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Pandemic: Over 40 Percent of China’s Cinemas May Go Bust

According to a survey that the China Film Association released on May 27, 2020, the pandemic has had a severe adverse impact on the entire Chinese film industry. The survey was conducted in April, with questionnaires sent to select, mature, dynamic, and market-competitive cinemas. Four in ten cinemas may permanently close down. Since February, all cinemas have been in the red.


The survey showed that the national box office revenue for the first quarter dropped 88 percent year on year to 2.23 billion yuan (US$312 million). The cinemas with more than 2,000 seats saw the box office revenue decrease by 87.7 percent year-on-year. Those with 500-2000 seats by dropped 88 percent and smaller ones with less than 500 seats by 91.3 percent.


Over 90 percent of those surveyed were pessimistic about the short term prospects. Half believed that it will take at least 3 to 6 months to reach the same level as before the pandemic and 37 percent of the theaters believed that it will take more than half a year.


As many as 42 percent of the cinemas surveyed responded they are at risk of “closing the door.” Only 10 percent indicated that they may change hands and continue to operate. Finally, 28 percent said they are “waiting for the headquarters’ arrangements.”


The China Film Association estimated that if cinemas reopened in June and revenues gradually recovered to 90 percent of last year’s levels within six months, the box office revenue would be reduced by about 60 percent year-on-year for 2020.


In 2015, China surpassed the United States to become the country with the largest number of screens in the world, over 70,000 screens in 12,480 cinemas in 2019. Its annual box office revenue accounted for about a quarter of the world’s total. As of 2019, it was the second-largest film market in the world.  China has been the largest overseas box office for Hollywood and in 2019 contributed 5.4 percent to the growth of the global film industry.


Sources:, May 29, 2020.

China Won’t Set a GDP Growth Target

On May 22, the third session of the 13th China’s National People’s Congress was held in Beijing. Chinese Premier Li Keqiang delivered a government work report, stating that China will not set a GDP growth target for 2020. For the first time since setting economic growth targets in 1994, China will not set a specific target for annual economic growth. Li Keqiang explained, “[M]ainly because of the great uncertainties of the global pandemic situation and the economic and trade situation, China’s development is facing some unpredictable factors. This will help guide all parties to focus on the “six stabilities” (stabilizing employment, finance, foreign trade, foreign investment, domestic investment, and expectations), and “six protections” (protecting the employment of residents, basic livelihood, market players, food and energy security, supply chains in the industrial chain, and basic-level operations)

The government work report announced that China will issue 1 trillion yuan in government bonds for COVID-19 control.

Source: BBC Chinese, May 22, 2020

China’s Revenue Hit Hard in First Four Months of This Year

According to the statistics released by China’s Ministry of Finance on May 18, in the first four months of this year, Mainland China’s general public budget revenue fell by 14.5 percent year-on-year, indicating that the Chinese economy has been hit hard by the Wuhan virus and its fiscal revenue has also declined. The general public budget revenue is a tax-based revenue according to Article 6 of China’s Budget Law.

The statistics further show that the revenue of the central government and local governments decreased by 17.7 percent and 11.5 percent year-on-year, respectively.  The national government fund budget revenue decreased by 9.2 percent year-on-year.  According to Article 9 of China’s Budget Law, the government fund budget revenue is revenue collected, charged or raised from specific targets and exclusively used for the development of certain public undertakings.

Tax revenue from industry sectors affected by the Wuhan virus has been hit the hardest. From January to April, hospitality and restaurants, transportation, and sports and entertainment declined by 46.8 percent, 29.8 percent, and 28.2 percent, respectively.

On a monthly basis, the national fiscal revenue from January to April decreased by 3.9 percent, 21.4 percent, 26.1 percent, and 15 percent respectively. The national fiscal revenue includes both tax and nontax revenues.

Source:, May 18, 2020

HKET: A Large Number of Chinese Mask Makers Went Bankrupt

Hong Kong Economic Times (HKET), the leading financial daily in Hong Kong, recently reported that a large number of Chinese mask manufacturers have filed for bankruptcy. With the spread of the coronavirus, the global demand for masks fueled a rush in China to manufacture more masks. However, most of the international customers have high quality requirements. This has led the Chinese government to enforce manufacturing standards that are much more strict in order to battle massive international returns. Tougher quality checks in China resulted in a sudden widespread bankruptcy of mask makers in China. An online video showed a huge pile of low-quality masks left in front of a factory in the city of Anqing, which is China’s primary manufacturing base for protective masks. Many mask companies in Anqing also stopped manufacturing because of the dramatic increase in the price of raw materials and manufacturing machinery. Now the masks produced there are very hard to export.

Source: HKET, May 6, 2020

Chinese Central Bank: In March, Foreign Investors Unloaded Chinese Assets

Well-known Chinese news site Sina recently reported, based on data released by the Chinese central bank, that, in the month of March, international investors unloaded around RMB 208.4 billion (US$29.5 billion) in stocks and around RMB 20 billion (US$2.83 billion) in bonds. Starting this February, international investors began unloading Chinese assets and the March numbers showed an acceleration. Analysts pointed out that, with the expansion of the coronavirus pandemic, the lack of U.S. dollars in the international market caused a panic selling of Chinese assets. This wave of sell-out resulted in a quite obvious decline in the Chinese foreign currency reserve. The spokesperson for the Chinese State Administration of Foreign Exchange (SAFE) commented at a press conference that the global market headed downwards in the first quarter, which triggered a trend of risk aversion; it is understandable. SAFE expressed the belief that the Chinese market remains attractive, regardless of which channel (direct investment, bonds, or stocks) international investors prefer.

Source: Sina, April 30, 2020

CBN: Moody’s Downgraded Some Chinese Companies

China Business Network (CBN) recently reported that, in the past couple of months, Moody’s downgraded 24 Chinese non-financial companies. These companies are mainly in the fields of transportation, real estate and automobile manufacturing. Seven of the transportation companies now have a negative outlook and the ratings of all five automobile manufacturers were lowered. Among the 24 companies, 17 also have China’s domestic ratings and 16 of them remained unchanged. These companies are typically large enterprises and the new development will hurt their capacity to issue bonds, especially overseas bonds. However, under the global pandemic environment, companies can hardly maintain a good posture, so we are in a time of competition for the title of not-too-bad. Chinese ratings agencies have a long reputation for overrating companies, so established international ratings agencies like Moody’s are more trustworthy.

Source: CBN, April 28, 2020

China’s Central Bank Testing Digital Currency

Guangzhou Daily reported that China’s central bank, The People’s Bank of China, is testing the use of digital currency in the accounts of the Bank of Agriculture through transportation subsidies.

According to the central bank’s Digital Currency Research Institute, the digital renminbi is being used in pilot tests in Shenzhen, Suzhou, Xiong’an, Chengdu, and the future Winter Olympics site.  Because these are internal, closed pilot tests, such testing does not mean that the digital RMB is officially issued or will affect commercial operations. Nor will it affect the RMB issuance and circulation system, the financial market, and the social economy beyond the testing environment.

The central bank has been studying official digital currency since 2014. At the end of 2017, with the approval of China’s State Council, the central bank organized some commercial banks and relevant institutions to research and develop a digital RMB system jointly.

It is expected that the central bank will follow a gradual promotion for its digital currency, starting with the four major banks’ payroll payment clients and public service clients, and then gradually expand to online companies and operators.

Unlike Alipay and WeChat Pay, the functions and attributes of the central bank’s digital currency are similar to paper money, except that it is digital. Third-party Internet payments such as Alipay and WeChat Pay use commercial bank deposit currency settlements.

Source: Xinhua, April 20

Tech News: Satellite Analysis Showed Chinese Economy Did Not Rebound

Taiwanese technology news site Tech News recently reported that, despite China’s global propaganda, a new scientific study showed that the Chinese economy did not rebound. According to the Broad Activity Index (BAI), provided by U.S economic analysis vendor SpaceKnow, Chinese supply chain industrial activities continued to shrink. As of early April, the Chinese BAI was -0.2 percent. The company deployed cutting-edge technology which uses three satellites to monitor over 5,000 supply chain checkpoints in China. Satellite based methane and ozone studies also showed Chinese economic activities remain on a very low level compared to “normal” times. However, the night-time lighting level did not change much. It was discovered that factory closures were replaced by hospital openings. The study concluded that the Chinese economy didn’t even start to rebound.

Source: Tech News, April 13, 2020

Sina: Two Conglomerate Giants Face Financial Crisis

Recently two conglomerate giants the HNA Group and the Founders Group found themselves to be in a deep financial crisis. On April 14, during a creditor’s meeting, the HNA Group’s request for a one-year debt extension was turned down. On February 29, the heavily indebted HNA announced that it has entered into the takeover process and is working with a task team that the Hainan Provincial Government formed during the transition. Meanwhile the Founders Group announced that it will be unable to meet its debit payment and has entered into a bankruptcy procedure. It is currently working with the bank, the department of Education, and other financial institutions on the restructuring process.

According to Sina, both companies were expanding rapidly in recent years through a large numbers of mergers and acquisitions, using capital operations to inflate their assets. The source of the funds was that they were incurring debts from the banks and from strategic investors. The risk to this model was that, as soon as it received the profit from the subsequent investment, it was unable to cover the interest from its previous debt and the company faced a cash flow risk. In 2018, the HNA group started to have cash flow and liquidity issues. Despite the fact that it sold more than 300 billion of its assets in 2018, it was still unable to improve its capital structure. {Editor’s note: According to sources from overseas media, HNA’s expansion could also be partially related to unspecified private cash investments that top party officials in China made in order to transfer their assets overseas.}

Source: Sina, April 15, 2020

CNA: China Auto Industry Faces Parts and Order Shortages

Affected by COVID 19, the Chinese auto industry is facing parts and order shortages. Despite the fact that the Chinese government recently introduced a stimulus plan for electric vehicles and used cars, it is believed that the fate of the Chinese auto industry is dependent on the recovery of the supply chain outside of China. The Central News Agency reported that, due to uncertain future orders, once they are caught up making the existing safety stock orders, many auto manufacturing plants may have to shut down. To reduce their costs, some factories have started to give workers three days off a week from their work shift. Meanwhile the auto market demand is weak as well. Auto sales revenue in the last week of March was down 24 percent compared to the same period in 2019. Airtex in Tianjing is predicting a 30 percent order reduction once the U.S. can get out of its COVID 19 lockdown. As most countries in Europe and the US are dealing with COVID 19, auto makers in China, especially electric auto manufacturers who rely on imports of key components and parts, will face a parts shortage. It is expected that the risk to the auto industry will come in the second half the year.

Source: Central News Agency, April 11, 2020