While China’s coastal provinces and major cities are recovering from the COVID-19 pandemic, firms in its poorer western and central provinces are falling well behind in metrics such as output and sales revenue, a private survey showed yesterday.
The majority of firms are recovering far more slowly than those in wealthier areas around Beijing, Shanghai and Guangdong, a report from China Beige Book International (CBB) said.
While revenue and profits for the third quarter saw steep declines year-on-year across China, many interior provinces also saw output, domestic orders and sales prices falling from the second quarter as well, according to a quarterly survey of thousands of Chinese firms by the US-based consultancy.
Photo: Reuters
For instance, revenue increased 41 percent quarter-on-quarter for Shanghai and the wealthy eastern provinces of Zhejiang and Jiangsu, but fell by 10 percent in the more remote western regions of Tibet, Gansu, Qinghai and Xinjiang, it said.
“For the corporate elite — large firms and those based in the Big 3 coastal regions — the economy is accelerating... But the rest of China — most firms in most regions — are seeing a far more muted recovery,” CBB chief economist Derek Scissors said in comments issued with the survey.
Last month, China’s industrial output accelerated the most in eight months, while retail sales grew for the first time this year, suggesting the economic recovery is gathering pace as demand starts to improve more broadly from the COVID-19 crisis.
However, the retail recovery is unbalanced and spending on luxury goods, vehicles and electronics is leading the charge, rising faster than food, clothing and other essentials.
While the supply side of China’s economy has shown resilience, a strong and broad rebound in spending is needed for a more meaningful economic recovery. Even though the virus is under control, income and job losses due to the pandemic have made poorer Chinese unwilling or unable to increase spending, keeping a lid on the rebound.
“Higher-income households have probably built up savings, because of the forced reduction in consumption during lockdown, and could now be ready for a spending spree. It is lower-income households that face a longer slog of normalizing their finances,” Gavekal Dragonomics (龍洲經訊) analyst He Wei (何暐) said in a recent report.
The lopsided recovery can also be seen in the auto market.
Sales of luxury vehicles have recovered much quicker than regular ones, and are now almost one-fifth of all vehicles sold.
Regional divergences were also visible in credit, CBB said, with a far higher proportion of companies in the wealthy areas around Beijing, Shanghai and Guangdong accessing capital.
“Borrowing levels stayed flat or fell outright in 4 of 5 non-coastal regions,” CBB said in the report.
Additional reporting by Bloomberg
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Catastrophic computer outages caused by a software update from one company have once again exposed the dangers of global technological dependence on a handful of players, experts said on Friday. A flawed update sent out by the little-known security firm CrowdStrike Holdings Inc brought airlines, TV stations and myriad other aspects of daily life to a standstill. The outages affected companies or individuals that use CrowdStrike on the Microsoft Inc’s Windows platform. When they applied the update, the incompatible software crashed computers into a frozen state known as the “blue screen of death.” “Today CrowdStrike has become a household name, but not in