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ECONOMY

China New Economy Index Bounces Back in June

By Fran Wang
The Mastercard Caixin BBD China New Economy Index rose to 29.3% last month from an all-time low of 28.2% in May. Above, workers assemble digital products in Huaying, Sichuan province, in April 2016. Photo: IC
The Mastercard Caixin BBD China New Economy Index rose to 29.3% last month from an all-time low of 28.2% in May. Above, workers assemble digital products in Huaying, Sichuan province, in April 2016. Photo: IC

(Beijing) – The share of nascent industries driven by technology and talent in the Chinese economy rebounded moderately in June from the previous month, a research report showed Sunday, a positive sign for the country where growth momentum has cooled.

The Mastercard Caixin BBD China New Economy Index (NEI) rose to 29.3% last month from an all-time low of 28.2% in May, according to the report jointly compiled by Caixin Insight Group, the financial data and analysis platform of Caixin Media, and big-data research firm BBD, in collaboration with the National Development School of Peking University. The monthly index, launched in March 2016, is sponsored by global payments service provider Mastercard.

The report defines “new economy” as industries that are talent and technology intensive but capital light and that have the potential for sustainable and rapid growth. They must also be encouraged by national industrial development strategies laid out by the government.

The NEI follows more than 140 up-and-coming industries under 10 major categories of manufacturing and services sectors – such as information technology, energy conservation and environment protection, and finance and legal services, tracking the ratio of inputs of labor, capital and technology in them to those in the overall economy.

By focusing on these sectors instead of resource- and labor-intensive industries, the index helps track the pace of structural transition in the world’s second-largest economy.

"The NEI rebounded from May’s historical low, indicating a recovery and stabilization of the overall economy," said Wang Zhe, senior economist of Caixin Insight, adding that previously released NEI figures were revised in April.

“We are cautiously optimistic about growth in the third quarter,” he said.

Even though expansion in gross domestic product picked up for the second straight quarter to hit 6.9% in the January-March period, analysts are widely expecting China’s growth to trend down this year. Official data released so far for the second quarter of the year have pointed to slowing economic momentum, as policymakers stepped up efforts to rein in housing prices and crack down on shadow banking to stop risky practices that could threaten the country’s financial stability.

Some economists have hoped if the new economy grows steadily, it will leave more breathing space and time for the old part of the economy that is facing problems, such as excess capacity, to reform and adjust.

June’s NEI was boosted by improvements in all its three sub-indexes of labor, capital and technology, the report showed.

The sub-index of technology, which gauges the number of scientific research personnel recruited by the tracked industries and the quantity of new inventions and patents they obtained, led the recovery last month, increasing to 25.1% from 23.6% in May.

The capital investment indicator rose to 30.7 last month after falling in the previous two months, while the labor input sub-index edged up to 30.6 from 29.9 in May.

A breakdown by sector showed that new information technology and information service remained the top contributor among the 10 major industrial categories to new economy, making up 12.2 percentage points of the NEI in June. It was followed by financial and legal services’ 4.5 percentage points and Biotech’s 3.3 percentage points.

The average monthly entry-level salary provided by new economy sectors was 8,975 yuan ($1,300) last month, down slightly from May’s 9,115 yuan. But the proportion of employment by the industries in total hiring in the country climbed to 29.5% from 28.9% in the previous month.

Shanghai topped the list of cities in terms of performance of firms in the new economy, followed by Beijing and Guangzhou in south China. Other places among the top 10 included the southwestern city of Chongqing, the southern booming town of Shenzhen, and Wuhan in central China.

Contact reporter Fran Wang (fangwang@caixin.com)


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