They Come Bearing Cash

Propeties Purchased

According to the National Association of Realtors, Chinese home buyers are bringing cash and buying real estate.  Though Canadians purchased about 3,000 fewer homes in the US for which they paid a total of $9 billion, the Chinese spent $27 billion for their 29,000 properties.  The difference is that the Chinese are buying mostly in high priced suburbs while the Canadians are buying mostly vacation homes.  Average price for a Chinese property was an eye-popping $936,615.  Source: Barons

What Goes Around Comes Around

Administrative Regions

Mostly, the writing about China, here and elsewhere, speaks to the broad trends – migration toward the big dream in the big city, the rising middle-class, etc.  Though these trends are real, they paint a-two dimensional picture in a three dimensional world.

Example: At 18 Mo Wangqing left his tiny home town called Binghuacun, located in the interior of Guizhou Province, to follow the dream in the big city factory.  Now, at 36, he’s done.  He is back at home where the mountain passes flow with clear water, the perfect place to farm fresh fish and to open a restaurant for tourists that want to escape. He’s not alone. Bloomberg Businessweek reports that “last year 1.2 million people returned to the Guizhou Province, up from 520,000 in 2011.”

Lesson: All the trends we read about in China are probably moving in multiple directions at the same time.  Source: Bloomberg Businessweek

Service Sector Continues to See Growth

Service Sector - July 2016

Since January 2015 the non-manufacturing or service sector of the Chinese economy has been comfortably above 50, the level at which the Index points to growth.

To understand this representative survey of 1,200 businesses in China, note that it “includes ten questions on business activity, new orders, new export orders, in hand orders index, stock, intermediate input price, subscription price, employment, supplier delivery time, and business activities expectation.”  Sources: Trading Economics; National Bureau of Statistics, China.

Some Ups, Some Downs, but Mostly Ups

Mining

Overall China’s industrial sector grew 5.1% in June as profits hit $92.4 billion, faster than any month since March.  But the growth was lumpy.

  • Winners: electronics, steel and oil processing
  • Losers: mining, State-run firms

Mining was worst hit where profits were down 83.6% for the first half of the year.  Bad for mining, but probably good for the environment.

Raymond Yeung, an economist at ANZ in Hong Kong, was quoted as saying, “The bottom line is that the worst has gone in terms of industrial profits.”   Source: Reuters

Retail: Steady as She Goes

Retail Sales - Jul-16

Monthly growth has been consistent since we started tracking growth of retail sales back in June of 2014.  The average increase over the last 13 months has been 0.83%.  June was 0.92% – above the average – while July was slightly below at 0.75%.  We have not seen a negative turn through the 13-month period from July 2015 through July 2016.  All of this is consistent with the country’s consumer sector goals.  Source: Trading Economics; National Bureau pf Statistics, China

Conversion Growth Remains Steady

Carrier Data July 2016

The 12-month average growth for 3G/4G phones remains around 20 million per month – give or take a million here or a million there.  The conversion rate is strong while the number of mobile subscribers has remained relatively stable at 1.3 billion.  There are still several hundred million feature phones out there, but our guess is that they are mostly in rural areas.  Urban sophisticates are smartphone people all the way.  Sources: China Mobile, China Telecom, China Unicom

 

Mobile Ads Key to Reaching Chinese Travelers

Vpon logo

Vpon’s well named 2016 Asia Pacific Mobile Programmatic Advertising Semi-Annual Statistics and Trends Report, conducted by Vpon and GfK, suggests some strategies for reaching the valuable pool of Chinese outbound travelers. By 2020 some 200 million Chinese will take to the friendly skies.  By 2025 they are expected to spend over $278 billion seeing the outside world.

The key for an advertiser is that 50% of all Chinese consumers depend on their smartphone to match prices, scan QR codes and for shopping.  GfK’s commercial director of APAC market opportunities says,  “The smartphone is an important shopping tool for Chinese travelers. It is naturally the best advertising channel as well. It’s important for brands to leverage mobile devices to connect with cross-border tourists.”

Therein lays the key to Asia’s largest market for programmatic mobile ads, a market that generates 3.9 billion daily biddable requests.  Source: CampaignAsia

More Positive News from the IP Front

Patents

Last year the Chinese moved ahead of the US as the country issuing the most patents. The importance of their growth in this area of intellectual property rights is not that they passed the US, rather that with every new patent the Chinese have more skin in the game making them more likely to respect the IP rights of others. That is very good thing.  Source: Wall Street Journal

The Chinese Keep Coming

LeEco-Vizio logos

Another Chinese company comes shopping in the US.  This time it is consumer electronics manufacturer Vizio that is being acquired by China’s Le Holdings Co Ltd (LeEco) for $2 billion.  The deal is expected to close in the fourth quarter.  Vizio will operate as a wholly owned subsidiary of LeEco. Source: Reuters

Crossing the 50 Threshold is Significant

Manufacturing Purchasing Index -july-16

Increased purchasing by the manufacturing sector is a sign of confidence in the future.  The signal will be even stronger if it sustains into August. Though one month doesn’t make a trend, crossing 50 for the first time since February 2015 is significant.  Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, was quoted as saying “The Chinese economy has begun to show signs of stabilizing due to the gradual implementation of proactive fiscal policy.”  Source: Markit Economics