High-Value Industries’ Economic Input Eases To 7-Month Low in May

The contribution of high-value-added industries like biotechnology and financial services to China’s overall economy hit a seven-month low in May, according to a private index.

The Mastercard Caixin BBD New Economy Index (NEI) dropped 0.1 percentage point from April to 29.6, as technology and capital inputs decreased. The reading indicates that “new economy” industries accounted for 29.6% of overall economic input activities in May.

The New Economy Index has declined in four of the five months this year.

The decline in the New Economy Index contrasts with the results of the Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which gauges sentiment among manufacturing executives. That index was unchanged in May at 51.1, indicating continued moderate growth in the traditional manufacturing sector last month.

The New Economy Index, launched in March 2016, defines a new economy industry as one that is labor and technology intensive but has relatively low ratios of fixed capital, has sustainable and rapid growth, and is in a strategic industrial sector encouraged by the government.

For years, China has sought to transition its economy to one driven by services and technology-intensive sectors rather than export-oriented manufacturing. New economy firms often enjoy government subsidies and even an expedited path for initial public offerings.

The NEI measures labor, capital and technology inputs in 10 emerging industries relative to those used by all industries. The technology input sub-index, which has fluctuated widely since October 2017, stood at 30.3 in May, a decrease of 0.3 point from the previous month. Capital investment also decreased by 0.3 point to 31.0 in May. The labor input sub-index remained unchanged from April at 27.9.

The monthly entry level salary for new economy jobs, compiled from online career website listings, was 10,444 yuan per month in May, up from 10,420 yuan in April, according to a report compiled by research firm BBD and the Caixin Insight Group, Caixin Media’s financial data and analysis platform. Hiring in the new economy sectors accounted for 27.3% of all hiring in May, down 0.1 percentage point from April.

Between November 2017 and May 2018, China’s southern province of Guangzhou ranked first by average NEI, followed by Beijing and the city of Hangzhou, according to the report.

Contact reporter Liu Xiao (liuxiao@caixin.com)