3 January 2018
3 January 2018
HY Corporate Credit
HY Multi Sector.Media. Cable & Satellite
The end of property cycle will negatively affect land sales revenue, which
comprises 30% of local government revenue. We expect the government to
loosen controls on property markets in 02 2018 to offset the impact of
property cycle on investment and government finances.
New growth engines
President Xi's Oct speech pointed to a number of sectors that could be developed
in the next few years. We highlight two areas that could become renewed
engines for China 's growth: manufacturing industry and consumption upgrade.
The advancement in the overall manufacturing sector is likely a long and
gradual process. China is still far away from the production frontier; 2016
output per worker in manufacturing is only 20% of the frontier (e.g. Japan),
and is comparable to Korea 's level in 1990 (Figure 51). Robot density in
manufacturing is still very low, measured by the number of industrial robots
per 10,000 manufacturing workers (Figure 52). There is great potential for
China to invest in manufacturing technology and equipment, though the
process would likely take many years before China 's manufacturers can catch
up with their peers in developed economies.
'Figure 51: Labor productivity index, manufacturing
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The upgrade in manufacturing will be uneven across industries. The first movers
will be the traditionally labor intensive industries, who faces greater pressure
from rising wages. Capital substitution for labor is already happening in
industries such as textile and cement. As China 's labor cost rose rapidly, workers
are moving out from these traditionally labor intensive manufacturing sectors.
Productivity is increasing fast in these industries through both technological
improvements and shutdown of lower efficiency producers (Figure 53 and 54).
[figure 53. Labor cost and employment. textile
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Deutsche Bank Securities Inc. Page 205
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