1 billion yuan, with the surrounding ecosystem producing 5 billion yuan of output value.

Since the beginning of this year, Suzhou, Jiangsu Province, has seen 251 new low-altitude economic projects started, with a total planned investment of over 73 billion yuan. Hefei, Anhui Province, has proposed to build an eVTOL integrated manufacturing plant. Anhui Province will build a low-altitude Flight Service Platform that integrates functions such as flight monitoring, airspace management, flight planning, navigation information, meteorological information, data management, and statistical analysis. Nanjing, Jiangsu Province, has 30 drone-related companies, covering parts of the industrial chain such as R&D, manufacturing, training, examination, operation service, and industry applications. Shenzhen, Guangdong Province, is host to several well-known domestic eVTOL manufacturers.

According to data released by the Civil Aviation Administration, as of the end of 2023, China had more than 1.26 million drones, a 32 percent increase from the previous year. In 2023, civilian drones accumulated more than 23 million flight hours. The “China Low-altitude Economy Development White Paper (2024),” recently released by the Smart Equipment Industry Research Center of CCID Consulting, shows that China’s civilian drone industry reached 117.43 billion yuan in 2023, a year-on-year increase of 32 percent. According to the paper, the eVTOL industry will see its first cycle of breakthrough commercialization in 2024, with the industry reaching a scale of 9.5 billion yuan by 2026 [in sales].

Sources:
1. Xinhua, April 28, 2024
http://www.news.cn/20240428/2323db6402404ec2b408888a74b17ea8/c.html
2. People’s Daily, May 5, 2025
http://finance.people.com.cn/n1/2024/0505/c1004-40229081.html

China is building and promoting a domestically-manufactured commercial airplane, the C919.

On April 29, 2024, China Southern Airlines signed a purchase agreement with Commercial Aircraft Corporation of China (COMAC) to buy 100 C919 aircraft, with deliveries scheduled from 2024 to 2031. Air China signed an agreement on April 26, 2024 for 100 C919 aircraft, with deliveries also scheduled from 2024 to 2031. China Eastern Airlines was the first airline to order C919 planes. It placed an order for 5 aircraft in 2021 and another order for 100 aircraft in September 2023.

Source: Xinhua, May 1, 2024
http://www.news.cn/20240501/94f7e635c5ef4f2eadd721536911f9e2/c.html

Radio Free Asia (RFA) Chinese Edition recently reported on the latest data from the Chinese National Bureau of Statistics, showing that around 460,000 Chinese restaurants were deregistered or had their licenses revoked in the first quarter of this year, a year-over-year increase in restaurant closures of approximately 230 percent. Among the closed restaurants, 180,000 closed in March alone. People in the industry lamented that business has become increasingly difficult. China’s consumer market has continued to decline in the post-COVID-19 era, and a wave of business closures has spread from the manufacturing and international trade sectors to the restaurants industry.

A consumer said in an interview with RFA that many residents in her city could not find jobs and have lost their sources of income; they are cutting back on food and clothing expenses. She also said that people from all walks of life are experiencing the current recession. Prospects now are not particularly good, and people don’t dare to spend their money. Thus, China’s day-to-day consumption patterns have changed. People don’t see hope, nor can they see a future.

The recession in the restaurant business is the most direct manifestation of the reduction in the income of Chinese residents – they are not eating out. Some domestic experts suggested that restaurant owners follow the lead of the green energy automobile industry – reduce prices and go overseas.

Source: RFA Chinese, April 23, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql1-04232024012355.html

A recent survey by an education consultancy in China has sparked heated discussions among Chinese netizens. It claims that, in recent years, an increasing number of university graduates are choosing to work in small counties instead of in big cities, and that the job satisfaction of such graduates has risen. Two young Chinese people interviewed by Voice of America disagreed with the survey results, saying that jobs in smaller counties actually offer lower salaries and fewer career development opportunities, contrary to the survey’s findings.

Wei, a 21-year-old tourism management student, is anxious about his future job prospects (like many of his graduating peers). He feels torn between working in a big city, which would mean intense competition and high living costs, or working in a small county, which would offer fewer opportunities for career growth and have lower-skilled job opportunities, unmatched to his degree.

The survey suggested that, in small counties, employment for bachelor’s degree graduates rose from 20% in 2018 to 25% in 2022, with job satisfaction improving by 9%. The survey reported that 70% of graduates employed in county jobs were working in roles relevant to their degrees. Wei stated that there is a huge gap between the survey results and the reality in China – small counties offer few private sector jobs, have lower pay, have policy implementation issues, and offer only unstable temporary work unless one is in the government sector.

While the survey data show that, in small counties, the monthly income of people with bachelor’s degrees has risen from 4,640 yuan (US$ 640) in 2018 to 5,377 yuan (US$ 742) in 2022, Wei believes that the official numbers are “false rhetoric disconnected from the reality of a decade’s wage stagnation,” and that many graduates end up returning home unemployed.

Some experts suggest that youth are leaving big cities due to lack of opportunities amid China’s current economic downturn and industrial restructuring, and that small counties are seen as providing better work-life balance despite lower salaries.

Source: Voice of America, April 21, 2024
https://www.voachinese.com/a/surveys-found-china-s-college-graduates-seek-job-opportunities-in-smaller-cities-20240421/7578947.html

The downturn in China’s real estate market continues. In the first quarter of 2024, sales by the top 100 real estate companies plunged 47.5% year-on-year. Official data show the prices of new homes and second-hand homes (i.e. homes that are not newly constructed) continuing to decline for several consecutive months.

Though the market for non-new homes showed some positive changes, reports indicate that the real estate market’s overall downward trend is unlikely to reverse, with the winter far from over. Major developer Vanke, once considered a “model player” in the industry, saw its 2023 net profit plummet 46.4% and has implemented management pay cuts. Analysts warn that even “quality” developers face default risks while troubled firms like Evergrande remain in limbo, signaling that the market has not yet bottomed out.

Some expect 2024 to be the year that China’s property market rebounds. However, a greater proportion of experts view the downturn as symptomatic of structural issues, with a solution requiring new economic drivers to replace traditional industries like real estate. The “new productive forces” concept promoted by China’s central government places hope in new industrial areas as economic drivers to spur growth. Doubts remain, however, about whether such “new productive forces” can match the enormous impact of the real estate sector on employment and on the broader economy in the short-term.

The current transitional state of China’s real estate market poses major challenges to the economy, including labor mismatch and overcapacity risks. Real estate had been an economic pillar, contributing around 17% of China’s GDP and employing over 15 million. While strategic shifts towards green energy and digital economies are inevitable directions in the long-term, filling the void left by a struggling real estate sector will not be easy.

Source: BBC Chinese, April 15, 2024
https://www.bbc.com/zhongwen/simp/chinese-news-68786662