This episode covers the Caixin China General Services PMI of September, tourism data from the Golden Week with European Chamber President Joerg Wuttke’s comments on the impacts of domestic travel restrictions and results from China’s central bank survey on industrial entrepreneurs sentiment in the third quarter. Join us online on the 25th October to find out more about the key takeaways from the 20th Party Congress: Register here.
Caixin China General Services PMI: https://www.pmi.spglobal.com/Public/Home/PressRelease/770dd9c3e5b541dbb33a70812cf14287
PBOC entrepreneurs ’macroeconomic survey: http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4675853/2022100915295990951.pdf
Report by China’s Ministry of Culture and Tourism on Golden Week travel (in Chinese): https://mct.gov.cn/whzx/whyw/202210/t20221007_936291.htm
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RUI: Hello and welcome to China Shortcuts.
MARIANN: The European Chamber’s weekly catchup about the Chinese business landscape.
RUI: The Caixin China General Business Activity Index, better known as services PMI, indicated that the service sector’s activity contracted in September, with firms reporting disruptions to operations and restrictions on travel.
MARIANN: Although services output only reduced slightly, it was the first time since May that the index showed contraction. The September reading contrasted sharply with the steep increases in activity recorded in the previous three months. Some companies noted that efforts at curbing new flare-ups of COVID-19 across China restricted operations and dampened demand. Total new orders fell for the first time in four months due to weakened domestic demand, while new export business showed a mild expansion in September. Service sector employment continued to decline, with firms trimming their staffing levels at the quickest pace since May.
RUI: Data from China’s Ministry of Culture and Tourism indicated that revenues from tourism declined significantly over the week-long National Day holiday that started on 1st October.
MARIANN: Tourists across China spent about 287 billion yuan over the holiday also referred to as Golden Week. This was less than half of the pre-pandemic level in 2019, and 26 per cent below last year’s figure. With COVID measures fueling uncertainty about travel, the holiday failed to live up to its potential at boosting domestic tourism and consumption. The daily number of domestic passengers was about 60 per cent lower than during the holiday week of 2019.
RUI: Restrictions on domestic travel are weighing heavily on businesses as well, with people-to-people exchanges increasingly limited to virtual meetings that lack the human touch. Commenting on the latest travel uncertainties is European Chamber president Joerg Wuttke:
JOERG WUTTKE: Traveling in China is a little bit like Chinese roulette. You never know where it’s gonna hit you. If you are in a city where a district goes down and you have to do quarantine. It’s really, very difficult. Personally, I am hit myself because I haven’t seen a plane from the inside this year. Because as front man of the chamber, they request 7 days before I meet a minister, hence no travel, which says a lot about the trust in COVID policies here. And then we have cases like Massimo, our vice president, was indicating in Chengdu, where we had 2 days of quarantine in Chongqing when he’s visiting his partner. Then he has to spend another 2 days when he goes back to Chengdu. So 4 days for one meeting is of course a problem. Business is dying; business is down; employment is down. So the travel restrictions within China are stifling the economy.
RUI: According to the results of a survey conducted by China’s central bank, industrial entrepreneurs were downbeat about China’s economy in the third quarter.
MARIANN: About 47 per cent of the 5000 industrial companies surveyed nationwide described China’s current economy as ‘cold’. While the entrepreneurs’ macroeconomic heat index improved slightly from the previous quarter, it still indicated a significant decline year-on-year. Notably, the heat index stood lower than in the third quarter of 2020, when China’s economy was bouncing back from the onset of the pandemic. Firms were pessimistic about the business climate and profitability alike, with the indices declining further from the reading of the previous quarter.
RUI: This Sunday, 16th October, the Communist Party of China will convene in Beijing for its 20th National Congress. The twice in a decade event is when the CPC discusses the party’s key issues and announces the new team of top leadership.
MARIANN: The Party Congress comes at a time when China is facing several serious economic challenges stemming from a range of issues such as COVID flare-ups, real estate doldrums and the fall-out from Russia’s invasion of Ukraine.
RUI: Join us online on the 25th October to find out what experts view as the key takeaways of the 20th Party Congress, and gain insights into its potential implications for businesses as well as the economy and the future of China.
MARIANN: Thanks for listening. Tune in again next week.
RUI: In the meantime, find useful links in the episode notes.