China’s ‘real economy’ survives stock market battering

Beaten by marathon disappointments at the stock market, Chinese investors are now ashamed to even admit to owning a stock portfolio.

But that doesn’t seem to upset policy-makers unduly. The “real economy”, which is all that concerns a micro-managing government, has yielded some surprisingly toned results forecasts at the half-year mark.

From the stressed banking sector to the more lightweight services industry, China’s real economy, although not spectacular, should not pose much concern for now. Nearly half of Shanghai’s A-share listed enterprises issued growth forecasts for H1, with most companies reporting mild growth overall.

This week, 939 companies listed on the Shanghai and Shenzhen bourses released profit forecasts for the first half. Of these, 457 forecast year-on-year profit growth, while others expect a drop in profits.

Chinese banks, which have been under siege lately for the scale of their non-performing assets, are managing to keep up appearances. State-owned banks are expected to see their net profits grow by 10 per cent this year — lower than those of previous years.

China’s total bank assets hit $22.65 trillion (Dh83.19 trillion), by May, up 16.3 per cent year on year, but the non-performing loan ratio for commercial banks stood at 1.03 per cent, topping 1 per cent for the first time since last year. It is, however, unlikely that banks will expose the full extent of their risks. Instead, they may focus on keeping away doomsday broadcasters.

Industrial enterprises too registered stronger profits, offering an uptick sign for the world’s largest manufacturing country. Major industrial companies defied the slow trend and expect a profits surge of 15.5 per cent year on year.

Virtual test of ‘real’

A sound way to test the buoyancy of market demand and purchasing power of Chinese citizens is perhaps through the volume of online transactions.

Online payment transactions handled by Chinese payment service providers totalled a whopping 830 trillion yuan or $134.3 trillion (Dh493.27 trillion) in 2012. While banks handled 19.2 billion online payment transactions totalling 823 trillion yuan, another 10.46 billion transactions worth 6.89 trillion yuan were handled by other payment agencies last year.

This booming online transaction practice is being used not only in traditional areas such as online shopping and bill-paying, but also in booking segments related to education, tourism, fund products, insurance, community services and medical and health services. With no way to airbrush these figures, online transaction records now provide a more authentic barometer of the Chinese economy and spending power of its people.

A more unconventional barometer of the Chinese economy is the outsourcing sector. Unlike countries like India, whose outsourcing service has stagnated, Chinese companies are brimming with new energy. The service outsourcing business expanded 43.9 per cent year-on-year in the first quarter, when deals valued at more than $15.76 billion were signed.

The value of contracts from international markets reached $11.27 billion, up 52.1 per cent. The United States, European Union and Japan ranked as top employers. The industry, which began in China in the mid-1990s, now involves more than 20,000 companies.

Soft power-packed

A sign of feel-good China also comes from its entertainment industry. Here, the modern and anachronistic flourish side by side. China’s so-called “performance market” grew a tremendous 60 per cent in 2012 with more than two million performances last year. This quirky remnant of a state-controlled culture industry continues to “reform” under strict watch with entry of vast private investment. The 2013 Report on the Performance Market has a record of 13,000 performing groups and 3,059 agencies along with a vastly expanding private performing segment of 10,000 group players.

The more democratic and market-driven movie market is also on a high with box office revenue of domestic films more than doubling year-on-year in H1, beating imported movies for the first time in five years. In the first six months, movies had generated 10.3 billion yuan in box office revenue, up 27 per cent year-on-year. Domestic productions contributed 6.47 billion yuan, grabbing a market share of 63 per cent. Listed entertainment companies are going strong with Huayi Brothers Media Corp, one of the leading film corporations in the country, releasing 15 films this year. Bona Film Group, a Nasdaq-listed private film producer and distributor, has 10 productions for next year.

— The writer is a freelance journalist based in China