October 2018

Mastercard Caixin BBD China New Economy Index

Released: 10:00 am Beijing Time November-02-2018

Overview

In October 2018, the Mastercard Caixin BBD New Economy Index (NEI) reading came in at 29.8,

indicating that the New Economy accounted for 29.8% of overall economic input activities that

month, down 1.5 ppts from September (Chart 1). The declining NEI was due to the decrease 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 decline in the October NEI reading came from the

decrease of capital input (Chart 2). Capital input fluctuated widely in the recent year, dropping to

34.6 this month, with 4.5 MoM decrease. Technology input index went down since March 2018,

coming in at 27.4 this month, with 0.7 MoM increase. Labor input index showed a stable trend in

the past two months, decreasing slightly to 27.1 this month, with 0.3 MoM decrease.

Taking the weights into account, percentage changes in labor, capital and technology inputs were

-0.1, -1.6, and 0.2 ppts, respectively. The net NEI change was -1.5 ppts in total (Chart 3).

As for sectors, the New IT industry formed the largest proportion of the New Economy Index,

contributing 10.8 ppts to NEI. Advanced Equipment Manufacturing was the industry with fastest

growth in October, contributing 3.7 ppts and ranking the third. Advanced Materials came eighth

from third, the biggest drop in ranking, contributing 0.5 ppts in October (Chart 4).

New Economy Employment

In October 2018, the average monthly entry-level salary of the New Economy was RMB 10,150,

decreasing from last month’s level of RMB 10,161 (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 26.7% of the total in October, lower than the

previous month’s 26.9%. At the same time, the compensation share of New Economy decreased

0.26%. Accordingly, the average entry salary level of New Economy declined compared to the

national level. The entry-level salary premium of the New Economy decreased, from 3.8% in

September to 3.2% as compared to economy-wide counterparts (Chart 6).

Economic Trends Based on Employment Data

We focused on China’s economy this month. In 2018Q3, China’s real GDP growth rate fell to

6.5%. It was among the quarters with lowest growth since 1992 (1999Q4 and 2009Q1), which

indicated a business cycle typically lasting for 36 – 40 quarters. We are in the trough and the

macroeconomy won’t be worse in our opinion.

Chart 7 showed the employment of general workers and operators continued to decline and the

share of new jobs started to rebound in October. However, not all industries’ new jobs saw a rise.

Job creations in Electronic Technology, Petroleum and Hotel sectors were climbing, while the

new jobs of IT, New Media and Fund industries were still in decline. We are experiencing an

economic transformation cycle and the upstream sectors such as energy and basic research start to

recover.

Operation of Different Enterprises Based on Employment Data

In 2018Q3, the divergence between state-owned and private enterprises weakened. According to

the National Bureau of Statistics, the growth rate of state-owned enterprises’ profits fell sharply

YoY, but their private counterparts were stabilizing marginally. The new employment of

state-owned enterprises showed a growth trend since July 2017, but started to drop after reaching

the peak in March 2018 (Chart 8). Meanwhile, the job creation by private enterprises began to

rebound. So did the new employment of large and small companies. Resource allocation among

enterprises in difference ownerships shows a cyclical pattern and it’s currently regressing to the

mean.

Chart 9 showed the share of new enterprises in specific areas in October 2016, October 2017, and

October 2018. The share of new enterprises in 2017 top-ranked Engineering and Decoration

declined in this month, while that in IT and culture went down and up. Besides, sub-sector of

Automobile was ranking down in two consecutive years and Environmental Protection sector was

experiencing two years of expanding.

China’s Economy is stabilizing in the bottom in terms of structure adjustment.

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, Shenzhen, Guangzhou and Nanjing. Rankings are based on a

weighted average of the percentile rank of indicators for the city in the past six months.

Chart 11 showed the average NEI city rankings between April 2018 and October 2018. The top

five cities were Beijing, Nanjing, Guangzhou, Shanghai and Shenzhen.

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 Ma Ling, Public Relations

Tel：+86-10-85905019 Tel：+86-10-8590-5204

Emails：zhewang@caixin.com 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

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For more information, please visitwww.caixin.com.

About Mastercard

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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/.