Mastercard Caixin BBD China New Economy Index(September 2017)

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

Overview

In September 2017, the Mastercard Caixin-BBD New Economy Index (NEI) reading came in at 29.6, indicating that the New Economy accounted for 29.6% of overall economic input activities that month, down 3.7 ppts from August, dropping below 30 again (Chart 1). The declining NEI was due to the decrease of labor and capital. 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 September NEI reading came from the decrease of labor and capital inputs (Chart 2). Capital investment showed wide fluctuations in the recent half year ,and went down significantly after a three-month growth. It decreased from 38.9 last month to 24.6 this month. Labor input index was 29.8, decreasing slightly in September. Technology input index was 36.3, the highest level since 2016.

Percentage changes in labor, capital and technology inputs were -0.2, -5.0, and 1.5 ppts, respectively. After accounting for the sum of their weights, the net NEI change was a -3.7 ppts decrease from August (Chart 3).

Looking at the sectors, the New IT industry formed the largest proportion of the New Economy Index, contributing 9.1 ppts to NEI. New Energy came second, contributing 4.9 ppts , the highest proportion and the fastest growth in ranking since 2016. Advanced Equipment Manufacturing ranked the third, contributing 3.4 ppts in September(Chart 4).

New Economy Employment

In September 2017, the average monthly entry level salary of the New Economy was RMB 9,500 per month, increasing from last month’s level of RMB 9,313 (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 28.4% of total hiring in September, lower than the previous month’s 29.4%. At the same time, the compensation share of New Economy sectors rose slightly to 31.2% and the average entry salary level of New Economy remained stable compared to national average entry wage level. The entry level salary premium of the New Economy was 10.0% as compared to economy-wide counterparts, increasing from 6.0% in August (Chart 6). In the recent half year, the average salary premium of the New Economy experienced a solid increase, back to 2016 average level at 10%.

Decomposition of New Established Enterprises

We use newly-established enterprises data to monitor new enterprises in sub-sectors (Chart 7).

Ranking up sub-sectors (from September 2016 to September 2017) include the following. Construction (No.21 to No.17, 31.8% increase in proportion), Engineering (No.9 to No.5, 12.1% increase in proportion), Real Estate (No.25 to No.22, 261.1% increase in proportion). Changes in key words above indicated that construction investment ,mainly driven by government, started to rise again. Moreover, some industries with light capital were developing. IT saw a ranking up to No.8 from No. 24 with a proportional increase of 162.8 ppts, the fastest growth sector in terms of ranking in September. Culture saw a ranking up to No.9 from No.12 with a proportional increase of 12.7%. Consulting saw a ranking up to No.6 from No.8 with a proportional increase of 2.6%. Education saw a ranking up to No.13 from No.15 with a proportional increase of 8.7%.

Ranking down sub-sectors (from September 2016 to September 2017) include the following. Construction (No.7 to No.16, 44.0% decrease in proportion, the largest drop this month), Decoration (No.5 to No.7, 16.6% decrease in proportion), Sales (No.14 to No.15, 0.8% increase in proportion), Catering (No.10 to No.11, 6.7% decrease in proportion), Agriculture (No.16 to No.21, 7.1% decrease in proportion), Farming (No.23 to No.24, 6.1% increase in proportion), Breeding (No.22 to No.25, 3.6% increase in proportion). The investment in infrastructure and traditional industry started cooling off.

Economic Activities Based on Major Airport Traffic

As usual, we explore airports traffic data and compare passengers inflow of major airports in September 2017 and September 2016.

We calculate the changes of daily net passengers inflow average by subtracting daily net passengers inflow average in Sep16 from that in Sep17. Based on this methodology, cities with the fastest increases in net inflows are Beijing, Guangzhou, Chengdu, Nanchang and Shenzhen, whose prosperous economy keeps attracting people and where we witnessed increased economic activities(Chart 8). Shenzhen ranked number 5th in September, the first time in the top ten. Southwestern cities like Chengdu and Kunming kept attracting people since 2016.

Cities with the fastest decreases in net inflows are Hangzhou, Wuhan, Changsha, Guilin, and Harbin. This shows the attractiveness of these cities went down during the past year.

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 in several months. In August 2017, ratio of demand for contruction employees reached 7.77%, a decrease by 0.72% from 8.49% in July. At the same time, the completed investment in real estate development in August was RMB 973.3 billion, an increase from RMB 915.1 billion in July, or a 6.36% MoM increase.

This month starts seeing a decrease in demand for construction employees, reaching the level at 6.27%, with a 1.5% MoM decrease. Given the historical accuracy of the index, we predict that real estate investment decreases next month.

City Rankings of the New Economy

Based on overall New Economy rankings, the top twenty cities are shown in Chart 10. The top five cities are Shanghai, Guangzhou, Hangzhou, Beijing 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 March 2017 and September 2017. The top five cities are Beijing, Shanghai, Hangzhou, Shenzhen and Xiamen.

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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