July 2019

Mastercard Caixin BBD China New Economy Index

Released: 10:00 am Beijing Time August-02-2019

Overview

In July 2019, the Mastercard Caixin BBD New Economy Index (NEI) reading came in at 28.7,

indicating that the New Economy accounted for 28.7% of overall economic input activities that

month, down 1.3 ppts from June (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 declining in the July NEI reading came from the

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

32.0 this month, with 2.2 MoM decrease. Technology input index was on a downtrend since

March 2019, coming in at 27.3 this month, with 1.8 MoM decrease. Labor input index declined

moderately in the recent year, decreasing slightly to 26.6 this month, with 0.2 MoM decrease.

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

-0.1, -0.8, and -0.5 ppts, respectively. The net NEI change was -1.3 ppts in total (Chart 3).

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

contributing 8.8 ppts to NEI. Biotech was the industry with fastest growth in July, contributing 3.7

ppts and ranking the third. Science Research and Hi-tech Services came fifth from second, the

biggest drop in ranking, contributing 3.4 ppts in July (Chart 4).

New Economy Employment

In July 2019, the average monthly entry-level salary of the New Economy was RMB 10,880,

increasing from last month’s level of RMB 10,867 (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.

The ratio of hiring in the New Economy sectors to that in total dropped by 0.2%. At the same time,

the compensation share of New Economy decreased by 0.1%. Accordingly, the average entry

salary level of New Economy increased compared to the whole economy. The entry-level salary

premium of the New Economy increased to 5.8% as compared to economy-wide counterparts

(Chart 6).

Economic Trend Based on Employment Data

In July, the NEI declined slightly, which were in part reflected in our micro data.

Chart 7 showed the employment of private enterprises since January 2017. In 2017 (January 2017

as base period), changes of employment were similar for three types of enterprises: small and

micro firms, large firms and representative random sample. In April 2018, the employment of

small and micro enterprise declined first and it was followed by the drop of employments in large

enterprises and random sample. In October 2018, the employment of small and micro enterprise

rebounded and so did the other two types a month later, which powered up China’s

macroeconomic data through the first quarter of 2019. In April 2019, the employment of small and

micro enterprises dropped suddenly, leading to downward employment of its counterparts.

In recent two months, we observed a downtrend in share of middle and low-end position job

creation as well although the share rebounded in the first quarter of 2019 (Chart 8). It’s an

indicator of downward pressure of China’s macroeconomy. As we mentioned previously, the

monopolistic power of large enterprises might lead to lower economic activity. Here we compared

the salary in small and large enterprises. We found the salary gap between the largest 10% and

smallest 10% enterprises shrank in past ten months (Chart 9). In general, large enterprises are able

to offer higher salary, or the salary premium, to attract labor forces. However, since October 2018,

the premium declined. Average salary of the smallest 10% enterprises were closer and closer to

that of the largest 10% ones, probably due to labor oversupply. Inability to absorb labor is the

negative signal for future economy.

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 Hangzhou. Rankings are based on a

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

Chart 11 showed the average NEI city rankings between January 2019 and July 2019. The top five

cities were Beijing, Hangzhou, Shanghai, Xiamen and Shenzhen.

In addition, we showed the city rankings adjusted by living cost by taking housing price,

minimum wage and disposable income per capita into account (Chart 12). After the adjustment,

the top five cities were Beijing, Chengdu, Shanghai, Chongqing and Shenzhen, following by

Nanjing, Hangzhou and Dongguan.

Historical Data

NEI NEI-labor NEI-capital NEI-technology Entry-level salary avg.

(yuan) Premium

Jul-19 28.7% 26.6% 32.0% 27.3% 10,880 105.8%

Jun-19 30.0% 26.8% 34.2% 29.1% 10,867 105.3%

May-19 28.0% 26.8% 29.1% 28.3% 10,776 105.0%

Apr-19 28.6% 26.8% 28.7% 31.1% 10,672 103.2%

Mar-19 28.3% 27.0% 28.5% 30.2% 10,533 102.8%

Feb-19 27.4% 26.7% 26.1% 30.4% 10,627 102.8%

Jan-19 28.8% 27.1% 31.4% 28.0% 10,541 102.6%

Dec-18 29.1% 27.5% 32.0% 27.6% 10,286 102.8%

Nov-18 31.3% 27.6% 37.1% 29.3% 10,212 103.1%

Oct-18 29.8% 27.1% 34.6% 27.4% 10,150 103.2%

Sep-18 31.3% 27.4% 39.1% 26.7% 10,161 103.8%

Aug-18 29.1% 27.3% 31.9% 28.1% 10,320 103.1%

Jul-18 30.6% 27.6% 36.8% 26.6% 10,357 103.6%

Jun-18 29.2% 27.8% 32.0% 27.4% 10,369 104.3%

May-18 29.6% 27.9% 31.0% 30.3% 10,444 104.0%

Apr-18 29.7% 27.9% 31.3% 30.6% 10,420 103.9%

Mar-18 31.3% 28.3% 33.1% 33.6% 10,265 104.2%

Feb-18 29.8% 28.2% 31.7% 29.7% 10,759 104.4%

Jan-18 31.3% 29.2% 31.5% 34.4% 10,481 104.8%

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/.