Orders from India to China

“First in, first out”, from the epidemic. China reverses the trend after a difficult start to the year.

From India to China

The episode of the orders from India is an example. Since September, many textile export companies in India cannot guarantee delivery due to the epidemic. Many orders have been transferred to China to be produced there. India has more than seven million confirmed cases and more than 100,000 deaths. Several large Chinese factories have their order books full until May 2021.

The price of cotton soars

Since the recovery after the national holiday, cotton futures have increased by 16 percent in just seven days. The price of the 2101 main contract reached 15,305 yuan, a new year-to-date high:

textile business in China

The bull market is explained by a sudden increase in demand and a likely cold winter this year. Shen Wan’s Textile and Clothing Index shows a gain of 11.55% since the end of the national holidays.
The increase is also fueled by usual year-end orders placed early to prevent the epidemic’s possible difficulties.
During these vacations, the textile mills worked overtime to record and process orders. Some mills even worked on October 1, a holiday. Henggang Company in Zhejiang received an order for tablecloths from Zara, representing 60% of its annual sales, which was to be produced in India. Other companies in various provinces, from Shandong to Canton, Jiangsu to Zhejiang, are experiencing the same phenomenon.

Catch-up effect

Alibaba Research Center shows that from May, the number of orders for fabrics and textile raw materials in China doubled and those in the clothing industry tripled compared to the same time last year. The catching-up effect of the previous months worked.

A “harmonious” performance?

In August, clothing exports reached $16.21 billion, an increase of 3.2% over the previous year, representing the year’s first positive monthly growth.
According to official data, textile, clothing, and the seven other labor-intensive product categories exported 2.59 trillion yuan during the first three quarters in China, an increase of 5.4%, which represents 20.4% of total exports. 828.78 billion yuan of masks were exported, an increase of 37.5%.
The field testimonies and comments collected by journalists on the 第一财经 website do not sound exactly like the official data. This type of figure is sometimes questionable. With the slowdown and halt in certain regions at the beginning of the year, the textile industry, over the year as a whole, the situation is not yet positive. Companies that recorded volumes equivalent to 60-70% of last year’s orders consider themselves happy, but overall, the figures are around 50%.

As for India, the sector is essential. In 2019, the Indian textile and clothing market was worth about $250 billion. It is the world’s largest jute cotton producer and the second-largest producer of silk, with 22% of the world’s yarn production capacity. The textile and clothing industry is also one of the significant foreign exchange sources, accounting for 15% of India’s total export earnings.
The drastic management of the epidemic from January 23 onwards has enabled China to come out of it better and faster. Currently, it is reaping orders from countries in difficulty, such as India. It will undoubtedly continue to benefit from returning to normalcy within the country, while many countries can not the end of the tunnel. How much longer?

Related articles :

China-India, where to go?

Articles on the economy

Sources :

印度纺织订单转移至中国 工厂国庆加班赶进度


21 October 2020

A new industry in shape, and two cities on the rise, Chengdu, and Chongqing

The Chinese economy’s transformation reshuffles some of the cards, with cities that remain on old development models “watching the train pass,” while others grasp modernity. Faced with the widening gap between North and South and East and West, one region breaks the categories and stands out from the crowd: the urban pole of Chengdu-Chongqing.
The Meituan Group’s research center, in a study on “new industries and professions within the life services sector,” ranks the top thirty cities between three levels: 1. the first level 2. high-potential group 3. Cities with potential. Sichuan’s capital, Chengdu, and Chongqing have broken the usual classifications by moving to the forefront with the top tier cities, Beijing, Shanghai, Shenzhen, and Guangzhou.

Ranking :

China two greats cities

Meituan specializes in online sales related to the restaurant industry. The term “life services industry 生活服务业” includes services related to food, restaurants, housing, beauty care, aesthetic medicine, hairdressing, wellness, repairs, apartment management, recycling, photography, personal styling. What are the new occupations in this industry?

Chengdu and Chongqing at the forefront?

A city’s ability to be a leader in new trends is inevitably linked to a dynamic economy and an open environment. Moreover, Chengdu and Chongqing also display unique competitiveness, the former being nicknamed the capital of cosmetic medicine. The life service industry has formed a group of new initiatives. The epidemic has accelerated the penetration of digitization in life services, such as take-out, group purchasing, flash sales, online car booking, and other services to form a “new digital infrastructure” serving residents’ lives.
Chengdu and Chongqing residents have always been more adventurous consumers, and they are looking for new experiences in food, drink, and entertainment. The market felt the wind, capital, and talent quickly flowed in, and service became the main battleground. New business formats began to emerge.

The attraction of the region

Chengdu and Chongqing are ranked third and fifth in China regarding the number of employees in new occupations in the life services sector. The Chengdu-Chongqing cluster, thanks to targeted measures and a suitable living environment, has attracted a large number of young employees. Over the past five years, Chengdu and Chongqing have recorded a positive net migration of nearly 500,000 people each year. It is no coincidence that Chengdu and Chongqing are in the lead.

big cities in mainland china chengdu chongqing

China’s GDP per capita must exceed the $10,000 threshold to avoid falling into the middle-income trap. The first trend is to replace dependence on investment and resources by relying on consumption and scientific and technological innovation; the second is to keep up with the wave of digital transformation and seize new momentum. The second is to embrace the wave of digital transformation and take new momentum. The epidemic has brought about revolutionary changes in the consumer services sector: online retailing, online education, and online entertainment are growing rapidly. New models, such as contactless services, are emerging, showing remarkable economic resilience.
Policymakers have realized that the service industry should rely on digital platforms. In the last two months, the central government has issued two documents on accelerating society’s digitization and support.
Chengdu-Chongqing has a prominent place. As part of the development of West 2.0, they are at the heart of the national strategy to promote Chinese cities’ fourth circle. Within the framework of the dual-cycle process, local and international, the two cities are the few cities in the interior that record a takeoff of its economy.

The new forerunner of urban competition

Among the cities in the new format, Chengdu and Chongqing are typical examples of experience-based cities.
Another category is the cities of new technology-based industries. Shenzhen, the city of the digital economy, is the technological innovation capital of China. These two types of cities have one thing in common: they are more attractive to new professionals. Shenzhen ranks third on the list, second in terms of the number of new employees. Competition between cities for new professions is bound to intensify.

New careers

Most new jobs are created through a combination of the Internet and offline. On the Meituan platform alone, there are more than 70 types of new professions. During the epidemic, the “neighborhood group purchasing manager” came into being. The niches generate rare jobs: takagist decorator (live game), traditional Chinese style costume designer, wildlife photographer, digital operations manager, meal planner in theme restaurants, adviser and salesman of country products, organizer for tailor-made business or tourist trips.
The new professions require essential digital skills. Staff in the sector are better educated and have higher incomes than in the last decade. 26.7% of Meituan’s merchants have a bachelor’s degree or higher, 40.7% have a monthly income of more than 9,000 yuan (US$1,350), and 24.7% have a monthly income of more than 12,000 yuan (US$1,350).

Vertiginous growth

With the development of new industries and new professions in service to local life, Meituan’s data is quite convincing. For example, in the first half of 2020, the number of delivery personnel on the Meituan platform reached 2,952,000, a 16.4% year-on-year increase, which is very important for stability and employment.
In 2019, the life services industry’s transaction volume on the platform reached 483.74 billion yuan. From 2016 to 2019, the transaction volume grew at an average annual growth rate of 55.1%.

Training needs to improve

Today, vocational schools’ training system is often lagging behind market developments, and the slow updating of teaching materials and equipment is penalizing. Macroeconomic monitoring is also necessary to adapt to changes. For example, it is essential to speed up recognizing new professions to encourage the renewal of vocational school courses and increase practitioners’ training of new occupations.

Thanks to digital technology, the life service industry is gradually breathing new vitality into the Chinese economy by forming a more efficient industrial chain. Changes have already begun to appear. Chongqing and Chengdu have taken the lead.

Related articles :

City clusters and the redistribution of maps

What are the most attractive Chinese provinces?

What kind of Chinese cities has the best investment potential?

Sources :


17 October 2020

Decoupling and protection

The American administration wants to achieve decoupling with China. We listen to various points of view, some seeing China as the loser, others the opposite. Chinese economist Huang Qifan gives a somewhat official point of view. He describes the current American difficulties, the ten aspects of decoupling. He says that both countries will lose out while thinking that American companies would instead continue to benefit from globalization than follow Trump. In the last part, Huang shows that China is not easy prey, that it cannot succumb to financial attacks, unlike other countries in the past.

黄奇帆, Huang Qifan :

Huang Qifan exmayor of Chongqing

Summary of Huang Qifan’s lecture:

The Three Main American Difficulties

The biggest event of the year is the Black Swan, the coronavirus epidemic, which is expected to affect at least 10 million people worldwide by the end of the year. The United States, the region where the virus is the most developed globally, is currently experiencing several serious problems: 1. severe economic stagnation.2. a highly populist society.3. Politicians are running away.
Inflation and economic contraction are striking. The US government has issued $3 trillion in bonds in the last three months, another $3 trillion in quantitative easing super-loans, which is in addition to $6 trillion in monetary easing, so much so that the US government’s national debt balance has reached $27 trillion.
With monetary hyperinflation of this magnitude, substantial inflation follows, and in the event of an epidemic, products, the economy, businesses will not experience inflation, but the opposite. So, where does this monetary bubble go? Three places: 1. the stock market, the Dow Jones fell to 18,000 in February to rise to 28,000 .2. Real estate. 3. Precious metals, for example, gold from the United States. Its price has increased by 80% since the beginning of the year. Another aspect is the devaluation of the dollar against the euro and the depreciation of the yuan.
The other end is economic contraction. The United States is experiencing the worst economic contraction in decades. It now has a record number of unemployed people. Inflation is a disaster, causing the devaluation of the currency.
Now that the currency is devaluing, the economy is contracting, life is hopeless, and the future is uncertain. We are rushing to extremes. The left is going further left, the right is going further right. America is torn between the Democratic and Republican parties, between blacks and whites; even the federal and state governments are clashing.
The third characteristic is, of course, the evasiveness of politicians, who do not face reality by blaming the Chinese, the cause of all evil, for the proliferation of the virus. Tens of millions of people have been laid off because of the Chinese economy, Chinese companies, and the Chinese government, which have stolen Americans’ jobs.

Ten aspects of the decoupling of the US and China

  1. Decoupling of exchanges, then no deals. The concept of trade decoupling is more severe than tariffs. Adding tariffs is still trade. It’s just increasing the cost of trade, but it’s not yet decoupling. But if the business is decoupled, I don’t buy your products, I don’t sell them to you, and mutual trade and economic exchange stop.
  2. Decoupling of capital markets
    A bill is expected to be introduced that will affect more than 200 Chinese companies, and if passed by the US legislature, this law is a straitjacket for Chinese companies. The companies listed in the United States today are all listed with the help of US investment banks, US law, and accounting firms, all in full compliance with US law. But with the new straitjacket and new regulations, this is unlikely to be legal.
  3. Financial decoupling. US insurance banks do not make loans or insurance for Chinese companies.
  4. Technological decoupling. Recently, we saw with Huawei that the US is blocking chips or high-tech equipment.
  5. Investment decoupling. This is called a lender. American companies disinvest in China or don’t invest in China.
  6. Decoupling of education. All kinds of measures are taken to expel Chinese students. After graduation, students are not allowed to find jobs in the United States.
  7. Decoupling of the Internet. A month and a half ago, US Secretary of State Mike Pompeo proposed five aspects of Internet decoupling.
  8. Decoupling with the Swift network could lead to extreme inconvenience in trade between China and the world.
  9. The alleged decoupling of currency and exchange rate
  10. Long arm skill. US domestic law is used as a substitute for international law to find various Chinese companies’ faults in different countries, freeze assets, or impose hefty fines. Example: the arrest of Ren Zhengfei’s daughter from Huawei, Canada.

All losers

The American government has not yet declared war. We are on a dangerous slope at the moment: US trade decoupling, technology decoupling, and investment decoupling all lead to the problem of market loss. The United States has more than 10,000 companies in China, created in the last 20 years, with a total investment of $500 billion, which translates into $700 billion in production and $50 billion in profits. Its return on investment is therefore 10%, and its sales margin of 7%.
US$700 billion in China is equivalent to 5 trillion yuan in production value, 1,500 billion yuan in GDP. Decoupling would lead to paralysis in this area; China would lose 1.5% of GDP and 2.5 million jobs. In this sense, of course, it will affect us in some areas of China, in certain circles, but China has room for maneuver. It can fill the void; it is capable of balancing; it will only have local difficulties. But for the United States, if those 10,000 or so companies really listen to Trump and disinvest completely, the number one loses $50 billion in profits.
They can’t recapture that market anywhere else in the world.

Follow Trump?

The entrepreneur’s emperor is the market, efficiency; the board of directors wants profit, it wants a minimum ten-year base, it will not follow a politician in office for four years and eight years. General Motors founded a mixed capital company in Shanghai in 1994 and today sells three million cars a year in China. The parent company sells more than eight million vehicles a year. Once GM leaves China, three million vehicles will be gone, and only five million will be left, making it a second-rate auto plant. How can GM bosses listen to Trump?
Apple is dead if it leaves China. Trump told Apple to divest. Why can’t Apple manufacture in the United States? Cook explained that Apple had one factory in the United States and one in Brazil. The company was losing money. But in China, the company produced more than 100 million cell phones, which generated 75% of the world’s profits from the cell phone part. The boss of the company also explained something exciting. China cannot leave Apple, and Apple cannot leave China; leaving China means death. Companies are not very inclined to follow Trump, just like Wall Street. The Chinese government in June opened access to foreign financial services central government. August data already showed $30 billion in investment. Investors follow the market, not the president. Trump instead disrupts the markets.

The chip market

China will be affected, whether it’s trade decoupling, technological decoupling, or investment decoupling, or so-called education decoupling, Internet decoupling, it will have an impact on China, but the effect is tolerable, it can be adjusted, and over time it can force China to move up a level. Of course, decoupling from the United States will not destroy the United States, but specific American companies may find themselves in difficult situations.
A study by the Boston Consulting Group estimates that restrictions on chip sales to China could cost US suppliers as much as $83 billion, or 37% of their revenues. They could lose the Chinese market.

Finance: China has some defences

We can discuss decoupling capital markets, decoupling insurance and banking finance, decoupling the Swift network, decoupling currency, and decoupling long-arm jurisdiction. These decouplings are all financial instruments, and by using these instruments, the Americans sunk the former Soviet Union, causing an 80% drop in GDP in dollar terms. Today, Russia’s GDP is lower than that of one of our provinces, Guangdong, and the reason is the scourge that was sown in 1990. In 1998, these financial attacks also brought down South Korea in 1998, Thailand, and Southeast Asia, and in the early 1980s, Japan was also hit hard. The blows are significant. Would China be in an unbearable situation if financial instruments were to hit it? If we decouple from the United States in the financial sector, we would all lose, the United States more so. What is the reason for this? Why can’t they beat China when they’ve been successful against Russia, Southeast Asia, South Korea, and Japan? Whether it is the Asian financial crisis or the 2008 crisis, we have never seen American financial methods attack the Chinese financial system, and above all, we have in China three defenses that can be described as our nuclear umbrella, our shield. First, we do not have free convertibility of capital. Prudence has always accompanied the decisions of the State Council. 2. Until today, even though we are said to be open to foreign financing, at the end of last year, foreign financial institutions accounted for only 1.8% of China’s financial assets. 3. Financial operations in China must be governed by the Chinese constitution, Chinese law, and the central bank, under penalty of punishment. We are a sovereign country.
Why are the five cases we have just mentioned cited everywhere? The Russian economy had barely begun to develop when the currency was fully convertible with no defense for capital as a result of the so-called reforms. Secondly, the Russian reforms changed all their financial regulations to the liking of the American IMF. Finally, American companies entered Russia and controlled more than 30 percent of financial assets. As long as South Korea, Southeast Asia, and Japan, these three regions and countries are open and controlled by Americans. Security is not assured. China has limited openness and is much more protected. At this stage, this is the fundamental reason why Chinese finance is immune to international shocks from the financial crises of the late 1980s, late 1990s, or 2008.
End of the summary

It is essential to recognize that the Chinese government has been able to defend national interests since the opening of the late 1970s by moving forward cautiously, particularly in the opening of financial markets. There has always been an intense fear of being the plaything of the financial markets like weaker countries. The protection of its currency has allowed it to advance in its deep waters. One of the strengths of the United States is innovation, which is China’s weak point. Will China be able to move from copying and improving existing innovations to being a leader in innovation? For the moment, the answer cannot be yes. Will the future show the opposite?

Related articles :

Scenario and decoupling

Innovation in China

Economy, it’s only the beginning

15 October 2020

The public sector and wages, +51% but …

China’s public sector generates 40% of the national GDP, which does not prevent it from being at the forefront. By 2020, the world’s 500 largest companies globally include 92 Chinese state-owned enterprises and 30 private enterprises, three times as many public companies. A company’s strength can be reflected in its costs. A 2018 study shows that access to short-term credit is cheaper for state-owned enterprises. They benefited from rates ranging from 5.06% to 5.17%, while the private sector ranged from 6.05% to 6.14%. The spread is the same for long-term and bonds. The public sector is advantageous, as are most, but not all, of its employees. What is the paradox?

Salaries,+51% compared to the private sector … on average

The average wage of employees of state-owned enterprises, 91607 yuan, is lower than that of foreign-owned enterprises 106,180 (about 14% lower), slightly higher than that of Hong Kong, Macao, and Taiwanese joint-stock and joint-stock companies (slightly higher) 90164, and higher than that of other private enterprises 60551 and thus higher than the national average, 75229. It is estimated that the average wage in state-owned firms is 51% higher than in private firms and 21% higher than in all sole proprietorships.
Given the more stable positions in state-owned companies, the social and security aspects, it is not difficult to understand why students are now rushing into them.

No higher salaries for “political” leaders

The Chinese banking sector is very profitable; the salary and benefits are also high. Statistics produced by China Economic Net, based on the 2019 annual report, show that the salaries and benefits of employees of the six major state-owned commercial banks range from 267,800 yuan (Agricultural Bank of China) to 375,100 yuan (Bank of Communications). The presidents of the six banks’ annual salaries range from 469,900 yuan (ICBC Chen Siqing) to 779,300 yuan (Bank of Communications Ren Deqi). ICBC is the “largest bank in the universe” with a profit of 313.4 billion yuan in 2019, but the annual salary of its president is only 1.65 times the average annual salary of the bank’s employees (285,200 yuan).
A state-owned enterprise in Chinese :

国企 public enterprise in China

Among the Big Six banks, there is a “pay “rollover” between government-appointed “executives” with wage restraints and 1. executives from the labor market, and 2. branch managers with no wage restraints. These annual salaries (including those of financial, risk, audit, information manager, secretary of the board of directors, etc.) can exceed one million yuan. The annual salary of some provincial or foreign branch presidents is more than two million yuan.
The salary levels of the chairmen, presidents, and vice-chairmen of China’s six largest state-owned commercial banks are significantly lower – three to four times less – than those of the ten largest joint-stock commercial banks (China Merchants, Pudong Development, CITIC, Everbright, Huaxia, Minsheng, Guangfa, Xingye, Ping An and Zheshang) If we compare the six largest Chinese commercial banks with their six foreign counterparts (JPMorgan Chase, Bank of America, Citi, Wells Fargo, Goldman Sachs, and HSBC), the salaries of the president, chairman, and vice-chairman of the latter are 266 times, 225 times and 152 times higher, respectively. 

The salary restrictions for government-appointed executives are probably politically motivated, to show that the state’s money is not being wasted and that it is properly managed? Is this a model of socialist management with Chinese characteristics? I don’t think so!

Related articles :


Source :


10 0ctober 2020

Government revenues are falling

The journalists of the Yicai website 第一财经 have carried out a study on the public revenues of Chinese municipalities in the first seven months of 2020. What does their analysis tell us?

60% of cities have declining government revenues

Of the 330 municipalities with the rank of city, some are administered directly by the central government. They cannot be compared. Some of the cities did not have complete data. One hundred seventy-six were therefore retained. 60% of them showed a decline in government revenue over the first seven months of the year. Those most affected, such as Harbin, are dependent on heavy industry and an undiversified industrial structure.

Hubei and the Northeast

Of the 74 cities with positive growth, seven posted an increase of more than 10%. Most are in Guangxi.
Of the 102 cities with declining revenues, 20 showed a drop of more than 10%. Some were at the heart of the epidemic in Hubei: Xianyang -47.2%, Shiyan, Jingzhou, and Wuhan.
Xianyang -47.2%, and Shiyan – 36.3 experienced the largest falls. The automotive market is vital for these two cities. At the break-even point in the first quarter, the sector weighed on revenues. In the first quarter, Wuhan, which was down 45.9%, managed to reduce the fall to 30.5% over the first seven months.
The Northeast suffered, with Harbin at -20.7%. Regions focused on heavy industries and energy were not spared, such as Yangquan and Ordos in Inner Mongolia.

The digital economy still

The digital economy, which generated a quarter of the national GDP in the first half of the year with an increase of 10.5%, has enabled municipalities invested in the sector to resist.
Hangzhou benefited from a 1.1% increase in revenue. 

Better local governments

Local governments fared better than the central government, with a 6.2% drop in revenue than 11.3%. Indeed, central revenues are more tied to the economy, and the impact of the epidemic on taxes is strong. Local taxes, such as property taxes, are less affected. Moreover, local governments, faced with financial difficulties, use more energy to collect taxes and do not hesitate to increase them to achieve a balance. They have a whole arsenal to their credit; moreover, non-tax revenues increase much more than usual tax revenues. With special taxes on education, administrative charges, they can sell assets and land.

Two phenomena

Zhang Zhenyu, Director of the Research Institute of Local Finance at Dalian University, should consider two important points: 1. alongside the emergence of Central China; there is a retreat of the North-East. Alongside an East-West economic structure, North-South differentiation is taking shape. 2. The quality of public revenue is declining; non-tax income is becoming too important.

Positive GDP and government revenues decline

These figures are interesting because they provide another view of the state of the economy. Besides the GDP growth, public revenues are decreasing, much for the central government, 11.3%, less locally 6.2%, according to this study. No one is surprised by this difference in GDP and revenue data. One can remain perplexed! The local governments use their usual creativity and get money into the coffers. Publicly, the article can go no further into the causes and implications.
They draw attention to the Northeast retreat mentioned last week and the widening gap between North and South in recent years. The good news is the confirmation of the center of the country’s dynamism around a Chengdu-Chongqing area.

Related articles :

What can the Northeast expect?

Clusters of cities and the redistribution of the maps

Articles on the Chinese economy

Sources :


2 October 2020

City clusters and the reshuffling of the cards

China’s specificities have given rise to unique development models while creating a multi-speed China. The clusters of cities are reaping economic development’s main benefits, but there are significant disparities between them. Let’s take a look at some data.

City clusters

China’s size and its population concentrated in the east and center have led to specific urbanization and structuring of cities. A distinction is made between clusters of cities 城市群 defined as follows: a vast city group together at least three major cities in its immediate periphery, all linked by efficient communications and economic complementarities.


The twelve most essential clusters check the law of 80/20. They occupy 19% of the territory and generate 82% of the national GDP. When we look more closely, five significant groups stand out:

  1. Beijing-Tianjin-Hebei in the North
  2. The Yangtze Delta with Shanghai, the major cities of Zhejiang and Jiangsu
  3. The Middle Yangtze around Wuhan, Changsha, and Nanchang
  4. The Pearl River Delta in Guangdong Province
  5. Cities around Chengdu and Chongqing

The east facade

The phenomenon accentuates geographical inequalities. They attract the most people, with huge cities seeing population arrivals and small towns seeing departures. Between clusters, the differences are also significant. While the Pearl River area recorded a population growth of 20% between 2006 and 2015, those of Beijing and Shanghai posted increases of 10%. The northeastern clusters -Harbin and Changchun- experienced declines. The movement of populations follows a southeast trend. In the North, there has been a decrease in population. Beijing, the capital, and its periphery are the exception. It has had to put restrictions in place to stem population growth, as has Shanghai. The map below for 2019 shows the population increases on the eastern side (the provinces in green), especially in the South with the provinces of Guangdong and Zhejiang, which show positive balances of more than 800,000 people.

population movement in China

A reshuffling of the cards?

Competition remains strong between these various groups. Some cities have implemented measures to attract qualified personnel with, for example, allowances for engineers and students as in Hangzhou. Others, such as Shenzhen, do not need them. The weaker ones are still in danger of declining, especially since the U.S. trade war and the epidemic have put a strain on municipal finances. The financial media 第一财经 has surveyed 176 of China’s 330 largest cities. 60%, 102, have negative growth in government revenue over the first seven months of the year. Those oriented towards the future with the digital economy are doing well, while the North and its heavy industry are struggling more. Are we going to see a new distribution of cards?

Related articles :

What can the Northeast expect?

What are the most attractive Chinese provinces?

Which cities attract the most people in China?

China, railway, the winners, the losers

Where are China’s universities concentrated?

Sources :

176城前7月财政收入:近六成负增长 多城非税收入增长快

26 September 2020

What can the Northeast expect?

A survey of “Finance and Economy of the 21st Century” reports that twelve districts attached to cities have very low real estate prices, with apartments at less than 100,000 yuan (14 680 USD). Of these twelve places, eight are in the Northeast. They are not necessarily poorly located. They are close to the center or the train station. This analysis recalls the decline of this region, a former bastion of an outdated planned economy. The research bureau Trigger Trend, following the investigation, identifies the facts, exposes the causes of this decline and tries to find the exit solutions.

Summary of the article : 

The decline of the population

The region includes the three provinces of Liaoning, Jilin, and Heilongjiang.

Faced with an economy out of step with the prosperous provinces, it experienced a population decline as early as 2013. It has lost 1.64 million people over the last seven years. With 107.9 million inhabitants, it has 7.7% of the country’s population against 8% in 2014.

A global crossroads

Thanks to the Trans-Siberian Railway construction linking Moscow to the ports of Vladivostok and Dalian more than a century ago, the Northeast had experienced its first boom. Harbin became a crossroads of the world, and the isolated cities of Shenyang and Changchun entered the world economy. The developed railway network, until 1978, contributed to the boom of the economy. 

A lost strategic point

The container revolution and the boom in maritime trade have relegated the train to the spectator seat. Also, China’s eastern facade, integrated into world trade, uses the large neighboring ports. The cost of transportation between Harbin and Dalian is four times higher than between Shanghai and New York. During the unequal treaties (Argun and Beijing in 1860), the weakened Qing Dynasty ceded to Russia 600,000 square kilometers north of the Heilongjiang River and 400,000 square kilometers east of the Ossouri River while losing access to the seafront. Heilongjiang and Jilin are thus landlocked.
However, the sea is very close. From the village of Fangchuan in Hunchun, there are 15 kilometers on the Tumen River to the Sea of Japan.

 North Korea and Russia have joined forces to completely strangle the Tumen River’s mouth in the Northeast. Russia built a railway bridge during the Korean War to deliver aid supplies to the Kim family. As the bridge is only 7 meters high, it blocks all large ships. North Korea allowed only Chinese fishing boats to sail, cargo ships and warships cannot pass, and the entire Tyumen River lost its commercial value.
Many people think that if China had destroyed the railway bridge and made North Korea bend in reform and opening, the Northeast could have integrated into the world economy at a “lower cost.” Not only would a large number of foreign investors come here to invest in factories, but the Northeast would have benefited more from the markets of Japan and South Korea and even the U.S. – the demand of hundreds of millions of consumers.

The Tumen River cannot save the Northeast

Many believe that the Tumen River could save the region in negotiations with North Korea and Russia. But not all rivers are called the Yangtze. The Tyumen River, much awaited by the Northeast, is not a great river.
The only place on the Tumen where thousand-ton boats can pass is the 15-kilometer waterway at Fangchuan. With a little improvement, river and sea vessels of 300 to 2000 tons can pass. However, the further inland you go, the smaller the number of ships passing by the sea.
For the Yangtze, it is different. The water depth of the Ningbo Port Canal is 30 to 100 meters, and ships of 300,000 tons can enter and exit freely, while boats of more than 400,000 tons can enter and exit at high tide. Downstream of the Yangtze River, the water depth is 12.5 meters, and 100,000-ton cruise ships can arrive at Nanjing Port with lighter loads, while 50,000-ton cruise ships can arrive there directly. In the Yangtze River’s shallow waters, 5,000-ton freighters and 10,000-ton fleets can also reach Chongqing directly.

Tumen and Yangzi Jiang in China

Better navigation would bring a marginal improvement, but in no way would it change the situation. Many car factories use ro-ro ships to reduce transportation costs, ships that can carry thousands of cars at a time, but weigh thousands of tons. Would companies choose to open an automobile plant upstream on the Tumen River?
The depth of the waterway’s draft is directly related to urban development. The main waterway in the northern part of Jiangsu Province is a thousand-ton waterway, which connects Lianyungang, Huai’an, Suqian, Xuzhou, and other cities. It looks at the level of development in northern Jiangsu Province today.

The roots of the decline

After the war, the Northeast became the most developed and economically advanced region in China, producing 41% of its cement, 76% of its electricity, 92% of its steel, and 95% of its coal mines.
After 1949, the region accounted for almost 40% of construction projects cooperating with the Soviet Union. Daqing oil, Anshan iron and steel, Fushun coal, and Changchun automobiles all came out of this province to be sold throughout the country. The region had gambled only on heavy industry and is paying the consequences of this strategy. The government has identified 80 areas with limited resources, a third of which are in the Northeast.
Everyone thinks that around the capital, Northern China forms the ring of Beijing’s poverty belt. Around Shenyang, a belt of resource depletion is also included with Fushun, Gongchangling, Panjin, and Fuxin.
It is challenging for the Northeast to take off.
However, I particularly disagree with some who say that the Northeast’s economic woes’ real cause is an obsolete industrial structure that is overburdened with heavy industries.
In the era of the planned economy of “national failures,” none of this was a problem. Liaoning’s industrial products are supplied to the entire country according to plan, often more than demand. There is no need for marketing as long as the national plan is followed; no matter how depleted a mine is, the state will transfer employees.
Times have changed, and this type of industrial structure has become a problem today. Since reform and opening, the geographical distribution of many industries has changed considerably. The massive chemical industry in the Northeast is no longer dominant but faces competition from several provinces. For example, XCMG, which produces heavy construction machinery, is based in Jiangsu, while Zoomlion and Sany Heavy Industries are based in Hunan.
Liaoning’s petrochemical industry used to occupy a central position in the country. However, with more than 500,000 tons of ethylene projects in Wuhan, Nanjing, Shanghai, Tianjin, Pengzhou, Zhenhai, Maoming, and other booming locations, Liaoning’s petrochemical industry is no longer smiling. From a macroeconomic point of view, market saturation has penalized the heavy chemical industry. Despite policies to revitalize the Northeast sector, the proportion of heavy industry has declined significantly and is smaller than other traditionally less essential regions in this market. The ratio of heavy industry in Jilin’s GDP is 67.9% and 67.4% for Heilongjiang, while the Canton province of Guangzhou is 68.3%, Chongqing 79.6%, and Ningbo 74.5%.
In my opinion, the real cause of the economic woes of the Northeast is not heavy industrialization and its industrial homogenization, but rather the following two reasons. The first is the lack of suitable waterways and efficient public services. It is difficult for the Northeast to develop in heavy industry or turn to the light industry, have price advantages, and compete.

Transport disadvantage

In the past, China’s economic performance has long been dominated by the manufacture of low- and mid-range products. To gain a competitive advantage, labor-intensive industries must be cheap.
Therefore, the key to the development of low-end manufacturing is low labor and transportation costs.
Chengdu-Chongqing’s economic ensemble, which was inland initially, was able to rise because it had these two strengths. Then, step by step, it migrated to electronic information and other high value-added industries to raise its level. In the early stages of transformation, the Northeast has a large number of skilled workers and a very high rate of urbanization, which may correspond to the first point. But Jilin, Heilongjiang, and even Liaoning, with the absence of waterways, cannot compete in transport costs.
The annual flow of runoff water from the Liao into the Liaoning is only 13.7 billion cubic meters, only 4% of the Pearl River, t 23% of the Huaihe. Shallow water, mud, and freezing in winter make the Liaohe value for shipping very low. Whether the Northeast produces a labor-intensive light industry or capital-intensive heavy industry, it must first be transported by rail or road to the port of Dalian and other transit locations.
This additional transportation cost is prohibitive. Some export-oriented foreign companies will see this as a reason to simply not invest in the Northeast. 

The weight of the past

This, coupled with the fact that the Northeast was the first place in China to establish a planned economy, has left many scars with the most significant application. The history of the Jiefang truck – Liberation – illustrates these practices of the planned economy: since 1956, when the first Jiefang truck was built, there have been no technical modifications or changes in the truck for more than 30 years. It was only after the creation of the functional area that it was decided to make improvements. In this bureaucratic sys
In the larger industries, Heilongjiang and Jilin have 466 and 356 state-controlled enterprises, respectively, fewer than Hunan’s 715. But the losses in Heilongjiang and Jilin are twice as significant in this area. This whole business environment is well known. 
The Northeast may accommodate one particular company, but it is challenging to bring the entire industrial chain together, using upstream and downstream support, and using economies of scale to reduce production costs.
What do you leave to the Northeast to compete with similar products in the Yangtze Delta and the Great Bay region without a price advantage? How can the Northeast survive the fierce global competition without going into liquidation? It has nothing to do with whether you choose the heavy or light industrial route.

Ideological way out

 To me, the only thing that can save the Northeast is the Northeast itself. In the end, perhaps the biggest problem of the Northeast is not the lack of a physical outlet, but rather an ideological one.
End of the article summary

Trigger Trend, faced with the difficulties of the region, does not see many solutions. It considers that it is still paying the price for the legacy of an era that was not conducive to innovation and development. The Northeast needs to break out of a spirit inherited from a planned economy and take paths more conducive to creativity. The author does not address issues such as unemployment figures – he certainly can’t! Over the last two decades, the region has had to carry out massive downsizing of staff in state-owned factories, which are very loss-making. The recent decline has not improved the situation. Is unemployment in the “harmonized” national average of 5.6% in the cities? What is the real growth of the economy? Zero, negative, positive?

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26 September 2020

Digital, all is well?

When you look back over the last ten years, you can quickly see that China’s digital catch-up occurred at the beginning of the decade, or even before and that it very quickly gained a lead over most Western countries. By the end of 2015, I was already no longer using cash or credit cards for purchases in China. I paid all through We Chat or Alipay. Everything became more straightforward with the digitalization, banking, health, and even the administrations took the train. The sector even flourished during the epidemic.

36.2% of GDP

China’s digital economy continues to grow. It generated 36.2% of China’s GDP in 2019, with 3500 billion yuan, contributing to 67.7% growth. Big data accounts for 810 billion, +32%. Information technology services and software companies posted an increase of 21.4% and Internet-related services of 29.1%. The electronic equipment manufacturing sector grew by 9.3%. The number of Internet transactions reached 3,481 billion yuan last year.

25% of retail sales of physical products online

In August, Internet retail sales of physical products, up 15.8%, accounted for a quarter of total sales. The material/concrete category 实物商品 includes all products that are delivered by a transportation system, such as clothing, books, food. They cannot be sold in a dematerialized manner, such as software or digital subscriptions. We cannot compare the same categories, but for your information, e-commerce in France is not expected to generate much more than 10% of retail sales this year. In the United States, the proportion of online sales rose from 15.1% in the second quarter of 2019 to 16.1% in the same period of 2020.

All the lights are green?

Revenues from Internet platforms increased by 13.6% in the first half of the year. The cloud sector also benefited from the increase in demand, with a growth of 14.3%. Industrial companies in services have exceeded the 400,000 mark and industrial APPs 250,000.
Numerous transformations will come about; the government is pushing the digitization of the economy and society with significant resources. All sectors are affected, even agriculture. Digital money is taking its first steps. Ant, which will make its IPO, is driving the industry upwards with Alibaba and Tencent.

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22 September 2020

Decoupling Scenario

Bloomberg economists Tom Orlik and Bjorn van Roye have measured the impact of US-China decoupling. Journalist Wang Jian reacts to these estimates and recalls the Chinese response’s difficulties, the domestic cycle.

The decoupling scenario 脱钩 from economists

A complete decoupling could lead to a decline in growth to 3.5% in 2030, compared to a forecast of 4.5%, which considered the relationships unchanged.
Decoupling, synonymous with the end of trade and technology flows, which stimulate growth, will have a more substantial impact on China than on the United States because China benefits more from international trade and innovation. American growth should be slightly impacted. Economists expect 1.4% in 2030, compared to 1.6% previously.
In this scenario, China’s productivity growth will slow down, and capital spending will weaken as technology transfers come to a halt. The results will not be catastrophic because the country has sharply narrowed the technology gap with advanced economies over the last 20 years. Increased funding for research and development and stronger linkages with advanced economies could offset the effects of decoupling. On the other hand, the results could be more severe if the United States successfully brought its allies into decoupling, such as Korea, Japan, France, and Germany.

The importance of the 6% threshold

Wang Jian reminds that the passage of the growth under 6% will not make it possible to mitigate the country’s structural problems. The strong growth compensated for the shortcomings. With “low” relative growth, for example, the hole in social protection will not be sustainable; the government invested little in this area for various reasons: it preferred to put capital elsewhere and respond to other interests. Real estate bubbles and local debt will pose serious difficulties.

Domestic consumption

To rely on the domestic market to face the next few years is the age-old Chinese consumption problem.
When Prime Minister Li Keqiang recalled that 600 million people had an income of 1,000 yuan (140 USD) per month, he was basing his remarks on figures that showed that 70% of the population did not exceed 2,000 yuan per month. Under these conditions, consumption will not be the economic engine. Figures for the second quarter indicate that consumption is lagging behind and that investment, especially in infrastructure, has driven up growth.
Wang Jian estimates the parallel/grey economy (灰色经济) at 30%. Its importance differs by region. In general, the higher you go in the North, the more critical it is. It cannot have a significant weight in consumption.


The contribution to the growth of investment is + 156%, that of import-export is +16.6%, while consumption has a negative contribution of … 73%. This fall in consumption is, of course, linked to the epidemic. Will it be able to recover?
These investments have been fueled by the issuance of special bonds following the epidemic. Astronomical new debts have been created.

In recent years, the government had placed its hopes on the national market. It is normal; the consumption figures presented a better picture. In 2019, it positively contributed to the growth of 57.8%, much higher than investments at 31.2%. It will be necessary to reverse the trend so that the national market presents a robust counterpart to the decoupling. Is it possible? Not immediately!

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9 September 2020

Does Singapore inspire Shenzhen?

The Chinese government has tried to calm the soaring real estate prices, fueled by sometimes very organized speculation (the famous Wenzhou groups). These prices have created considerable wealth more in the cities. The average wealth in Beijing, 70% of real estate, is close to 9 million yuan ($1.3 million); some popular areas of the capital have seen prices per square meter multiplied by 20 in 15 years (see here). This madness has not been accompanied by sufficient housing construction for the most modest households – 600 million people have 1000 yuan of income per month (see article). Shenzhen has nothing to envy in terms of soaring prices. In recent years, the authorities have been accelerating the construction of social housing. According to the Chinese press, the municipality of Shenzhen wants to put an end to speculation and is implementing a policy of social housing, like the Singaporean model.

Shenzhen :

Shenzhen, objective to 2035

The objective is to reach in 2035 an offer of apartments for rent or sale, representing 60% of the total offer. In 15 years, 1.7 million flats are to be built, 1.1 million will be for rent. The government is extending a series of measures to make land available.
5.5 million new inhabitants are expected to settle in the city, which will require 1.83 million apartments. The authorities aim for qualified (talented) employees at prices equivalent to 60% of the market price, families at 50%, and the lowest income at 10%.

Singapore :

Singapore, a model

Shenzhen wants to move away from the Hong Kong model, where speculation and high prices go hand in hand. It is inspired by the Singapore model, which, as early as 1964, put in place a public housing construction program to solve the shortage of housing at the time and encourage low- and middle-income populations to buy the new constructions. Public housing makes up the majority, which is managed directly by the government. According to media surveys, there are 30 square meters for every Singaporean, compared to 15 square meters for a Hong Kong national. More than 80% of the population resides in these dwellings.

Changsha and Chongqing in advance?

Changhsa, the capital of Hunan, has already taken this path. There are already 237,800 social housing units, 20,000 are built every year. Chongqing is also ahead in this area. The former mayor, Huang Qifan, regrets that this social housing in general in China is not open to newcomers, but to old residents, see the article. The newcomers slow down their consumption because they have to pay too much rent. With the help of this housing, Changsha and Chongqing have not reached the stratospheric prices of other cities.

Has everything been done against speculation?

We are in 2020, and the rise in real estate prices is phenomenal over the last 18 years. Has the government done everything to curb this rise? Has it wanted to oppose this speculation? On the one hand, measures to limit purchases have been introduced. On the other hand, the credit floodgates feeding speculation have opened regularly. The first to be informed (well placed) of the new borrowing measures took advantage of this to take out large loans and buy at attractive prices before prices soared. Besides, local governments took advantage of this windfall, as did interest groups with close ties to the highest levels. In an environment where corruption was estimated at 20% of the selling price, it was a win-win situation for everyone. We want to speed up the construction of social housing, very good. Isn’t that normal for a government that proclaims itself to be socialist?

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A real estate boom in Shenzhen? Yes, but!

2nd September 2020