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In the First Four Months, China’s Sizeable Industrial Enterprises Saw Profits Drop by 20.6 Percent

The National Bureau of Statistics of China recently released official data on industrial enterprises for the first four months of this year. The total profits of industrial enterprises above a designated size reached RMB 2,032.88 billion (around US$288 billion), a year-over-year decrease of 20.6 percent. Among them, State-owned companies saw a year-over-year profit decrease of 17.9 percent; joint-stock companies had a profit decrease of 22.0 percent; foreign and Hong Kong, Macao and Taiwan-invested companies had a profit decrease of 16.2 percent; and privately-owned companies suffered a decrease of 22.5 percent. During the first four months, the manufacturing industry saw a profit decrease of 27.0 percent and the electricity, heat, gas and water production and supply industry had a profit increase of 34.1 percent. Among the 41 major industrial sectors, the total profit of 13 industries increased year-over-year. One industry was flat, and 27 industries declined. It is notable that the general equipment manufacturing industry profit increased by 20.7 percent and the automobile manufacturing industry profit increased by 2.5 percent. However, the textile industry profit decreased by 30.2 percent, the agricultural and sideline food processing industry profit decreased by 36.3 percent, and the computer, communication and other electronic equipment manufacturing industry profit decreased by 53.2 percent.

Source: National Bureau of Statistics of China, May 27, 2023
http://www.stats.gov.cn/sj/zxfb/202305/t20230526_1940198.html

Briefings | | |   Economy/Resources

EU Chamber of Commerce: European Companies Pause on Investments

Primary Taiwanese news agency Central News Agency (CNA) recently reported that the president of the European Union Chamber of Commerce in China said that China’s economic growth is not what it used to be. At present, European companies are cautious about investment. Although large companies continue to invest, smaller companies have pressed the pause button or they have left. He believes that the biggest problem in China’s economy is the real estate industry, which accounts for a quarter of the total Chinese GDP. There are almost no new developments. In addition, in the field of exports, China exported 6.4 million containers to the EU last year, while the EU only exported 1.6 million containers to China. This shows China’s dependence on European consumers. In terms of industrial production, energy supply problems continue to arise. Youth unemployment remains high. China’s large private enterprises are facing serious difficulties. They are being punished, while state-owned enterprises are being rewarded with strong government support. In China, the EU Chamber of Commerce does not yet see the same way that they did  during the Cultural Revolution in the 1960s, but the country is heading in that direction.

Source: CNA, May 27, 2023
https://www.cna.com.tw/news/acn/202305270037.aspx

Briefings | | |   Economy/Resources Geo-Strategic Trend

Leaked Meeting Minutes Showed Kunming City Investment Companies Are Running Out of Money

An article, said to be the minutes of an internal meeting of Kunming City Investment Companies, was widely spread on the Internet. The triggering event for the meeting was that Kunming Land Investment Company struggled to pay back a 200 million Yuan (US$28) debt which was due on May 19. Kunming is the capital city of Yunnan Province and is supposed to be the richest city in Yunnan.

A few highlights of the minutes are:

To help Kunming Land Investment Company make its payment, Kunming city gave 130 million Yuan from its fiscal budget. The investment company itself raised 35 million Yuan, and Kunming Land Reserve Investment Company provided 40 million.

Collectively, city investment companies in Kunming have 20 billion Yuan in debt due in the second half of this year. Kunming city does not have the money. The Yunnan Province government might have some money, but a Deputy Governor already stated that the province will not rescue every company.

The Deputy Major of Kunming led three chairmen of three investment companies, including Kunming Industry Investment Company, Kunming Urban Investment Company, and Dian Investment Company, to Shanghai on May 20 and 21. They were to ask Shanghai Urban Investment Company to transfer some money – Shanghai was tasked to provide Yunnan Province with financial support (several hundred billion Yuan each year), but it didn’t transfer money last year.

The Kunming city government has gathered all the money it can gather from its investment companies. If there is another debt crisis, the city has no money and no means but to issue new debt.

All loans (to Kunming city investment companies) that can be extended have already been extended. Principle and interest payments on fixed asset loans have all been deferred. Kunming Transportation Investment Company, Kunming Production Investment Company, Kunming Land Investment Company, Kunming Rail Transit, and Kunming Urban Investment Company have already accomplished this extension.

Source:
1. Pingcong website
https://pincong.rocks/question/58589
2. Net Ease, May 23, 2023
https://www.163.com/dy/article/I5EBF1QL0519B61A.html

Briefings | | |   @CS Economy/Resources Government/Politics

It’s Getting Difficult to Enter the Ridesharing Business

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that large cities like Changsha, Sanya, Jinan, Suining, and Dongguan have successively released risk warning notices for the Uber-like ridesharing industry in China. The government has been reminding workers to enter cautiously. The ridesharing platforms and the number of ridesharing vehicles are growing rapidly and the market capacity is becoming saturated. In order to “maintain the market order” of the ridesharing industry, many local governments have decided to suspend the acceptance of related businesses registrations. Only a year ago, the ridesharing market was relatively free to enter. It was regarded by many people as one of the options for flexible employment opportunities. Now many cities have suspended the acceptance of related businesses. With the rapid growth of the unemployment rate, the industry as a whole is in a situation of more drivers and fewer orders, which will lead to a reduction in unit price and per capita order volume. This will result in a decline in driver income and an increase in working hours. Over time, service quality may fade away and friction between drivers and passengers will increase, among other issues. In the past two and half years, the number of ridesharing platforms that have obtained business licenses increased by 102, an increase of 49 percent. Also, the number of ridesharing driver licenses issued increased by 2.861 million, an increase of 112.4 percent. In the past 12 months, China added 1.014 million registered ridesharing drivers and 538,000 new ridesharing vehicles. However, the total number of orders nationwide has not increased significantly.

Source: Sina, May 18, 2023
https://finance.sina.com.cn/tech/roll/2023-05-18/doc-imyufcvw4965891.shtml

Briefings | | |   Economy/Resources Social Stability

Lianhe Zaobao: Unemployment Rate among Chinese Youth Rose Significantly

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, according to data from the National Bureau of Statistics of China, the unemployment rate among Chinese youth aged 16-24 rose to more than 20.4 percent in April, reaching a record high. The same number was 19.6 percent only one month ago. Chinese officials admitted frankly that structural problems in employment are still relatively prominent. The number of college graduates hit a new high this year, and the unemployment rate among young people remains high too. Stabilizing and expanding youth employment still “requires continued efforts.” Since 2020, the bottom of the youth unemployment rate curve has been rising. This also means that, excluding cyclical and structural factors, the overall youth unemployment rate has been consistently on the rise. A high unemployment rate just shows that there is a problem with the supply of jobs. The decline in job supply is essentially caused by economic growth that has not met expectations. In recent years, the number of college graduates has continued to rise. Coupled with the unemployed groups left over from the past few years, the number of college students seeking jobs will continue to increase in 2023. This “snowball” effect of employment pressure is obvious. At the same time, the mismatch of skills and preferences increases the difficulty of employment as well.

Sources:
(1) Lianhe Zaobao, May 16, 2023
https://www.zaobao.com.sg/realtime/china/story20230516-1395140

(2) Tencent News, May 16, 2023
https://new.qq.com/rain/a/20230516A044CQ00

Briefings | | |   Economy/Resources Social Stability

Hi-IQ Crimes Are Surging in China

An Internet article talked about how the current economic downfall in China has caused a spike in crimes, many of which are high intelligence crimes.

According to official numbers, 30 key cities in China have taken in more than half of China’s total fiscal income. Among these 30 cities, except Beijing, Shenzhen (in Guangdong Province), and Chengdu (in Sichuan Province), all other cities had poorer housing sales in April than a year ago. More than half of these cities saw that the total square footage sold dropped 30 percent or more.

Many other products are also having had difficulties being sold and their inventories have skyrocketed. Huawei and its subsidiary Honor have 10 million mobile phones in stock. BYD cars are piled in garages. Jiuguijiu, a famous strong Chinese liquor containing around 50 percent alcohol, currently  has over 1,000 tons of liquor in stock, while its annual sales in 2022 was just 1,147 tons.

The economic problem has led to a surge in crime. The Supreme People’s Procuratorate published its first quarter data, showing that the procuratorate system approved the arrest of 10,923 people for crimes of fraud in this period. It also sued 18,146 people in court on fraud charges, making fraud crime the fifth largest crime type in the first quarter. This implied that there were at least 100,000 criminal cases brought to court in the first quarter.

Searching the key words of “government” or “bank” on the People’s court website returned many results. This indicates that many local governments or banks have defaulted.

The websites for crimes of fraud have frequently been updated in terms of their styles and content, expanding from telemarketing fraud, financial fraud, and loan fraud to senior housing fraud, medical insurance fraud, and collectible fraud. Many fraud rings are well organized, with a clear division on work and strict hierarchical management. Criminals have evolved from using only the telephone to using the Internet, and even Artificial Intelligence (AI) and big data analysis.

Source: VCT News, May 10, 2023
https://vct.news/news/d879a7cc-eaa4-4ea9-96f4-26d5ba2a95ec

Briefings | | |   Economy/Resources

Massive Price Reduction on Pre-Owned Houses Is Expected

The week of May 1 (China’s Labor Day) used to be one of the hottest real estate sales weeks. However, this year, the sales volumes of both new houses and pre-owned houses have been low. For example, among the largest four cities with the highest housing prices in China, only 13,928 pre-owned housing units were sold in Beijing in April, a drop of 37 percent from the 22,192 units in March. Shanghai dropped by 27 percent and Guangzhou and Shenzhen were down by 14 percent and 19 percent, respectively.

On the other hand, a number of pre-owned housing units have kept coming on the market. Shanghai has around 200,000 units listed for sale. Approximately 13,000 units have been added each week for the past two months. However, only 17,000 units were sold in the entire month of April.

China had 606,000 foreclosed housing units auctioned off in 2022, an increase of 35.7 percent from 2021. Unlike the U.S. where a person can stop makjng payments on his mortgage and owe the bank nothing after declaring bankruptcy, Chinese law says that even if a person chooses to declare  bankruptcy or stop making payments on his mortgage, he is still liable for the remaining debt. Therefore, once a person is unable to make his mortgage payment, not only does he lose the down payment on his house as well as the subsequent payments, but he still has to pay the remaining debt and will be put on many spending restrictions until he clears his debt. This tough law gives people a great incentive to sell their house instead  of declaring bankruptcy if they do not want to continue their mortgage payments. China announced on April 25 that it implemented a nationwide real estate registration. Many people felt this was a step to prepare for adopting a real estate property tax, which is bad news to those who own many properties.

The “landlord tax” even came out faster than the property tax. Three provinces including Hebei, Hunan, and Yunan piloted the tax last year. The government will collect a 10 percent tax on rent if an individual rents out part of his own residence and 20 percent tax on rent from a non-residence.

All these factors will drive more people to sell their houses. A price reduction is unavoidable.

Source: VCT News, May 15, 2023
https://vct.news/news/f26f9d83-7acb-4ebc-99dc-88c82ffb3bd1

Briefings | | |   @CS Economy/Resources

Population Decline in China’s Major Cities Sparks Response from Official Media

China’s state-run newspaper, People’s Daily, has recently published articles addressing the country’s population issues in the wake of negative population growth in major cities like Beijing, Shanghai, Guangzhou, and Shenzhen.

In the first article titled “Comprehensively Understanding and Correctly Viewing the New Situation of China’s Population Development,” the author, who goes by the pen name Zhongyin, notes that China’s aging population will become a permanent reality and that it is a global problem faced by many developed countries. The article stresses that China should focus on developing high-quality human resources to support its modernization process.

The second article, titled, “Focusing on Improving the Overall Quality of the Population”, emphasizes the need to improve the overall quality of China’s population while striving to maintain a moderate birth rate and population size. It suggests that China should create a modern human resources system with high-quality and abundant resources that are optimally distributed.

These articles highlight the challenges faced by China due to its aging population, declining birth rates, and the need to develop high-quality human resources.

Source: Central News Agency (Taiwan), May 16, 2023
https://www.cna.com.tw/news/acn/202305160355.aspx

Briefings | | |   Economy/Resources