July 2018 Mastercard Caixin BBD China New Economy Index Released: 10:00 am Beijing Time August-02-2018 Overview In July 2018, the Mastercard Caixin BBD New Economy Index (NEI) reading came in at 30.6, indicating that the New Economy accounted for 30.6% of overall economic input activities that month, up 1.4 ppts from June (Chart 1). The rising NEI was due to the increase of capital input. 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 weights of the index, respectively. The rise in the July NEI reading came from the increase of capital input (Chart 2). Technology input index went down since March 2018, coming in at 26.6 this month, with 0.8 MoM decrease. Capital investment showed a slow downtrend since March 2018, but rebounding after June 2018. It continued to rise to 36.8 this month, with 4.8 MoM increase. Labor input index declined moderately since July 2017, dropping to 27.6 this month, with 0.2 MoM decrease.
Taking the weight into account, percentage changes in labor, capital and technology inputs were -0.1, 1.7, and -0.2 ppts, respectively. The net NEI change was 1.4 ppts in total (Chart 3). Looking at the sectors, the New IT industry formed the largest proportion of the New Economy Index, contributing 13.5 ppts to NEI. Biotech was the industry with fastest growth in July, contributing 4.0 ppts and ranking the second. Culture, Sports & Entertainment came fifth from second, the biggest drop in ranking, contributing 2.4 ppts in July (Chart 4).
New Economy Employment In July 2018, the average monthly entry level salary of the New Economy was RMB 10,357 per month, decreasing from last month s level of RMB 10,369 (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 openings.
Hiring in the New Economy sectors accounted for 27.1% of total hiring in July, lower than the previous month s 27.3%. At the same time, the total compensation share of New Economy sectors decreased to 28.1%, which meant the average entry salary level of New Economy declined compared to the national average entry wage level. The entry level salary premium of the New Economy was 3.6% as compared to economy-wide counterparts, decreasing from 4.3% in June (Chart 6). In the recent year, the average salary premium of the New Economy was lower than the first half year of 2017 generally, and fell to the lowest point since the index published. Growth of Different Enterprises Based on Employment Data In the previous month, the declining industrial production was verified by the shrinking employment of general workers and operators. But it was reported by NBS that profits of industrial enterprises above designated size continued to rise. We compromise the dilemma using big employment data. Chart 7 showed the job creation by enterprises of different sizes since January 2016. We categorized all industrial enterprises into 20 groups by scale, with the 95 th percentile indicating the 5% largest companies. It can be seen that the largest 5% of enterprises created 22% of total job positions in July 2018, increasing from 13% in the second half of 2017. However, the bottom (the smallest) 40% ones absorbed 37% and 48% new employees in July 2018 and the second half of 2017, respectively. In the past year, the enterprises with smaller sizes shrank significantly compared to the larger ones.
In addition, we checked new employment data by enterprise ownership (Chart 8). In accordance with NBS system, we tagged enterprises by state-owned, collective-owned, private, funded by Hong Kong, Macao and Taiwan, and foreign funded. In the past year, private enterprises created less jobs, decreasing from 60% in March 2017 to 46% in March 2018. Only in recent months did it show slight growth. However, the stated-owned ones experienced significant growth. The other three types remained stable. We conjectured that state-owned enterprises crowded out its private counterparts, which is consistent with the declining of industrial value-added and the rising of profits of the industrial state-owned enterprises.
With the crowd out effect, average salaries in different enterprises declined in recent quarter (Chart 9). Among them, average salaries in stated-owned enterprises experienced the biggest drop. Meanwhile, average entry-level salary in new economy declined for the last two months. The salary reflects the enterprises expectation of labor productivity as well as economic activity in future. In this respect, the state-owned enterprises are not optimistic. They earned profit by monopoly power, raising output prices and depressing input costs.
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 were Beijing, Shanghai, Guangzhou, Shenzhen 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 January 2018 and July 2018. The top five cities were Guangzhou, Beijing, Shanghai, Shenzhen 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 visitwww.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/.