New Economy Index Rises for Third-Straight Month in August

(Beijing) – The contribution of biotechnology, advanced equipment manufacturing and other emerging higher value-added industries to the Chinese economy rose for the third-straight month in August, according to the latest Mastercard Caixin BBD China New Economy Index (NEI) released Saturday.

So-called “new economy” industries accounted for 33.3% of total economic inputs used to make goods and services last month, the research report found.

The August reading marked the third consecutive month of increase after the index dropped to 28.2% in May. It was higher than April’s 31.8% and the same as March’s figure. 

The NEI index includes three sub-indexes that measure the labor, capital and technology inputs in 10 emerging sectors and calculates what share they respectively make up of the total inputs in all of China's industries.

The gain in August was mainly driven by nascent industries contributing more to the share of capital input.

Launched in March 2016, the NEI defines a “new economy” industry as one that is labor and technology intensive but has a relative low ratio of fixed capital, has sustainable and rapid growth, and is one of the strategic new industries encouraged by the government. The industries in the index are: energy conservation and environmental protection, new energy, new-energy vehicles, advanced materials, new information technology (IT) and information services, high-tech services and research and development (R&D), biotechnology, financial and legal services, advanced equipment manufacturing, and culture, sports and entertainment.

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 labor input sub-index was unchanged from the previous month while the technology input sub-index declined in August, according to the report 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 index is sponsored by global payments service provider Mastercard.

The technology input sub-index has a weighting of 25% in the NEI and gauges the number of scientific research personnel recruited by the tracked industries and the number of inventions and patents they obtained. The measure of capital investment accounts for 35% of the NEI while the labor input sub-index’s weighting is 40%.

Although new IT and information services remained the top contributor among the 10 major industrial categories, its contribution to the NEI reading declined to 9.8 percentage points last month from 12.2 percentage points in July.

Advanced equipment manufacturing was second, making up 5.8 percentage points, up from 4.0 percentage points in the previous month. Financial and legal services made the third-biggest contribution of 5.6 percentage points, also rising from 3.4 percentage points in July.

The average monthly entry-level salary in new economy sectors, based on data compiled from online career and recruitment websites, rose 1.8% from a month ago to 9,313 yuan ($1,400) in August and enjoyed a premium of 6% over entry-level salaries in the economy as a whole. Hiring in new-economy sectors edged up to 29.4% of total hiring in the economy from 29.2% in the previous month.

Contact reporter Fran Wang (fangwang@caixin.com)