Structural economic transformation in China still focuses on cutting excessive capacity, but meanwhile, a series of small but important signals reveal the emergence of “new” economies, which are promoted by technology, internet and millennial tastes, Financial Times reported on Oct 6, 2016.
According to the story entitled, “Gap widens between China’s ‘old’ and ‘new’ economies”, the difference in profitability is broadest since the 2008 crisis between new economies — represented by consumption, health and Information industry — and old economies — energy, materials and manufacturing industry.
Data released by Morgan Stanley Capital International (MSCI) show that the return on equity of new economy corporations that are listed in MSCI China Index is 20.9 percent — 14.5 percent more than that of old ones.
In August 2009, the gap was 0.7 percent, and last August, it was 6.9 percent.
Behind the emerging new economy is a series of taste changes in the 415 million millennials. Millennials in China are those born between the 1980s and the end of the last century. They usually understand technology, support environmental protection and pay much attention to their health. Generally, they want to improve lives instead of just buy things.
Such tastes determine winners from losers. For example, in 2015, the sales volume of fast moving consumer goods hit a new low in five years, falling by 3.5 percent year on year.
However, according to Bain & Co, in 2015, although traditional food sold less — the sales volume of fast noodles and beer fell by 12.5 percent and 3.6 percent, respectively — sales of pet food and yogurt rose by 11.7 percent and 20.6 percent, respectively. These two products are both indications of millennials’ rising demand for quality of life, Financial Times said.
In addition, the values of health, lifestyle, tourism and entertainment industry all saw double-digit growth last year. From 2011 to 2015, box offices in Chinese cinemas rose 35.4 percent every year.
Luke Richdale, JPMorgan’s head of global emerging markets, said e-commerce and financial technology are the most attractive industries in China’s new economies. “E-commerce only accounted for 3 percent of total volume of retail sales five years ago, but now it accounts for 14 percent,” he said.