2023 Calender Week 27

Posted on July 3, 2023

Welcome to the very first edition of our Glopen weekly newsletter, that brings you the latest business news, trends and topics related to China. In our weekly newsletters, we not only provide you objective information about China but also a fresh new perspective to view China.

1.    In June, China’s Manufacturing Purchasing Managers’ Index (PMI) was 49.0%, up 0.2 percentage points from the previous month, indicating a slight improvement in the manufacturing industry’s prosperity.

According to company sizes, the PMI for large enterprises was 50.3%, up 0.3 percentage points from the previous month; the PMI for medium-sized enterprises was 48.9%, up 1.3 percentage points from the previous month; the PMI for small enterprises was 46.4%, down 1.5 percentage points from the previous month, which is in line with what we have mentioned in our previous posts, small and medium enterprises are facing the most challenges.

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Manufacturing PMI during the last 12 months

In June, the non-manufacturing business activity index was 53.2%, down 1.3 percentage points from the previous month, but still above the 50% threshold, indicating that the non-manufacturing sector has consistently maintained a state of expansion so far this year.

In June, 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 52.3%, down 0.6 percentage points from the previous month, but it continues to be in the expansion zone.

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Composite PMI output index during the last 12 months

2.    The Chinese balloon that crossed the continental US from Alaska to the east coast in February did not collect any information, the Pentagon says.

Pentagon spokesperson Brigadier General Pat Ryder said on Thursday that the US was “aware the balloon had intelligence collection capabilities”. But “it has been our assessment now that it did not collect while it was transiting the United States or over flying the United States”.

He said the efforts the US took to mitigate any intelligence gathering “contributed” to the balloon’s failure to gather sensitive information. The balloon spent a week in February flying over the United States and Canada before it was shot down by a fighter jet off the Atlantic coast, on orders from President Joe Biden.

Chinese officials say it was a civilian weather balloon and that the US overreacted by shooting it down.

3.    On June 29, “multiple Chinese universities discontinuing WeChat Pay” became a hot topic.

The reason behind was the new 0.6% fee charged by WeChat Pay. Subsequently, WeChat apologized twice in one day, stating that due to improper handling of payment rate issues in the university life service scenarios, they would refine the rate management for the campus profit scenes. They planned to adjust the rate to 0.2%, of which WeChat Pay would actually charge a 0.1% fee. The other 0.1% would serve as a technical service fee given to partners providing services and technical support to the schools. The widely spread information about a 0.6% fee was purely misinformation.

According to Tencent’s official website, it charges between 0% to 1% transaction fee to the merchants depending on their industries: for example, 0% for public welfare payment industries, 0.2% for utilities, 0.3% for logistics companies, petrol stations and private schools, 0.6% for general industries, and 1% for special industries such as gaming.

4.    Chinese online travel agency Trip.com will offer 1bn RMB (140mn USD) in cash subsidies to encourage employees to have more babies, in one of the first instances of a local tech company working to turn around the country’s falling birth rate.

The travel group, which owns booking sites including Skyscanner, said it would pay out Rmb10,000 in annual bonuses to staff who had been with the company for at least three years for each new child until the age of five.

Interestingly enough Trip.com co-founder and executive chair James Liang is also a demographer, and has for years pushed the government to rethink its population policies. On 26 May he also published his new book: Population Strategy: How Population Impacts Economy and Innovation

5.    Real estate prices in Shanghai dropped for 2 consecutive months, second hand average prices dropped 0.8% in May and roughly 0.63% in June to 63.2 thousand RMB per square meter.

In fact, Shanghai is one of the last cities in this round of price decrease. Data shows that the number of second-hand houses listed in 13 major cities across the China, including Beijing, Shanghai, Guangzhou, Shenzhen, Nanjing, and Wuhan, reached 1.99 million sets at the beginning of this month, an increase of 25% compared to the beginning of January this year. Among them, Shanghai had the largest increase in the number of second-hand houses listed, surging 82% within five months. According to online real estate data, the number of second-hand houses listed in Shanghai has reached 200,000 sets.

Will the real estate price drop further and create a real estate crisis or is this actually a positive correction so that younger generation will have less pressure in the future? We will have to follow the trend closely. It is worth mentioning that since 2016 the minimum down payment for the first mortgage is at least 35% (before 2016 was set at 30%) and the second mortgage will increase significantly above 50% in China, unlike during the 2008 financial crisis where people could get mortgage with even 0% downpayment. So unless the real estate prices drop significantly, it would not be able to trigger a banking or financial crisis.


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