New Economy Index Dips on Weak Tech, Capital Inputs

A private index that uses big data to gauge China’s new economy dipped in April to the lowest level since October, dragged down by decreasing tech and capital inputs.

The MasterCard Caixin BBD China New Economy Index (NEI) dropped to 29.7 from 31.3 in March, indicating that new-economy industries accounted for 29.7% of total economic inputs used to make goods and services in April. In March, the headline figure increased for the first time in three months.

The NEI, launched in March 2016, defines a “new economy” industry as one that is labor- and technology-intensive — but has a relatively low ratio of fixed capital — and features sustainable and rapid growth. The definition also includes strategic new industries that the government is encouraging.

The NEI measures labor, capital and technology inputs in 10 emerging industries, relative to those used by all industries.

The headline reading waned in April mainly due to drops in the technology input and capital input subindexes. The technology input subindex, which accounts for 25% of the NEI, eased to 30.6 in April from March’s 33.6.

Meanwhile, the capital input subindex, which makes up 35% of the NEI and has been volatile since October, declined 1.8 percentage points to 31.3 last month from March’s 33.1, according to a report compiled by big-data research firm BBD and Caixin Insight Group, Caixin Media’s financial data and analysis platform.

The labor input subindex, which accounts for 40% of the NEI, edged down to 27.9 from 28.3 in March.

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, scientific research and high-tech services, biotechnology, financial and legal services, advanced equipment manufacturing, as well as culture, sports and entertainment.

The breakdown of 10 industrial sectors showed the new IT industry remained the biggest industry, contributing 8.9 percentage points to the NEI’s reading of 29.7 last month, despite its contribution being down by 1.1 percentage points month-on-month.

Advanced equipment manufacturing saw the fastest growth in April, contributing 4.3 percentage points to the headline figure. Its contribution ranked second. Culture, sports and entertainment’s ranking dropped to fifth from third, the biggest drop in ranking, contributing 3.2 percentage points to the NEI in April.

The average entry-level monthly salary in new economy sectors, based on data compiled from online career and recruitment websites, grew 1.5% month-on-month to 10,420 yuan ($1,639) in April.

The new economy industries provided marginally smaller traction for the country’s job market, as the data showed hiring in the sectors accounted for 27.4% of total hiring in April, slightly lower than the previous month’s 27.7%.

At the same time, the total compensation share of new economy sectors edged down slightly to 28.4%, indicating the average entry salary level in the new economy sector was lower than national average entry wage level, the report said.

For more on Caixin’s economic indexes, click here.

Contact reporter Pan Che (chepan@caixin.com)