Economy/Resources - 9. page

In the first quarter of this year, the year-on-year growth rate of BYD’s electric vehicle (EV) exports exceeded 150 percent, reaching over 97,000 units. Some 15,700 vehicles were shipped to Brazil during the first quarter, accounting for 16 percent of total exports. There was also a surge of exports to Mexico, which may be attributed to concern over possible upcoming Mexican tariffs or sanctions following the possible election of Trump as U.S. President.

China’s accelerating EV exports triggered a bidding war on cargo shipping costs. The Shanghai Containerized Freight Index showed that, from late January to late April, the cost of shipping from China to the South American destinations, including Mexico and Brazil, rose by 55.8 percent. These rising shipping costs reflect the increased demand for shipping along those routes.

In contrast, during the same period, the freight index for shipments from China to Europe decreased by 31 percent. Possible factors contributing to the lower demand for shipping from China to Europe include the European Commission’s investigation into accusations of unfair subsidies in China’s EV industry as well as EU tariffs starting as early as July.

An executive from a major Chinese electric vehicle manufacturer stated that “We are not worried about the new tariffs the U.S. might impose on Chinese electric vehicles because we do not sell directly to the U.S. However, we are concerned about the signals [U.S. tariffs] sends to other countries, especially to U.S. allies.”

Source: China Times, May 19, 2024
https://www.chinatimes.com/realtimenews/20240519001718-260408?chdtv

An analysis of 2023 financial reports from 29 Chinese cities’ metro companies revealed that all surveyed companies operated at a loss after government subsidies were deducted. The combined debt of these metro firms reached a staggering 4.3 trillion yuan (US$613 billion). Over the past four years, debt levels have risen annually across Chinese metro systems.

Media reports indicate that, while most metro operators saw revenue increases in 2023, many experienced profit declines despite rising government subsidies. In terms of revenue, Shenzhen Metro remained the nationwide leader, earning 25.15 billion yuan (US$3.59 billion) in 2023 – up 1.18 billion yuan (US$168 million) from the prior year. After subtracting 730 million yuan (US$104 million) in government subsidies, however, Shenzhen Metro posted a 180 million yuan (US$25.6 million) net loss.

Beijing Metro was among the most profitable in China, with a 2.4 billion yuan (US$342 million) net profit in 2023. However, it received a massive 25.34 billion yuan (US$3.61 billion) in government subsidies. After Beijing and Shenzhen, the Chinese metro companies with the highest net profits were those of Chengdu, Tianjin, Changchun, Qingdao, Ningbo, Nanjing, and Fuzhou. Of the 29 firms analyzed, 25 saw rising revenues but 17 suffered declining profits. Excluding subsidies, all posted a loss.

Fundamental drivers of ballooning metro debt include poor management, corruption scandals, and local officials pursuing “vanity projects” to boost their political credentials, leading to excessive subway construction and debt accumulation. These issues stem from systemic factors within China.

Source: Radio Free Asia, May 27, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql-05272024000605.html

On May 17th, the Hong Kong Monetary Authority (HKMA) announced a collaboration with the People’s Bank of China to expand the use of the digital renminbi wallet in Hong Kong, allowing all Hong Kong residents to open an account.

According to the announcement, Hong Kong residents can register and open a digital renminbi wallet on their mobile phones. After registration, they can use the popular local mobile payment app “Faster Payment System (FPS)” to top up their wallet and exchange for renminbi.

The HKMA stated that the digital renminbi wallet balance is capped at 10,000 yuan. Each payment cannot exceed 2,000 yuan, the cumulative daily payment amount cannot exceed 5,000 yuan, and the annual limit is 50,000 yuan. The wallet also has a function to exchange the digital yuan back into Hong Kong dollars.

In addition to using the digital renminbi wallet in various cities in the Greater Bay Area of Guangdong, Hong Kong residents can also use it in other pilot cities across mainland China.

Eddie Yue, Chief Executive of the HKMA, said Hong Kong is the first place outside mainland China to launch the digital renminbi wallet. The authorities will continue to work closely with the People’s Bank of China to gradually expand the application scope of the digital renminbi and promote acceptance by more retail merchants, facilitating cross-border retail payments for residents in both mainland China and Hong Kong.

The digital renminbi is a digital form of legal tender issued by the People’s Bank of China, exchangeable 1:1 with physical renminbi. It has been piloted in multiple major mainland Chinese cities since 2019.

Source: Central News Agency (Taiwan), May 17, 2024
https://www.cna.com.tw/news/acn/202405170225.aspx

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported a summary of the results from the 2023 annual report disclosure published by 58 listed Chinese banks.

In 2023, while China’s economy was broadly under pressure, the banking sector faced operation and development challenges of its own. Banks’ net interest income suffered a year-over-year decline for the first time since 2017. Also, the average net interest margin of listed banks was 1.69 percent, declining for the fourth consecutive year. Net fee and commission income decreased by 8.05 percent year-over-year, declining for two consecutive years. Listed banks achieved a total revenue of RMB 5.87 trillion yuan (around US$827.8 billion) in 2023, a year-over-year decrease of 0.98 percent.

Digital intelligence capabilities have become the core competitiveness of listed banks. It is worth noting that, in 2023, the banking industry paid a lot of attention to large data models, with more and more listed banks deploying large model technology. For example, in 2023, ICBC (Chinascope Editor’s Note: ICBC, the Industrial and Commercial Bank of China, is the largest bank in the world by total assets) established the industry’s first fully-independently-developed large-scale AI model, with hundreds of billions of parameters, deploying innovative applications to multiple financial business scenarios.

For some small and medium-sized banks, it may be difficult to find the resources required for digital transformation. This could lead to further intensified differentiation within the industry.

Source: Sina, May 15, 2024
https://cj.sina.com.cn/articles/view/2660807713/9e98b421001018rda

On April 10th, the China Association of Automobile Manufacturers released automobile production and sales data from January to March 2024. China’s production and sales reached 6.606 million and 6.72 million units, respectively, with year-on-year increases of 6.4 percent and 10.6 percent, respectively. These were the highest quarterly production and sales figures seen since 2019.

Automobile exports for Q1 totaled 1.324 million units, up 33.2 percent year-on-year. In terms of new energy vehicles (electric cars), production and sales during this period were 2.115 million and 2.09 million, respectively, representing year-on-year increases of 28.2 percent and 31.8 percent, respectively.

In the month of March alone, automobile production and sales reached 2.687 million and 2.694 million units, respectively, up 78.4 percent and 70.2 percent month-on-month, and up 4 percent and 9.9 percent year-on-year, respectively. Among these, new energy vehicle production and sales reached 863,000 and 883,000 units, respectively, up 28.1 percent and 35.3 percent year-on-year.

Source: People’s Daily, April 10, 2024
http://finance.people.com.cn/n1/2024/0410/c1004-40213186.html

To create economic growth, Beijing has been carrying out a “Trade-in (以旧换新)” plan to encourage industries and consumers to replace their equipment and durable goods, even including cars. Two articles on the People’s Daily website on May 14 showed some examples.

Industry

In one example, the Tianjin Power Company plans to invest over 700 million yuan (around US$100 million) this year to replace its old equipment, aiming to enhance the power grid’s digital and smart-tech capabilities.

Chuan Cheng Pharmaceutical Co., Ltd., located in Liaocheng, Shandong Province, is currently updating its exhaust gas treatment equipment. The new equipment will reduce carbon emissions by 410.4 tons and is expected to increase the company’s revenue by 1.3 million yuan.

The Liaocheng Development Zone has established a special team to promote large-scale equipment updates as well as trade-ins of consumer goods. The team is focused on 54 project areas, including industrial equipment and recycling. The team has identified an investment demand of 22.47 billion yuan and an update demand of 9.09 billion yuan.

Consumer Goods

Companies are offering subsidies for home-appliance trade-ins and for services to dismantle and take away existing home appliances. Applicable large household appliances include refrigerators, TVs, and air conditioners. Local governments are offering automobile trade-in initiatives, issuing policies to create and regulate a market for used cars and to promote services for dismantling scrapped cars and reuse of old car parts.

Sources:
1. People’s Daily, May 14, 2024
http://finance.people.com.cn/n1/2024/0514/c1004-40235482.html
2. People’s Daily, May 14, 2024
http://env.people.com.cn/n1/2024/0514/c1010-40235221.html