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.
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
RESTRUCTURING: Taichung and Taoyuan profited most from local firms moving back high-end manufacturing amid the US-China decoupling of trade ties, the ministry said The government’s “Invest in Taiwan” initiative might this year see NT$627.1 billion (US$21.7 billion) of investment pledges realized, with several firms raising stakes and two dropouts due to customer losses, Minister of Economic Affairs (MOEA) Wang Mei-hua (王美花) said yesterday. Wang made the statement at the monthly meeting of the Third Wednesday Club, a local trade group featuring the top 100 firms of each business sector. Since early last year, the government has launched three programs intended to help local companies grapple with US-China trade rows and the COVID-19 pandemic, mainly through moving production lines back to Taiwan. Thus far, the ministry
JOBS AT RISK? Most Cathay Dragon routes are to be operated by Cathay Pacific or a subsidiary, but it was unclear how Taiwanese workers would be affected Cathay Pacific Airways Ltd (國泰航空) yesterday said it is planning new flight services for Taiwan as it announced a corporate restructuring that included the shutdown of its regional subsidiary, Cathay Dragon (國泰港龍), and could lead to job cuts in Taiwan. Cathay Pacific said the shutdown means that the one round-trip service between Taichung and Hong Kong per day and seven round-trip services between Kaohsiung and Hong Kong operated by Cathay Dragon prior to the COVID-19 pandemic would be terminated. “The parent company is planning a new schedule between Taiwan and Hong Kong,” Cathay Pacific assistant manager for corporate communications Moses Hou (侯恩錫)
OVERHEATED MARKET?: The gauge would be designed to provide more reliable information than private-sector data, and help improve policymaking, the council said The National Development Council (NDC) is considering creating a business climate index on Taiwan’s property market, allowing policymakers to better monitor market movements and intervene if necessary, NDC Minister Kung Ming-hsin (龔明鑫) said yesterday. Kung made the remarks at a meeting of the legislature’s Economic Committee where lawmakers from across party lines voiced concerns about housing price hikes driven by capital repatriation. Kung said that the council is assessing the possibility of creating an index designed to provide more accountable and transparent information than data provided by private-sector market analysts, and could help improve policymaking. The council would compile a report on
STOCK MARKETS TAIEX closes slightly higher The TAIEX closed slightly higher yesterday as market sentiment remained cautious over the Nov. 3 US presidential election. Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) was again the anchor stabilizing the broader market, preventing the main board from falling into negative territory at the end of the session, dealers said. The TAIEX closed up 14.88 points, or 0.12 percent, at 12,877.25, on turnover of NT$167.982 billion (US$5.81 billion). TSMC, the most heavily weighted stock on the local market, rose 0.44 percent after fluctuating between NT$451 and NT$456. The semiconductor subindex and the bellwether electronics sector