The volume of industrial production increased by 5.8 percent in eight months. On the other hand, August showed below-average indicators – 4.5 percent (in July the growth was 5.1 percent). At the same time, the strong pace of development has been maintained in certain sectors. For example, last month the production of integrated circuits increased by 17.8 percent. This was to be expected: today China is investing huge amounts of money in this sector. Thus, in the first half of 2024, China invested more in semiconductor production than the United States and South Korea combined, according to statistics from the international industrial association SEMI.
The domestic automobile industry using new energy sources continues to develop at an extremely fast pace. As expected, in August its production and sales exceeded the psychologically important level of 1 million units. Production last month rose 29.6 percent to 1.09 million units, sales rose 30 percent to 1.1 million units. Automobiles powered by new energy sources accounted for 44.8 percent of total sales in the domestic automobile market in August, according to statistics from the China National Association of Automobile Manufacturers. According to experts, this figure will rise to 50 percent by the end of this year.
The service sector outpaced manufacturing in terms of development rates in August, showing a growth of 4.6 percent. At the same time, experts predict a significant increase in the pace of development of the service sector in the fourth quarter. The fact is that since the beginning of August, the central authorities have outlined a series of measures to stimulate trade in services both at home and abroad. Two strategic documents were published in monthly increments: a circular of the State Council of the People’s Republic of China on the development of service consumption on August 3 and proposals of the Office of the State Council on further opening up in trade in services on September 2.
The first, in particular, involves further digitalisation of the service sector to increase its accessibility to the final consumer, the active development of tourism and catering and, most importantly, the creation of an ecosystem within walking distance of the entire range of services at neighbourhood level. The second focuses on the external market and points to the need to increase both the export of services and their import, especially in areas such as medicine and environmental protection.
Less than a week after the publication of the circular on further opening up trade in services, 20 of China’s largest cities have already announced the liberalisation of the medical services market for foreign investors. From now on, the creation of clinics there will be allowed exclusively at the expense of foreign capital. Previously, the ceiling for foreign capital participation in specialised institutions in China was 70 percent.
At the same time, retail trade fell by 0.01 percent compared with July. On an annual basis, growth was 2.1 percent, much weaker than the July figures of 2.7 percent. However, observers are confident that the figures will soon improve: a series of holidays and seasonal sales are just around the corner, and the authorities are taking new measures to encourage consumption, including within the framework of a campaign to upgrade household appliances and the population’s vehicle fleet. To further develop this campaign, in August China doubled its subsidies for the renewal of the vehicle fleet. Now, for a citizen who exchanges an old car for a new one, the state will pay an additional 15,000 yuan, compared with the previous 7,000. If we talk about cars powered by new energy sources, the size of the subsidy is even higher: it has been increased from 10,000 to 20,000 yuan. The practice of providing subsidies for car replacement was introduced in China on April 24. In just two months, authorities subsidized 113,000 transactions to replace old cars with new ones through the trade-in system.
Foreign trade in August showed the highest growth rate among all sectors included in macro statistics: 4.8 percent. Looking at the overall data for eight months, the situation is even better: trade volume increased by six percent. Exports remain the driving force of development, increasing by 6.9 percent in January-August. As a result, at the end of eight months, China was left with a significant foreign trade surplus of 4.3 trillion yuan.
Fixed asset investments rose by 7.7 percent over eight months. The most attractive sector for investors was the manufacturing sector (investment growth of 9.1 percent). Capital was more cautious in the construction sector, which continues to suffer from the financial problems of developers and weak demand. In eight months, physical sales of housing fell by 18 percent and in monetary terms they plummeted by 23.6 percent.
At the same time, economists urge not to panic, regarding the continued decline in prices as a “natural and expected” process of market self-regulation. This is how the CLSA investment group characterizes the situation. According to its data, the volume of unsold housing on the Chinese market reached 739 million square meters in July, with a year-on-year increase of 14.5 percent. Weak demand with such an increase in supply naturally leads to a drop in prices. On average, since August 2021, housing prices in Chinese cities have dropped by 17.9 percent; in some small cities, the price drop has exceeded 40 percent.
Authorities continue to provide strong support to the property market. Since the beginning of the year, Chinese banks have already allocated 1.4 trillion yuan to revive construction projects frozen due to lack of funding, the State Administration for Financial Regulation of the People’s Republic of China reported. In total, additional funding was approved for nearly 5.5 thousand housing construction projects. This is intended to stabilise the property market, which has been in a state of turbulence since 2020. To support the market, banks are increasing mortgage lending and lowering mortgage rates. Between January and July, 3.1 trillion yuan in mortgage loans were issued nationwide.
