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Chinese Manufacturing PMI Numbers Confirmed a Decline

The Chinese National Bureau of Statistics official website recently published its December PMI numbers for China’s manufacturing industry. The overall PMI index landed at 49.4 percent. The PMI New Orders sub-index was 49.7 percent. The Raw Material Inventory sub-index was 47.1 percent; and Employment sub-index was 48 percent. The data indicates the first decline in the manufacturing business in 29 months.

Well-known Chinese financial company Caixin, which conducts its own independent and globally recognized Chinese PMI data collection, also published its December numbers. The overall Chinese manufacturing PMI index reached 49.7, which was the first time it had fallen below 50 since Caixin’s June 2017 report. The trending is in line with the National Bureau of Statistics. Caixin’s New Orders sub-index showed the first decline since July 2016 and New Export Orders showed a nine-month-in-a-row decline. The Employment sub-index has been showing a decline for 62 months.

In the meantime, in December, the Guangdong Provincial Department of Industry and Information Technology suddenly stopped publishing its manufacturing PMI numbers for the province. The event sent a shockwave across the media, since Guangdong is one of China’s largest manufacturing provinces. The government later explained that the move was per the requirements of the National Bureau of Statistics.

PMI (Purchasing Managers Index) is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.

1. Chinese National Bureau of Statistics official website, December 31, 2018
2. Caixin, January 2, 2019
3. Phoenix New Media, December 17, 2018

Sing Tao: Samsung Closed Its Tianjin Factory

Primary Hong Kong news media Sing Tao News Group recently reported that global mobile phone leader Samsung closed its Tianjin factory on the last day of 2018 and sent all of its 2000 employees home. This factory used to manufacture cellphones, camcorders, video recorders and DVD equipment, exporting to over 20 countries in Asia, Europe, and Africa. This is another major Samsung closure after the company shut down its Shenzhen factory last April. Now Samsung has only one handset manufacturing factory left in Huizhou, Guangdong Province, China. Local taxi drivers told the reporter that the close-down will definitely have a negative impact on the local economy and their business. In recent years Samsung has been moving from China to Southeast Asia and India. The Huizhou factory can still produce 72 million handsets. However, the two Samsung factories in Vietnam now make 240 million handsets. Last November, Samsung opened the world’s largest smartphone factory in New Delhi, which is expected to be Samsung’s biggest export center.

Source: Sing Tao News, December 31, 2018

Hong Kong’s Toy Industry Plans to Move Factories out of Mainland

Major Taiwanese news group Eastern Media International recently reported that, so far, Hong Kong’s toy industry has not been impacted by the US-China trade war, although many other sectors in the manufacturing business have been leaving China. However, with more and more negative expectations on the 90-day US-China negotiation, the Hong Kong toy factory owners are seriously considering relocating their facilities mainly to Vietnam and India. According to Lawrence Chan Wing-luen, Chairman of the Toy Industry Advisory Committee of the Hong Kong Trade Development Council (HKTDC), nowadays nine out of ten toys sold in the U.S. are made in China. More and more associated Hong Kong toy vendors are concerned about the trade war risks, which have mounted on top of the continuous cost increases that the Mainland manufacturing industry has seen in the recent years. For example, one of the largest Hong Kong toy makers, Wah Shing Toys, employs around 20,000 Mainland workers. Its board member Francis Wong Wai-cheuk said that the company is planning to move out.

Source: Eastern Media International, January 3, 2019

China’s Population Sees Negative Growth; First Time in 70 Years

China, as the world’s most populous country, has nearly 1.4 billion people. For decades, in order to control population growth, it implemented a one-child policy. However, in response to concerns about an aging society and a shrinking labor force, in 2016, the Chinese government allowed couples to have a second child.

Yi Fuxian, a researcher at the University of Wisconsin in Madison, pointed out that despite the second child policy, the number of safely born infants in China in 2018 was 2.5 million less than the previous year, compared with the forecast of an increase of 790,000.

Based on the publicly available birth information of villages and towns across China, Yi believes that last year was a “historical turning point for the Chinese population” and its negative growth may have become an irreversible trend. The causes include the decline of women of reproductive age, as well as the high expenses of education, health care, and housing, making newly married couples reluctant to raise children.

Year 2018 was the first year of negative population growth since the establishment of People’s Republic of China in 1949. Yi’s observation is that the aging of the population has accelerated while China’s economic vitality has declined.

Source: Central News Agency, January 3, 2019

Officials Held Accountable for African Swine Fever Outbreak

Although African swine fever continues to spread in China, the authorities emphasized that the epidemic is “overall controllable.” However, according to a local government website, 223 people in Liaoning and other places have been held accountable for deliberately hiding the epidemic information and have been slack in performing their duties of monitoring and investigation.

On December 30, 2018, Inner Mongolia’s Chinese Communist Party’s website published a release from the Information Office of the Ministry of Agriculture and Rural Affairs, titled, “The General Office of the State Council seeks accountability for the prevention and control of African swine fever in Liaoning, Anhui, and Hunan.”

The above news was not widely picked up by mainland Chinese media. According to the release, the General Office of the State Council issued letters to Liaoning, Anhui, and Hunan, demanding serious investigation for responsibilities. These three provinces have seen intensive outbreaks of cases and even a small-scale epidemic.

According to the report, some county and township government officials in Liaoning Province passed the buck around, some deliberately hid the outbreak information and failed to implement the monitoring and investigation. In some cities and counties in Anhui and Hunan Provinces, the prevention and control work was not in place and there was a lack of efficacy in performing their duties. A total of 223 officials in the three provinces were punished.

The report also reminded the government officials that they must understand the difficulty and complexity of the prevention and control of the epidemic.

Source: Central News Agency, January 2, 2019

China’s Home Vacancy Rate Is over 20 Percent

On December 21, China’s Southwestern University of Finance and Economics (SWUFE) released a “2017 China Urban Home Vacancy Analysis” report. The report sampled over 40,000 households in 364 districts or county-level cities in 29 provinces.

The report shows that the home vacancy rates in China’s urban areas were 18.4 percent, 19.5 percent, 20.6 percent and 21.4 percent in 2011, 2013, 2015 and 2017 respectively. Its current vacancy rate is only behind Spain (28.3 percent) and Italy (22.7 percent). It is higher than the U.S. and most European countries.

Gan Li, SWUFE’s director of the Center for Chinese Family Finance Research, said that, in recent years, China’s home vacancy rate has received a lot of attention and is considered to be a key factor in judging the trend of the housing market. Yan Yuejin, a researcher at a housing think tank, said that a vacancy rate of over 20 percent indicates that the speculative investment in housing is high and that housing idleness is high.

Buying a house is considered an important means of property ownership. However, the report shows that families with vacant houses face higher financial risks. In 2017, 32.2 percent of households with vacant homes had housing liabilities, compared with 17.3 percent of households with no vacant homes.

Source: Central News Agency, December 22, 2018