This episode covers the business implications of the Communist Party of China’s 20th National Congress, China’s third quarter gross domestic product (GDP) and sectorial data released by the National Bureau of Statistics, September foreign trade data, and updates on the increase of international flights to China, with comments from Philippe Bardol, chair of the Chamber’s Aviation and Aerospace Working Group. In addition, details are provided on the upcoming 2nd Carbon Neutrality Conference in Tianjin or online on 2nd November (sign up here).
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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 Communist Party of China concluded its 20th National Congress and as widely expected, Chinese President Xi Jinping was confirmed as the general secretary at the top of the CPC for an unprecedented third term.
MARIANN: President Xi outlined his long-term vision, underscoring high-quality growth as the basis for economic development, with increasing emphasis to be placed on green development. He reiterated that China would continue on the path of market reforms and high-level opening up, but at the same time called for greater self-reliance in the areas of science and technology. Before the week-long Congress came to an end on Sunday, the makeup of China’s new top leadership – the Politburo and the Standing Committee – was also unveiled.
RUI: Official figures for China’s third quarter GDP beat expectations, picking-up sharply from the previous quarter, when growth fell to the slowest pace since the first appearance of COVID-19.
MARIANN: China’s gross domestic product increased 3.9 per cent year-on-year in the July-September period, according to the National Bureau of Statistics. The data was released on Monday after a week of unexplained delay. And while it shows a significant rebound from the 0.4 per cent expansion in the second quarter, with the year-to-date growth at 3.0 per cent, China’s economy is still a long way away from reaching this year’s target of 5.5 per cent.
RUI: Along with the GDP data, the Statistics Bureau published a series of figures that indicated that one key factor of third quarter growth was a continued uptick in industrial production.
MARIANN: The rise of industrial production exceeded market expectations, with car manufacturing surging in September. Retail sales, on the other hand, increased at the slowest pace in four months, dragged down partly by a year-on-year decline in catering sales. The property market slump also played its part, resulting in a drop in the sales of certain goods, such as construction materials and furniture. The highlight within retail sales was again the automotive industry, where sales rose sharply from a year ago. Fixed asset investments showed a 5.9 per cent y-o-y increase in the first three quarters, with the rise in investments directed towards infrastructure and manufacturing accelerating, and those towards real estate development declining sharply. The urban unemployment rate jumped to 5.5 per cent in September, with the rate at a striking 17.9 per cent among young people between the ages of 16 and 29.
RUI: September foreign trade data showed a stronger than expected increase in exports, while import growth missed analysts’ forecasts.
MARIANN: Although better than expected, the 5.7 per cent year-on-year growth in exports indicated the weakest increase since April. China’s customs administration published the figures for September after a ten-day delay. In the first three quarters of 2022, the European Union was China’s second largest trade partner after the Association of Southeast Asian nations. During the same period Chinese exports to the EU were almost double the value of Chinese imports of EU goods, which highlights the EU market’s ongoing importance for China’s growth.
RUI: Several of China’s domestic airlines announced plans to raise the number of international flights as well as that of international routes they operate.
MARIANN: While the announcements suggest that China’s domestic carriers are somewhat more optimistic about international travel, the number of available international flights would still remain far below pre-pandemic levels. However, according to China’s Civil Aviation Administration’ October report, the number of flight cancellations due to pandemic-related regulations dropped significantly from August to September.
PHILIPPE BARDOL: Recently Chinese major airlines announced their intention to boost international frequencies during the upcoming winter season. Air China announced flying soon to Asian neighbours, China Eastern will double its international flights to up to 108 flights per week, China Southern will perform 86 flights per week. Those announcements followed a statement made by CAC saying that the international aviation in China is expected to recover up to 15 per cent of 2019 level in the first quarter of 2023. This shows a very positive trend, but considering the circuit-breaker policy that shortens commercial visibility, considering also that due to strict COVID prevention policy the onboarding of a plane takes now around 2 to 3 hours – so only 8 to 10 flights per day even in a large airport –, we don’t really see that increase of flights happening soon in major Chinese international airports. And without improving the procedures at arrival, we will face the same bottlenecks in the future, making it very difficult it to go beyond 15 to 20 per cent of the original air traffic.
RUI: The European Chamber’s Tianjin Chapter will host the 2nd Carbon Neutrality Conference on the 2nd November. The event will focus on the role European business can play in China`s race to become carbon neutral by 2060.
MARIANN: Join us in Tianjin or online to hear insights from high-level officials from several arms of the Tianjin Government, as well as representatives of local industrial clusters.
MARIANN: Thanks for listening. Tune in again next week.
RUI: In the meantime, find useful links in the episode notes.