2023 Calendar Week 49

1.From January to October 2023, Profits of National Large-Scale Industrial Enterprises Decline by 7.8%

From January to October 2023, large-scale industrial companies (above CNY 20mn revenue) achieved business revenue of CNY 107.78 trillion (approximately $16.83 trillion), up 0.3% year-on-year. Operating costs reached CNY 91.63 trillion (approximately $14.29 trillion), up 0.6%; operating income profit margin was 5.67%, a decrease of 0.50%.

From January to October 2023, profits of national large-scale industrial enterprises reached CNY 6.12 trillion (approximately $95.469 billion), reflecting a year-on-year decrease of 7.8%. This decline narrowed by 1.2 % compared to the period from January to September

Revenue (Yellow line) and profits (Blue line) y-o-y change in %

During this period, state-owned industrial enterprises saw a total profit of CNY 20,310.6 billion, down 9.9% year-on-year. Joint-stock companies registered a total profit of CNY 44,908.3 billion, down 7.0%. Foreign, Hong Kong, Macao, and Taiwan investment enterprises recorded CNY 14,431.3 billion in profits, a decrease of 10.2%. Private companies achieved a total profit of CNY 16,851.4 billion, a decrease of 1.9%

Jan-Oct 2023 revenue (Yellow bar) and profits (Blue bar) change in % by enterprise type

During this period, the electricity and heat production and supply industry saw profits increaseed by 50.1%; the black metal smelting and rolling processing industry grew by 37.0%; the electrical machinery and equipment manufacturing industry increased by 20.8%; the general equipment manufacturing industry increased by 10.4%; the specialized equipment manufacturing industry increased by 2.0%; automobile manufacturing industry increased by 0.5%. In contrast, industries such as non-metallic mineral products manufacturing saw a decline of 3.7%. The processing of agricultural and sideline food products decreased by 16.5%. The chemical raw materials and chemical product manufacturing industry declined by 42.8%.

DataSource: https://www.stats.gov.cn/sj/zxfb/202311/t20231127_1944914.html

 

2.Remarkable Performance by Chinese EV Companies and a new JV estabished by BMW and Mercedes-Benz in China, although the U.S government continuted to restrict them in the U.S.

On December 1st, the U.S. government released proposed new regulations regarding tax exemptions for electric vehicles (EVs). According to reports, the proposed guidelines issued by the U.S. Department of the Treasury and other agencies on Friday (December 1st) state that, starting in 2024, electric vehicles eligible for exemptions may not include battery components manufactured or assembled by “Foreign Entities of Concern (FEOC).” The definition of FEOC in the act includes companies owned or controlled by countries such as China, Russia, or Iran. Companies registered or having ownership exceeding a 25% threshold in the mentioned countries may be considered as FEOC.

At the same time, BMW Brilliance Automotive Ltd. and Mercedes-Benz Group China Ltd. have officially announced a 50:50 joint venture in China to operate a high-power charging network and provide premium charging services for Chinese customers. Leveraging their global and Chinese charging expertise, along with a deep understanding of the Chinese new energy vehicle (NEV) market, both BMW and Mercedes-Benz aim to deliver fast, convenient, and reliable charging solutions tailored to the Chinese market. This collaboration is designed to enhance the overall public charging experience for customers.

In the domestic market, both new players and traditional automotive companies witnessed a significant increase in November sales compared to the same period last year, with substantial growth rates. For instance, BYD, the global sales leader, sold 301,900 vehicles in November, a 31.1% YoY increase, leaving it only 317,000 vehicles away from its annual sales target of 3 million units set at the beginning of the year. In November, BYD exported 30,600 vehicles, marking a continuous six-month upward trend since June. Geely sold 153,800 vehicles in November, a 42% YoY growth. Great Wall Motors sold 31,200 vehicles in November, a 142.32% YoY increase, setting a new record for monthly new energy vehicle sales. The cumulative sales for January to November reached 232,000 units, up 91.94% YoY. GAC Aion sold 41,600 vehicles in November, a 45% YoY growth. Emerging players, such as Xpeng Motors, also performed well. Xpeng sold 20,318 vehicles in November, a 145.92% YoY increase, primarily driven by the AITO series.

Sales Performance :

With increasing demand for new energy vehicles driven by environmental policies and requirements for lightweight vehicles, the penetration rate is expected to rise gradually, presenting a promising market outlook.

 

3.The contraction in China’s PMI continued in November, prompting external expectations for additional policy support to stimulate growth

In November, China’s Manufacturing Purchasing Managers’ Index (PMI) was 49.9%, an decrease of 0.1 percentage points from the previous month, indicating that the manufacturing industry’s business activity has experienced a slight downturn

PMI during the last 12 months

When viewed by company size, the PMI for large enterprises was 50.5%, an drop of 0.2 percentage points from the previous month,continuing to remain above the critical threshold. The PMI for medium-sized enterprises was 48.8%, up 0.1 percentage points from the previous month,but below the critical threshold. The PMI for small enterprises was 47.8%, down 1.0 percentage points from the previous month, below the critical threshold as well.

Looking at the sub-indices that comprise the manufacturing PMI, the production index (50.7%), above the threshold, supplier delivery time index (50.3%) and employment index (48.1%) indicated that manufacturing production remains in expansion, while the new orders index (49.4%) showed a slight decline in market demand for the manufacturing industry, and raw material inventory index (48%) was decreased by 0.2 percentage points from the previous month.

In November, the non-manufacturing business activity index was 50.2%, a decrease of 0.4 percentage points from the previous month, still remaining above the critical threshold

Non-manufacturing business activity index during the last 12 months

In November, the Composite PMI output index, which reflects the changes in the output in current period of the entire industry (manufacturing and non-manufacturing industries) was 50.4%, decrease of 0.3 percentage points from the previous month, indicating that overall business production and operations activities in China continued to expand

the Composite PMI output index during the last 12 months

Data Source: 2023年11月中国采购经理指数运行情况 – 国家统计局

 

4.Pinduoduo’s market value surpasses Alibaba for the first time , reflecting the former has greater potential

Chinese e-commerce platform Pinduoduo(the global version called Temu) recently saw a significant surge in its stock price after announcing impressive quarterly results, briefly surpassing Alibaba in market value on November 29 in the US. This reflects investors’ belief in Pinduoduo’s innovative business model and significant growth potential, leading to a higher valuation.

According to reports from China’s Global Times, Pinduoduo released its third-quarter financial report on November 28, revealing a revenue of CNY 688 billion(approximately $9.4354 billion), a year-on-year increase of 94%. Operating profit was CNY 16.7 billion (approximately $2.2829 billion), representing a 60% year-on-year growth.

In the U.S. stock market on November 29, Pinduoduo’s stock experienced a peak increase of over 4%, reaching a market value of $191.4 billion, surpassing Alibaba’s $191.8 billion. However, by the close of the day, Pinduoduo’s stock had slightly retreated, and its market value fell below Alibaba’s. After the close, Pinduoduo was priced at $141.73, with a 1.96% increase, bringing its market value down to $188.3 billion . Alibaba’s closing price was $74.68, with a market value of $190.1 billion, putting the two companies’ U.S. stock market values within a difference of less than $2 billion

2018-Nov. 2023: Alibaba (Yellow line) and Pinduoduo (Yellow line) change in % of market value

Industry insiders believe that Pinduoduo’s market value surpassing Alibaba reflects different perspectives and expectations from investors regarding the two companies. Investors may see greater innovation and future growth potential in Pinduoduo, leading to a higher valuation. While Alibaba’s business is diverse and mature, it may face some growth pressures. On the other hand side Temu’s extremely low price strategy also faced critics complaining that their profit scrificed the profits of Chinese suppliers.

 

5.South Korean media acknowledges: “Made in China” sweeps across South Korea’s “Black Friday”

On the 28th, the South Korean newspaper “JoongAng Ilbo” highlighted the remarkable dominance of cost-effective Chinese products during “Black Friday.”

According to reports from the South Korean online shopping platform “Wemakeprice,” the sales growth rate for overseas purchases, as categorized by region this month, indicates a remarkable surge in China, with a growth rate of 801%, surpassing that of the United States and Europe (136%) and Japan (79.8%).

Taking the case of the South Korean shopping website “11th Street” from the 22nd to the 26th of this month as an example, the transaction volume for tablet computers and gaming products increased a staggering 27 times compared to the same period last year. Lenovo’s tablet computers played a significant role in this surge in popularity, attributed to their reputation for high cost-effectiveness. Reports highlight that Lenovo, China’s largest personal computer company, is renowned for producing tablets with excellent value for money. Lenovo’s tablets, priced at just over 100,000 Korean won (approximately 550 Chinese yuan), sold a remarkable 5 billion Korean won on the Korean group-buying website Tmon this month alone. Industry experts in South Korea indicate that the recent influx of cost-effective consumer electronics and new digital products from China has notably shifted the focus of the “Black Friday” direct purchase market towards China.

The report mentions that the popularity of Chinese consumer electronics and digital products has even influenced the purchasing preferences of men and women on this year’s “Black Friday.” In the highly favored categories of fashion and miscellaneous goods in 2022, the purchasing proportion of women (52%) was slightly higher than men (48%). However, this year, the percentage of male purchasers surged to 70%.

On the 28th, Yonhap News Agency also stated that during the year’s largest overseas direct purchasing event in the e-commerce industry, “Black Friday,” the impact from China was particularly pronounced. Chinese products, known for their outstanding cost-effectiveness, have driven sales growth for various companies. Tmon revealed on the 28th that the direct purchase transaction volume from the 20th to the 26th of this month increased by 179% compared to the same period last year. Looking at the growth rates in transaction volume for various categories, home appliances and digital product transactions recorded the highest increase at 319%, followed by baby and toddler products (152%), and food and health products (132%). The aggressive push of Chinese consumer electronics and digital products is especially noteworthy.

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