New Economy Index Contracts for Second Month

(Beijing) — The contribution of biotechnology, new-energy vehicles and other value-added sectors to China’s overall economy contracted for the second consecutive month in October, the latest Mastercard Caixin BBD China New Economy Index (NEI) showed.

The October’s NEI reading released Thursday shows that new economy industries accounted for 29.3% of total economic inputs used to make goods and services, down from 29.6% in September and 33.3% in August.

The continued drop in last month’s reading was mainly led by a decline in technology input, offsetting gains in capital and labor inputs.

The technology input, which gauges the number of scientific research personnel recruited by the tracked industries and the number of inventions and patents they obtained, was down to 30.5 from the year’s high of 36.3 in September.

On the other hand, capital input rose sharply to 27.4 in October from 24.6 in the previous month, while labor input edged higher to 30.1 from 29.8 in the same period.

The labor input subindex has a weighting of 40% in the NEI, while the capital input and the technology input account for 35% and 25% respectively.

The NEI defines a “new economy” industry as one that is labor and technology intensive but has a relatively low ratio of fixed capital, has sustainable and rapid growth, and is one of the strategic new industries encouraged by the government.

The 10 industries included 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 science research, biotechnology, financial and legal services, advanced equipment manufacturing, and culture, sports and entertainment.

The new IT industry remained the top contributor to the new economy, making up 10.4 percentage points of the NEI reading last month. The share rose from 9.1 percentage points in September, but still below the May-July period when the share was above 12 percentage points.

In October, the average entry-level salary of the new economy sectors was 9,950 yuan ($1,493) per month, the highest since the index debuted March 2016 and improving from September’s level of 9,500 yuan. Hiring in new economy sectors accounted for 29.4% of hiring in the entire economy in October, unchanged from the previous month.

Contact reporter Pan Che (chepan@caixin.com)