Mastercard Caixin BBD China New Economy Index(October 2017)

Released: 10:00 am Beijing Time November-02-2017

Overview

In October 2017, the Mastercard Caixin-BBD New Economy Index (NEI) reading came in at 29.3, indicating that the New Economy accounted for 29.3% of overall economic input activities that month, down 0.3 ppts from September, dropping below 30 for two consecutive months (Chart 1). New economy is defined as following: 1) human capital intensive, technology intensive and capital light; 2) sustainable rapid growth, and 3) in line with the strategic new industries defined by the government. Please refer to our previous reports (March 2016 and March 2017) for the list of NEI sectors.

Primary Inputs

The NEI includes labor, capital and technology inputs that account for 40%, 35% and 25% of the total weight of the index, respectively. The decline in the October NEI reading came from the decrease of technology inputs (Chart 2). Technology input index showed strong growth trend since June and reached the highest (36.3) in September. It was 30.5 in October, decreasing sharply from previous month. Capital investment fluctuated widely in the recent half year, and went down significantly after a three-month growth in September. It rebounded to 27.4, with 2.8 MoM increase. Labor input index remained stable with slightly increase to 30.1.

Percentage changes in labor, capital and technology inputs were 0.1, 1.0, and -1.5 ppts, respectively. After accounting for the sum of their weights, the net NEI change was a -0.4 ppts decrease from September (Chart 3).

Looking at the sectors, the New IT industry formed the largest proportion of the New Economy Index, contributing 10.4 ppts to NEI. Science Research & Hi-tech Services and Energy Conservation & Environmental Protection were industries with relatively faster growth in October, contributing 1.5 and 2.1 ppts and ranking the seventh and sixth, respectively. New Energy’s contribution declined sharply from second to eighth, contributing 0.5 ppts in October (Chart 4).

New Economy Employment

In October 2017, the average monthly entry level salary of the New Economy was RMB 9,950 per month, increasing from last month’s level of RMB 9,500 and reaching the highest level since 2016 (Chart 5). New Economy wage information is compiled from online websites of career platforms and recruitment services including 51job and Zhaopin, as well as other sites that list job demands.

Hiring in the New Economy sectors accounted for 29.4% of total hiring in October, the same level as the previous month. At the same time, the compensation share of New Economy sectors decreased slightly to 30.8%, which meant the average entry salary level of New Economy declined compared to national average entry wage level. The entry level salary premium of the New Economy was 4.4% as compared to economy-wide counterparts, decreasing from 10% in September (Chart 6). In the recent half year, the average salary premium of the New Economy was lower than the first half year in general.

Job Created by Industrial Enterprises with Above Designated Size

We matched employers in NEI’s labor big data with list of industrial enterprises above designated size in 2013, and calculated the recruitment percentage of enterprises of different sizes in recent three years. We categorized industrial enterprises above designated size in 2013 into 20 subgroups by their revenues. The first subgroup consisted of enterprises with 5% lowest revenues and the 20th subgroup covered the largest 5%. Statistics indicated that the larger enterprises absorbed more new employees in October 2017 than in October 2016. In October 2017, 30% of new jobs were created by the largest 10% companies, while the number was merely 20% in October 2016.

In addition, industrial enterprises were categorized into 20 subgroups by capital-to-labor ratios. We found capital light industrial enterprises created more jobs in 2015 and 2016. In 2016, 27.5% of jobs were created by 25% of the companies with the lowest capital-to-labor ratios. In 2017, it shrank to 24.3% and more jobs were posted by capital intensive enterprises (Chart 8).

Recovery in Investment Based on Employment Data

We use monthly completed investment in real estate development and demand for construction employees to analyze the current state of investment (Chart 9). The demand for construction employees and completed investment in real estate development showed a similar trend. They synchronized in most times, although diverging recently. In September 2017, ratio of demand for construction employees reached 6.27%, a MoM decrease by 1.5%. At the same time, the completed investment in real estate development in September was RMB 1.1 trillion, an increase from RMB 0.97 trillion in August, or a 14.56% MoM increase.

This month starts seeing increase in demand for construction employees, reaching the level at 7.48%, with a 1.21% MoM increase. Given the historical accuracy of the index, we predict that real estate investment increases next month.

City Rankings of the New Economy

Based on overall New Economy rankings, the top twenty cities were shown in Chart 10. The top five cities are Shanghai, Guangzhou, Beijing, Hangzhou, and Nanjing. Rankings are based on a weighted average of the percentile rank of indicators for the city in the past 6 months.

Chart 11 showed the average NEI city rankings between April 2017 and October 2017. The top five cities are Beijing, Shanghai, Hangzhou, Xiamen and Nanjing.

For further information please contact:

Mastercard

Mr. Wu Huanyu, Director, Communications

Tel：+86-10-8519-9304

Email：Huanyu_wu@mastercard.com

Caixin Insight Group

Dr. Wang Zhe, Senior Economist

Tel：+86-10-85905019

Emails：zhewang@caixin.com

Ma Ling, Public Relations

Tel：+86-10-8590-5204

Email：lingma@caixin.com

BBD

Dr. Chen Qin, Chief Economist

Tel：+86-28-65290823

Emails：chenqin@bbdservice.com

The Mastercard Caixin BBD China New Economy Index is the fruit of a research partnership between Caixin Insight Group and BBD, in collaboration with the National Development School, Peking University. The subject of a year of research, the NEI was first publically released on March 2, 2016 and will be issued the 2nd of every month at 10:00am China Standard Time.

About Caixin

Caixin Media is China's leading media group dedicated to providing financial and business news through periodicals, online content, mobile applications, conferences, books and TV/video programs. Caixin Media aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms. Caixin Insight Group is a high-end financial data and analysis platform. For more information, please visit www.caixin.com.

About Mastercard

Mastercard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MastercardAP and @MastercardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.

About BBD (Business Big Data)

BBD is a leading Big Data and quantitative business analytics firm specializing in the analysis of the high-growth industries emerging in Mainland China. Through dynamic data tracking, credit analysis, risk pricing and economic index construction, BBD provides its clients with a wide range of services at both the macro and micro level. For more information, please visit http://www.bbdservice.com/.

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