CHINA BIWEEKLY RMB Internationalization Business Promotion Office Global Business Division March 21st 2018 BIWEEKLY DIGEST [Economy] Retail sales for Chinese New Year holidays expand 10.2% YoY National People s Congress opens on March 5: 2018 target GDP growth rate remains unchanged at around 6.5% February manufacturing PMI falls to 50.3, down 1.0 point from the previous month [Industry] The winter sports industry booms toward the 2022 Beijing Winter Olympics January auto sales rise 11.6% YoY; sales of new energy vehicles increase to 5.3 times of the previous year January housing prices of 70 medium- to large-sized cities increases in 52 cities MoM and in 59 cities YoY [Trade/ Investment] January inward foreign direct investment rises 0.6% YoY and outward foreign direct investment rises 39.7% YoY 2017 volume of port cargo handled increases 6.4% YoY Disclaimer This document does not constitute any entrustment or any other contractual obligations. MUFG: Bank (China) (the Bank) shall not be responsible for any legal consequences hereof. Although this document is based on reliable data, the Bank does not guarantee its accuracy or completeness. The contents herein are limited to our current understanding. The Bank shall not be responsible for any losses or damages related to this document. Please consult your lawyers, tax consultants, accountants or other specialists for their professional advices, as appropriate. This document is the copyright of the Bank and is protected by the law. No partial or entire part of this document may be quoted, duplicated, or forwarded without the Bank s permission. Copyright 2018 Bank of Tokyo-Mitsubishi UFJ (China), Ltd. All rights reserved. 1
CHINA BIWEEKLY(March 21st 2018) [Economy] Retail sales for Chinese New Year holidays expand 10.2% YoY On February 21, the Ministry of Commerce announced that nationwide sales in the retail and restaurant sectors increased 10.2% YoY to approximately RMB 926 billion during the Chinese New Year holidays (February 15-21), marking a decrease of 1.2 percentage points from the previous year and the first slowdown in three years, despite maintaining a double-digit growth rate. This year has been enjoying successful sales of New Year-related items, organic foods such as organic grains, gold and silver jewelry using the dog of the Chinese Mufg@0203 Zodiac as a motif, smart consumer electronics such as high-definition smart TVs, dryer-equipped washing machines, and cleaning robots, and digital products such as smartphones and wearable devices. In the food and drink business, on the other hand, long-established restaurants, etc. received many reservations for a reunion dinner (where families reunite to celebrate New Year s Eve) while the use of delivery services and private chef services became new trends. Also, a lot of people enjoyed movies and trips during the holidays. On February 24, the State Administration of Press, Publication, Radio, Film and Television announced that the box office revenue for February 16-21 increased 68.3% YoY to RMB 5.694 billion, with the number of viewers up 60.1% YoY to 143 million. The box office top five for the period were all Chinese movies. Additionally, February 16, New Year's Day, marked a box office revenue of RMB 1.269 billion, hitting a record high for one day in the history of the Chinese movie market. According to the China National Tourism Board, domestic tourism revenue during the Chinese New Year holidays increased 12.6% YoY to RMB 475 billion, and the number of tourists rose 12.1% to 386 million. The popular regions among tourists included Guangdong, Sichuan, and Hunan. Long stay trips experiencing local New Year s events, winter leisure activities, or hot springs were among the popular travel styles. Meanwhile, the most popular overseas travel destination was Southeast Asia. About 50% of overseas tourists were in their 20s to early 30s. National People s Congress opens on March 5: 2018 target GDP growth rate remains unchanged at around 6.5% At the National People s Congress (the equivalent of the Japanese Diet), which opened on March 5, Premier Li Keqiang announced the economic management policy for 2018 in a report on government activities. Regarding specific policy management, he mentioned that the policy would be to continue focusing on promoting supply-side structural reforms, and while maintaining steady growth, drive forward the Chinese economic reform, enhance new growth driving forces generated by innovations, and improve people s quality of life, as well as produce solid results in the three top-priority tasks of preventing critical risks (especially financial risks), eradicating poverty, and preventing pollution. In terms of the main economic indicators, the 2018 GDP growth target was left unchanged at around 6.5%, the target set for 2017. He explained that the target figure would be in line with the actual circumstances of the Chinese economy, which is in the process of shifting from high speed growth to high quality growth, to realize the goal of a moderately prosperous society in 2020. As for employment, in addition to the 2018 targets of creating 11 million or more new urban jobs and keeping the registered urban unemployment rate 1 at 4.5% or below, a new target of keeping the surveyed urban unemployment rate 2 within 5.5% was set. This was to further reflect the reality such as that the development of the sharing economy is contributing to employment. Notes 1. Registered urban unemployment rate: the unemployment rate of people registered in urban areas 2. Surveyed urban unemployment rate: the unemployment rate of people including those registered in rural areas, etc. 2
On the fiscal side, although a proactive policy will be maintained, the target deficit-to-gdp ratio was lowered 0.4 points from that for 2017 to 2.6% as an increase in fiscal revenues could be expected with the steady economic growth. The monetary policy would remain prudent and neutral, promoting direct financing and equity financing and securing stable liquidity. The growth target for the broadly-defined money supply (M2) was not quantified but described as to achieve rational growth. Regarding foreign investment policy, he mentioned the full-scale opening-up of the general manufacturing industry, easing of regulations on the entry of foreign companies in the sectors including telecommunications, medical care, education, nursing care, and new energy vehicles, phased opening-up of bank card settlement operations, easing of regulations on the scope of business of insurance companies, easing or elimination of regulations on foreign investment in financial institutions such as banks and securities companies, simplification of the procedures for foreign companies to establish companies in China, nationwide expansion of reform trials through pilot free trade zones, and exploring the possibility of building a free-trade port. <Comparison of Main Economic Indices for 2017 and 2018> Index 2017 2018 Target Result Target GDP growth rate Around 6.5% 6.9% Around 6.5% CPI inflation rate Around 3.0% 1.6% Around 3.0% Money supply (M2) growth rate Around 12.0% 8.2% (Rational increase) Export/import growth rate - 14.2% (Maintain stability) Deficit-to-GDP ratio 3.0% 2.8% (calculation basis) 2.6% Number of newly employed people in urban areas 11 million or more 13.51 million 11 million or more Registered urban unemployment rate 4.5% or lower 3.9% 4.5% or lower Surveyed urban unemployment rate - 4.98% 5.5% or lower (Source) Created based on data published by the Chinese government February manufacturing PMI falls to 50.3, down 1.0 point from the previous month According to the February 28 announcement by the National Bureau of Statistics (NBS) and the China Federation of Logistics & Purchasing (CFLP), the manufacturing PMI for February dropped 1.0 point MoM to 50.3, surpassing 50 points, which is the break-even point in judging the economy, for the nineteenth consecutive month, but dropping three months in a row. NBS commented that such drop is normal in February, the month of the Chinese New Year holiday. All main indicators declined: production fell 2.8 points MoM to 50.7, new orders dropped 1.6 points MoM to 51.0, new export orders sunk 0.5 points MoM to 49.0, and imports decreased 0.6 point to 49.8. Meanwhile, the expected production and business activities index, which indicates the business confidence for the future, rose 1.4 points MoM to 58.2. The February non-manufacturing PMI fell 0.9 point MoM to 54.4, the first fall in four months. By sub-index, services dropped 0.6 point MoM to 53.8, and construction declined 3.0 points MoM to 57.5. The February composite PMI fell 1.7 points MoM to 52.9. The composite PMI is an index for monitoring the current status and the cyclic change of the overall economy, derived from a weighted average of the manufacturing PMI and the non-manufacturing PMI. NBS started announcing it since January of this year. 2017 2018 <Trends in the Main Manufacturing PMI Indicators> Manufactu ring PMI Production New orders New export orders Raw material purchase price Import index Employ ment index Expected produc tion and business activities Jan 51.3 53.1 52.8 50.3 64.5 50.7 49.2 58.5 Feb 51.6 53.7 53.0 50.8 64.2 51.2 49.7 60.0 Mar 51.8 54.2 53.3 51.0 59.3 50.5 50.0 58.3 Apr 51.2 53.8 52.3 50.6 51.8 50.2 49.2 56.6 May 51.2 53.4 52.3 50.7 49.5 50.0 49.4 56.8 Jun 51.7 54.4 53.1 52.0 50.4 51.2 49.0 58.7 Jul 51.4 53.5 52.8 50.9 57.9 51.1 49.2 59.1 Aug 51.7 54.1 53.1 50.4 65.3 51.4 49.1 59.5 Sep 52.4 54.7 54.8 51.3 68.4 51.1 49.0 59.4 Oct 51.6 53.4 52.9 50.1 63.4 50.3 49.0 57.0 Nov 51.8 54.3 53.6 50.8 59.8 51.0 48.8 57.9 Dec 51.6 54.0 53.4 51.9 62.2 51.2 48.5 58.7 Jan 51.3 53.5 52.6 49.5 59.7 50.4 48.3 56.8 Feb 50.3 50.7 51.0 49.0 53.4 49.8 48.1 58.2 Source: Created based on data published by NSB and CFLP Note: The method of tatking statistics for the production and business activities index was changed in January 2017 and past data was revised accordingly. 3
[Industry] The winter sports industry booms toward the 2022 Beijing Winter Olympics In China, winter sports such as ice skating and skiing are now growing more popular due to an increasing awareness of health and the diversification of consumer demand. With the 2022 Beijing Winter Olympics approaching and backed by the Chinese government's industry promotion plans, the winter sports industry is projected to grow further. According to the 2018 Winter Sports Industry White Paper released on January 15 by Tencent, a major Internet service provider, and others, the market of the Chinese winter sports industry (providing sports experience tourism, sports events, schools, marketing services, sports items, etc.) grew 9.0% YoY to RMB 397.6 billion. In addition, according to the 2017 Ski Industry White Paper released on January 25 by Beijing Carving Ski, which manages ski slopes, the number of ski slopes in China increased 8.8% YoY to 703 in 2017, of which ones with lifts increased 13.7% YoY to 145. In Hebei, bordering Beijing, 12 ski slopes were newly established in 2017, which was the largest increase among all regions. By type, ski slopes for tourists located adjacent to tourist areas accounted for 75%, suburban ones for local people comprised 22%, and full-fledged ones with accommodation facilities represented 3%; most of them were small- to medium-sized slopes for beginners. Regarding the ski population in China, the total number of ski slope users in 2017 increased 15.8% YoY to 17.5 million, coming close to the 18-million peak of the Japanese ski population back in the 90s. Also, the favorite overseas travel destinations of Chinese skiers were Japan (55% of the total), the European Alps (20%), North America (18%), New Zealand (3%), and South Korea (2%), in order of popularity. The top 10 cities for enthusiasts of winter sports including skiing were Beijing, Harbin, Shenzhen, Shenyang, Chongqing, Shanghai, Zhangjiakou, Changchun, Chengdu, and Tianjin, in that order, suggesting the growing popularity not only in the northern cities but all over China. In November 2016, after China had been decided as the location of the 2022 Winter Olympics, the Chinese government released the Winter Sports Development Plan (2016-2025) and the National Construction Plan of Winter Sports Infrastructure (2016-2022), and set a goal of expanding the market scale of the winter sports industry to RMB 600 billion by 2020 and RMB 1 trillion by 2025. Furthermore, the plans included developing 5,000 full-time and part-time instructors for winter sports courses in schools by 2020, constructing 650 skating rinks and over 800 ski slopes by 2022, expanding the population of winter sports athletes to 50 million as well as that of participants such as enthusiasts and industry participants to 300 million by 2025. 4
January auto sales rise 11.6% YoY; sales of new energy vehicles increase to 5.3 times of the previous year On the February 9, the China Association of Automobile Manufacturers (CAAM) announced that January auto sales rose 11.6% YoY to 2.809 million units, expanding the rate of increase from 0.1% YoY for December 2017. CAAM related the high growth rate to a larger number of business days in this January compared to last January, where the Chinese New Year s holidays fell. By vehicle type, sales of passenger cars in January rose 10.7% YoY to 2.456 million units (December: down 0.7% YoY to 2.653 million units), while commercial vehicles jumped 18.0% YoY to 353,000 units (December: up 5.7% to 407,000 units). By type of passenger car, sales of sedans rose 7.3% YoY to 1.159 million units (December: down 4.4% YoY to 1.2 million units), sport utility vehicles (SUVs) jumped 22.9% YoY to 1.083 million units (December: up 8.4% YoY to 1.173 million units), and multi-purpose vehicles (MPVs) dropped 13.4% YoY to 179,000 units (December: down 16.0% YoY to 228,000 units). Turning to the sales shares in the Chinese passenger car market, Chinese automakers kept 43.5% (December: 48.8%) with 1.069 million units, German automakers acquired 22.4% (December: 15.1%) with 551,000 units, Japanese automakers seized 17.1% (December: 14.2%) with 421,000 units, U.S. automakers kept 10.8% (December: 12.5%) with 265,000 units, South Korean automakers retained 3.7% (December: 6.6%) with 90,000 units, and French automakers secured 1.7% (December: 2.1%) with 43,000 units. German and Japanese automakers increased their market shares. Also, sales of new energy vehicles in January increased to 5.3 times of the previous year to 38,470 units, of which electric vehicles (EVs) rose to 5.3 times of the previous year to 26,753 units and plug-in hybrid vehicles (PHVs) grew to 5.4 times of the previous year to 11,717 units. (K of units) <New-Energy Vehicle Sales> 250 200 New-energy vehicle sales Percentage of total auto sales 8% 7% 6% 150 5% 4% 100 3% 50 2% 1% 0 0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2016 2017 2018 (Source) Created based on data released by CAAM 5
January housing prices of 70 medium- to large-sized cities increases in 52 cities MoM and in 59 cities YoY On February 24, the National Bureau of Statistics of China (NBS) released the housing price index of 70 medium- to large-sized cities for January. The prices of newly constructed homes rose MoM in 52 cities, down 5 cities from the previous month, and dropped in 13 cities, up 6 cities from the previous month. Prices rose substantially in Dalian (Liaoning), up 1.6% MoM, Kunming (Yunnan), up 1.4% MoM, Xiangyang (Hubei), up 1.2% MoM, and Zunyi (Guizhou), up 1.1% MoM. Prices fell substantially in Shaoguan (Guangdong), down 0.5% MoM, and in Shanghai and Guangzhou (Guangdong), down 0.4% MoM. The average rate of price increase from the previous month among first-tier cities Note, which had been flat in December, saw a decline. The rate decreased to 0.3% from 0.6% in December among second-tier cities Note, and to 0.4% from 0.5% in December among third-tier cities Note. On a YoY basis, home prices rose in 59 cities, down two cities from the previous month, and dropped in eleven cities, up two cities from the previous month. Prices rose substantially in Harbin (Heilongjiang), up 11.5% YoY, Shenyang (Liaoning), up 11.4% YoY, Guiyang (Guizhou), up 11.2% YoY, and Xi'an (Shaanxi), up 11.1% YoY. Prices fell substantially in Shenzhen (Guangdong), down 3.4% YoY, Wuxi (Jiangsu), down 2.7% YoY, Fuzhou (Fujian), down 2.3% YoY, and Nanjing (Jiangsu), down 2.0% YoY. The average YoY growth in home prices turned negative for first-tier cities, fell 0.2 points from the previous month for second-tier cities, and dropped 0.4 points from the previous month for third-tier cities. Note First-tier cities: Beijing, Shanghai, Guangzhou, and Shenzhen Second-tier cities: 31 cities including provincial capitals and sub-provincial cities Third-tier cities: 35 cities, excluding the above first- and second-tier cities from 70 cities 6
CHINA BIWEEKLY March 21st 2018 [Trade/Investment] January Inward foreign direct investment rises 0.6% YoY and outward foreign direct investment rises 39.7% YoY The Ministry of Commerce announced the statistical data for inward and outward foreign direct investment for January on March 2 and February 13. <Inward foreign direct investment> January inward foreign direct investment (excluding the financial sector) saw the number of newly established foreign companies increase by a significant 158.6% YoY to 5,197, and the amount of inward foreign direct investment (on an executed basis) increase 0.6% YoY to USD 12.07 billion. By country/region, Japanese direct investment dropped by a significant 27.1% YoY* to USD 0.35 billion and that from the EU also plummeted 39.9% YoY to USD 0.65 billion. Meanwhile, investment from the U.S. soared 50.0% YoY* to USD 0.24 billion and that from ASEAN jumped 43.0% to USD 0.58 billion. The amount of direct investment from the Belt and Road region also surged 48.0% YoY to USD 0.61 billion. (*) Calculated by MUFG: (Bank) based on the amount of inward direct investment announced by the Ministry of Commerce By industry, investment in the manufacturing sector rose 27.0% YoY to USD 3.83 billion, and investment in the service sector fell 9.6% YoY to USD 8.03 billion. <Outward foreign direct investment> January outward foreign direct investment (excluding the financial sector) jumped 39.7% YoY to USD 10.8 billion, showing a YoY increase for three consecutive months since last November. By country/region, the amount of direct investment in the Belt and Road region soared 50.0% YoY to USD 1.23 billion, out of which the amount was especially high for Singapore, Malaysia, Laos, Vietnam, Indonesia, Pakistan, and Sri Lanka. By industry, outward foreign direct investment in the mining sector shot up by 792.6% YoY to USD 3.75 billion. Further, investment in lease and commercial services increased 14.4% YoY, and investment in wholesale and retail business rose 24.2% YoY. 7
2017 volume of port cargo handled increases 6.4% YoY On January 26, the Ministry of Transport announced the volume of cargo handled at ports above a specific size Note in 2017. The total volume of cargo handled increased 6.4% YoY to 12.6442 billion tons, of which the volume handled at sea ports increased 6.4% YoY to 8.62534 billion tons, and the volume handled at inland ports increased 6.3% YoY to 4.01886 billion tons. Note: Sea ports that have handled at least 70 million tons of cargo or inland ports that have handled at least 50 million tons of cargo since 2009 The volume of international cargo increased 5.7% YoY to 4.00181 billion tons, of which the volume handled by sea ports increased 5.3% to 3.57074 billion tons and the volume handled by inland ports increased 9.0% to 431.07 million tons. Among the top five sea ports with the largest cargo volumes, Ningbo-Zhoushan Port (Zhejiang) was at the top, handling more than 1 billion tons, followed by Shanghai, Guangzhou (Guangdong), Tangshan (Hebei), and Qingdao (Shandong). The top five sea ports with the largest international cargo volumes were Ningbo-Zhoushan Port (Zhejiang), Shanghai, Qingdao (Shandong), Tangshan (Hebei), and Tianjin. The top five inland ports with the largest cargo volumes were Suzhou (Jiangsu), Nantong (Jiangsu), Nanjing (Jiangsu), Taizhou (Jiangsu), and Chongqing. The top five inland ports with the largest international cargo volumes were Suzhou (Jiangsu), Nantong (Jiangsu), Zhenjiang (Jiangsu), Jiangyin (Jiangsu), and Foshan (Guangdong). <Volume of Cargo Handled by Ports above a Specific Size in 2017> Volume (Mn of tons) YoY (%) Volume (Mn of tons) YoY (%) Ningbo Zhoushan Port (Zhejiang) 1,007.11 9.2 474.21 9.9 Shanghai 705.63 9.4 409.46 7.7 Guangzhou (Guangdong) 566.19 8.4 128.89 2.3 Tangshan (Hebei) 565.40 8.6 291.07 0.7 Qingdao (Shandong) 507.99 1.5 367.39 10.4 Tianjin 502.84 8.7 281.26 5.3 Dalian (Liaoning) 451.05 3.3 151.86 9.2 Yingkou (Liaoning) 362.39 2.9 76.61 3.7 Rizhao (Shandong) 360.02 2.8 247.01 6.3 Yantai (Shandong) 285.60 7.6 105.75 15.6 Zhanjiang (Guangdong) 281.52 9.9 85.96 13.1 Huanghua (Hebei) 269.57 10.1 41.67 29.0 Qinhuangdao (Hebei) 244.80 31.0 13.32 11.2 Shenzhen (Guangdong) 240.97 12.6 188.35 4.5 Beibuwan Port (Guangxi Zhuang Autonomous Region) 217.28 6.6 118.27 2.2 Xiaomen (Fujian) 210.46 0.6 93.99 4.0 Lianyungang (Jiangsu) 207.39 3.3 116.36 3.6 Fuzhou (Fujian) 145.99 0.6 61.31 4.2 Quanzhou (Fujian) 128.86 2.6 38.22 5.0 Total of sea ports (including ports not listed above) 8,625.34 6.4 3,570.74 5.3 Suzhou (Jiangsu)) 607.74 4.9 153.93 1.7 Nantong (Jiangsu) 235.69 4.2 57.18 1.6 Nanjing (Jiangsu) 239.13 8.8 23.99 1.2 Taizhou (Jiangsu) 197.06 15.9 17.84 14.3 Chongqing 196.06 12.9 6.59 19.5 Jiangyin (Jiangsu) 158.78 20.3 33.45 40.6 Zhenjiang (Jiangsu) 144.29 9.8 34.26 24.6 Wuhu (Anhui) 128.23 2.1 3.00 1.1 Yueyang (Hunan) 121.15 14.0 4.43 38.7 Hangzhou (Zhejiang) 107.86 48.2 Less than 0.01 4.0 Huzhou (Zhejiang) 105.15 21.4 1.89 94.9 Wuhan (Hubei) 100.18 11.3 10.26 26.3 Jiaxing (Zhejiang) 94.34 12.0 0.67 1.9 Foshan (Guangdong) 80.16 21.3 27.45 16.6 Wuxi (Jiangsu) 53.12 5.4 0.25 2.2 Shanghai 45.09 20.8 - - Total of inland ports (including ports not listed above) Domestic and international cargo Sea port Inland ports 4,018.86 6.3 431.07 9.0 Source: Created based on data published by the Ministry of Transport 8 International cargo