Tag: industrial

  • Domestic Demand Dwindles in China Despite Soaring Industrial Output

    Domestic Demand Dwindles in China Despite Soaring Industrial Output

    The second-largest economy in the world is currently experiencing a dual-speed growth pattern. While factories are flourishing due to robust exports, domestic demand is on a downward trajectory due to an ongoing slump in the property market.

    In May, retail sales, which serve as a critical measure of consumption, decreased by 0.6%, a significant drop from April’s 0.2% rise, and below the predicted 0.0%. This decline in retail sales marks the first reduction since December 2022. Even the extended Labour Day holiday was unable to boost consumer morale, and the government’s consumer goods trade-in initiative is gradually losing its effectiveness. An inflated base from the previous year’s May further added to this downturn.

    According to Zhiwei Zhang, chief economist at Pinpoint Asset Management, the disappointing retail sales data puts increased pressure on the government to contemplate policy measures aimed at stabilizing consumption. “Policy ‘fine tuning’ is anticipated around July, following the release of the second quarter GDP data,” Zhang added.

    On the other hand, data from the National Bureau of Statistics (NBS) revealed that industrial output in May grew by 4.5% compared to the previous year, an increase from the 4.1% growth recorded in April. This rise surpassed the projected 4.3% increase.

    Divides in the Economy

    A boom in global AI investment and related tech demand has allowed the world’s largest manufacturer to counterbalance the anticipated export blow from the Iran war. However, a 19.4% increase in exports has yet to positively impact domestic consumption.

    The economic weakness was particularly noticeable in the automotive sector, as domestic car sales suffered a decline for the eighth consecutive month in May. This trend hints at a diminishing demand in the world’s biggest car market, a pressure that is expected to linger throughout the year.

    Senior economist at the Economist Intelligence Unit, Xu Tianchen, identified several divisions in the May economy. “The divide between domestic and external demand, the divide between AI and traditional industries, and the divide between goods retail and services consumption,” he mentioned.

    He expects the second quarter’s economic growth to slow down to 4.5% from the first quarter’s 5%.

    Growing investment weakness and ongoing property drag

    Investment figures were also significantly weaker than expected. Fixed-asset investment dropped by 4.1% in the first five months of 2025, a fall from the 1.6% decrease recorded from January to April. Economists had anticipated a 2% decline.

    According to NBS spokesperson Fu Linghui, this fall is partially due to extreme weather conditions in several regions, as well as the shift from old to new growth drivers. Fu added that China still has substantial room for future investment, with urbanisation, rural revitalisation, the development of new quality productive forces, and public service improvements all requiring support.

    Questions & Answers

    What contributed to the decline in retail sales in May?
    Several factors contributed to the decline in retail sales in May, including a lack of consumer confidence, the waning effectiveness of the government’s trade-in scheme, and a high base from the same period last year.

    How are the car sales in China currently?
    Car sales within China have been on the decline, with May marking the eighth consecutive month of decreasing sales. This is indicative of a softened demand in the world’s largest auto market.

    What are the expectations for China’s economic growth?
    It’s anticipated that China’s economic growth may slow in the second quarter, dropping to 4.5% from 5% in the first quarter. While it might not be difficult to achieve a full-year growth target of 4.5-5%, the sluggish domestic demand may necessitate policy intervention in the second half of the year.

  • China’s Economy Under Pressure: Factory Output And Retail Sales Hit Yearly Lows

    China’s Economy Under Pressure: Factory Output And Retail Sales Hit Yearly Lows

    October witnessed the slowest growth in China’s factory output and retail sales in more than a year, applying added pressure on policymakers to overhaul the nation’s $19 trillion export-driven economy. Increasing supply and demand strains are poised to further hinder growth.

    For many years, those accountable for maintaining the momentum of the world’s second-largest economy had the choice of stimulating its massive industrial complex to enhance exports if domestic consumer spending dwindled. Alternatively, they could delve into public funds to finance GDP-boosting infrastructure projects.

    However, the tariff war initiated by former US President Donald Trump underscores the manufacturing behemoth’s dependency on the world’s most extensive consumer market. There are limits to how much growth the Chinese economy can derive from constructing more industrial parks, power substations, and dams.

    The Current State of Affairs

    The indicators released last Friday provide little optimism for a rapid recovery. As each month’s data worsens, the call for reform becomes more critical.

    According to data from the National Bureau of Statistics (NBS), industrial output experienced a yearly growth of 4.9% in October. This marks the weakest annual growth since August 2024, compared to a 6.5% increase in September, falling short of the anticipated 5.5% surge.

    Meanwhile, retail sales, a measure of consumption, saw a 2.9% expansion last month, which is also their slowest pace since last August. This decelerated from a 3.0% growth in September, albeit exceeding the projected gain of 2.8%.

    Fred Neumann, Chief Asia Economist at HSBC, remarked, “China’s economy is facing pressures from all sides.” He believes that the robust support from exports in the recent quarters will be challenging to maintain into the next year, even if US import tariffs are now lower than earlier feared.

    Policy Implications and Economic Outlook

    Policymakers are aware of the need for change to rectify historical supply-demand imbalances, spur household consumption, and confront the enormous local government debt that complicates provinces’ self-sufficiency.

    However, they also understand that structural reform will be challenging and politically risky, particularly at a time when the trade war has heightened economic pressure.

    Last week, separate data revealed that China’s exports unexpectedly collapsed in October. This is as manufacturers grapple to secure profits in other markets after months of front-loading intended to outpace Trump’s tariff threats.

    Contrary to expectations, China’s car sales also broke an eight-month growth streak. This is concerning, given that the fourth quarter is typically the strongest for auto sales, and the slump occurred despite an extra day due to a national holiday in October compared to 2024.

    Questions & Answers

    What are the main challenges faced by the Chinese economy?
    The Chinese economy is currently grappling with a slower growth pace in factory output and retail sales, increased supply and demand strains, manufacturers’ struggle to stay profitable because of the tariff war, and an unexpected decline in car sales.

    What measures are needed to boost China’s economy?
    Policymakers must address historical supply-demand imbalances, promote household consumption, and tackle the enormous local government debt. Structural reform, while challenging and politically risky, is crucial to enhance the nation’s economic outlook.

    How has the trade war affected China’s economy?
    The trade war has underscored China’s dependency on the global consumer market and increased economic pressure, leading to an unexpected collapse in exports in October. Manufacturers have been struggling to secure profits in other markets as they try to outpace tariff threats.

  • Korea braces for next industrial trends in 2017

    Korea braces for next industrial trends in 2017

    Korean businesses’ quest to step closer to future industries is expected to accelerate in the New Year, regardless of the political scandal, the ongoing investigations into dubious business-political ties and the looming presidential election.

    The year 2016 was an opportunity for general consumers to familiarize themselves with the innovative concepts of technologies. And the year 2017 is likely to see some of these technologies become reality.

    The convergence of the automotive industry with technology will speed up along with a transition to green cars, amid the growing competition in the battery market and the rising price of oil.

    Devices including smartphones and home appliances operated by artificial intelligence will come to the fore, with virtual reality and augmented reality technologies becoming mainstream in the tech world.

    The shifting technologies are also expected to affect the retail market with consumers looking for products that offer experience and value beyond a simple price benefit.

    Go player Lee Se-dol at a press conference at the Four Seasons in Seoul on March 12, 2016

    AI to be next big thing in the tech industry

    Artificial Intelligence, which astonished the world in a match with the top Go player Lee Se-dol, is expected to become the next big thing in the smart device and appliances industry in 2017.

    The nation’s largest tech company Samsung Electronics, which acquired the AI startup Viv Labs in October, seeks to recover from the note 7 debacle with its new AI-based smartphone Galaxy S8, which is set to be unveiled early this year. Viv Labs is the US tech firm set up by Apple’s Siri developers.

    Samsung Electronics’ Vice President Rhee In-jong said in October, “Galaxy S8 will be Samsung’s first platform, which adopts AI-based voice recognition technology,” adding that the technology has reached close to the level of the understanding humans.

    Korean tech firms — both smartphone makers and mobile carriers — are spurring AI development as the technology will ultimately be used to connect and control all home appliances and electronics.

    Samsung is set to unveil more advanced AI-based home appliances, which can be connected via Wi-Fi technology and controlled through smartphones, at the upcoming Consumer Electronics Show in January.

    LG Electronics is also slated to unveil AI-based home appliances, which adopt deep learning technology at the upcoming show. The deep learning technology enables products to provide customized services and functions by learning users’ habits and surroundings.

    The nation’s largest telecom carrier SK Telecom is also upgrading its AI-based speaker NUGU after first launching it in August. This device figures out users’ taste to recommend music, control home appliances and provides customized information such as weather and schedules based on their preferences.

    Market consulting firm IDC predicted that the global AI market would grow 55 percent on average annually from $8 billion in 2016 to $47 billion in 2020.

    Journalists and participants wear the Samsung Gear VR headset at the company‘s flagship Galaxy S7 launch event in Barcelona in February 2016.

    AR, VR to gain bigger presence

    Virtual reality and augmented reality technologies are geared to gain a bigger presence in the tech world in 2017, building upon the landmark developments made in 2016.

    VR is a technology that completely immerses users in computer-generated virtual worlds via a head-mounted display, while AR technology overlays, or augments, digital images onto a person’s view of the world.

    The year 2016 saw the release of next-generation VR headsets such as the HTC Vive, the Oculus Rift and Sony’s Playstation VR, which prompted the emergence of thousands of VR video games and mobile apps.

    The explosive popularity of AR-based mobile game Pokemon Go also highlighted AR’s potential to appeal to the masses on the mobile platform.

    The two cutting-edge technologies are geared to further advance and draw closer to the public in 2017 as the price of VR headsets further drop to boost the VR gaming sector, and as AR technologies are embraced by more industries.

    “After several years of hype, the operative reality behind virtual, augmented and mixed digital worlds is set to manifest more fully in 2017,” IHS Markit said in a recent outlook report.

    The firm expects AR and VR technologies will “advance significantly as Facebook, Google and Microsoft consolidate their existing technologies into more exhaustive strategies.”

    According to tech market intelligence company IDC, worldwide revenues generated by the AR and VR market will jump from just $5.2 billion in 2016 to more than $162 billion in 2020, as the two technologies expand their applications across diverse industries and services.

    IDC predicts that revenues generated by VR systems will surpass that of AR-related revenues until 2017, due to rising consumer uptake of VR-based video games and paid contents.

    After 2017, AR revenues will grow bigger as AR technology finds mass applications across areas such as healthcare delivery, product design and management tasks, it said.

    Just about every major tech company in the world has already entered the race to secure its place in the approaching era of VR and AR technologies. In the lead is Facebook-owned Oculus, Google and Microsoft, with Apple and Samsung Electronics working to catch up.

    Kia’s EV autonomous vehicle Soul

    Auto industry to face unprecedented race

    It was a tough year for the auto industry in Korea with an emissions scandal, strikes, low demand and negative growth.

    With the auto market expected to continue negative growth next year, carmakers will face unprecedented competition in the industry where automotive and technology are converging rapidly.

    South Korea’s largest automaker Hyundai Motor conducted a survey on the most anticipated technology next year. Almost 76,000 of 320,000 voters picked the autonomous driving technology. Although self-driving cars won‘t populate the road next year, most of the major carmakers and tech companies are putting all-out efforts to commercialize the self-driving technology.

    The debut of US electric automaker Tesla Motors and Chinese electric car maker BYD Auto will likely boost the EV market in South Korea, giving customers more choice in this growing segment. Tesla is set to open its flagship store in Korea and BYD officially launched its Korean office in Jeju Island in October.

    Backed by growing popularity, sport utility vehicles will remain as the silver lining for the sluggish auto market, which is expected to decline 1.2 percent on-year.

    Domestic carmakers, especially Hyundai Motor Co and Kia Motors Corp, will face fierce competition in 2017 in the Korean market as imported cars expand its market share. Currently, imported carmakers take up 13 percent of the total market.

    Outside Korea, South Korean automakers will struggle to thrive in mature markets, like the US and EU where analysts expect a zero growth next year, and in China where they saw disappointing sales figures in 2016. China’s auto market is expected to grow 4 or 5 percent in 2017 while other developing markets, like Russia and East Europe, will recover from the 2016 slump.

    China looms over Korean battery makers

    For Korea’s major battery makers — Samsung SDI and LG Chem — concerns over their performance in the Chinese market are likely to persist next year amid the neighboring country’s stricter rules on providing battery certification.

    The two companies have been dealt with a blow after the Chinese government suspended subsidies for electric vehicles using batteries produced by the two firms earlier this year. The two were excluded from the subsidy list as they failed to acquire the battery certification amid tightened regulations in China’s alleged protectionism moves.

    Unless China changes its policies, the Korean battery makers are unlikely to see improvement in their business there, the companies said.

    “While (the company) had anticipated the EV battery certification process will resume in the third quarter, (the Chinese government) did not carry it out. It is difficult to project an accurate timing,” a Samsung SDI official said in the third quarter’s conference call.

    LG Chem shared a similar view.

    “The biggest variable for the company’s sales growth for next year is China. If the status quo continues next year, the automotive battery business growth rate will be around 30 percent. If (the certification issue) is solved, the growth rate will possibly jump up to 60 percent.”

    Amid the higher threshold to the Chinese market, Korean battery makers are seeking to sustain their top position in the global ESS market next year.
    LG Chem topped the global ESS market share with 21 percent this year, standing at No.1 for two years straight, followed by Samsung SDI with 19 percent.

    “Amid the three-party competition of LG Chem, Samsung SDI and BYD Auto in the market, Tesla has risen as the new competitor. As the supply amount of the two Korean companies is projected to surpass 2 gigawatt hours next year, the two are likely to make up half of the market in total,” SNE Research forecasted.

    LG Chem has made aggressive ESS moves with supplying ESS for California’s largest power company SCE and other European companies.

    Experience-focused electronics retailer Electromart at Starfield Hanam

    ‘YOLO’ trend to rule retail in 2017

    In 2016, the retail sector saw consumers shifting their focus to stores and products that offer value and experience, rather than simply low prices.

    Despite the stagnant economy, brands saw consumers reaching for premium and healthy products, packing newly opened malls offering experience-based stores.

    In “Trend Korea 2017,” Seoul National University consumer studies professor Kim Nan-do dubbed this the “YOLO,” or “you only live once,” trend.

    “Consumers who used to think of restraint as a virtue are now enjoying and challenging themselves each moment, and spending money on simple, clear value,” he said.

    The most notable examples of YOLO spending can be found in travel, with consumers facing record-low interest rates choosing to spend money on meaningful experiences rather than saving it away. All retail sectors, meanwhile, have seen consumers choosing to open their wallets and enjoy the “here and now.”

    For example, consumers are buying more decorative products for the home to create better surroundings for themselves. According to the online open market Auction, sales of products like sculptures and music boxes from January to November rose by over 200 percent on-year. Hobby-related products such as classical guitars and model buildings and model airplanes also nearly doubled on-year.

    The Samsung Fashion Research Institute saw “selfness,” or the importance of brands‘ personalities matching those of consumers, to be a major factor moving the fashion industry in 2017.

    Starfield Hanam, a shopping mall featuring stores that allow consumers to experience products as well as buy them, saw nearly 2 million shoppers each month since it opened in September. Starfield Hanam’s popularity during a year when department stores struggled to maintain sales indicated that consumers are visiting and spending money at places that have an element of entertainment, rather than simply shopping options.

    “In an ‘experience economy,’ it will become more important for brands to find new marketing strategies that can satisfy the now-focused experience consumption of the YOLO consumers,” Kim wrote.

  • Indonesia, Singapore launch Kendal Industrial Park

    Indonesia, Singapore launch Kendal Industrial Park

    President Joko Widodo, along with Singapores Prime Minister Lee Hsien Long, launched the Kendal Industrial Park in Central Java Province as a new model of bilateral economic relationship.

    “Prime Minister Lee and I agreed that the investment cooperation in Kendal Industrial Park marks a new milsestone in our bilateral relationship, particularly in the investment sector,” Jokowi said in a joint press statement here on Monday.

    Both heads of state also discussed the potential for more such bilateral investments, as Jokowi believed there was a big opportunity to further develop this economic cooperation.

    The president also stated that Indonesia was committed to improve its competitiveness to become an investment destination country.

    “During discussions, I explained that we are continuously reforming the economic and legal sector to improve Indonesias economic competitiveness,” Jokowi added.

    Jokowi reminded that both Indonesia and Singapore are also enhancing cooperation in the tourism sector by developing new tourism destinations in Indonesia.

    Indonesia hopes that a range of Memorandums of Understanding (MoU) that have been signed would lead to more effective cooperation in the tourism sector.

    Jokowi noted that Singapore also supports Indonesia on several regional and international issues such as counter terrorism measures as well as in the South China Sea dispute.

    “Singapore is an important partner of Indonesia in many sectors. Indonesia and Singapore will also celebrate the 50th year of their diplomatic relationship,” Jokowi noted.

    A project being built in Central Java through bilateral cooperation will create about 4,000 jobs.

    Prime minister Lee underlined that many Singapore companies have been investing in Indonesia, not only in the free trade areas of Batam-Bintan-Karimun (BBK) in Riau Islands, but also in other areas in the country.

  • Hong Kong plans upgrade to industrial estates

    Hong Kong plans upgrade to industrial estates

    Alan Ma Kam-sing, chief executive of Hong Kong Science and Technology Parks told that the first phase will see multi storey factories build by 2020, with a focus on “high value-added” clients such as robotics, pharmaceuticals and biomedical manufacturers.

    Ma’s company runs three industrial estates in Hong Kong and has already updated its policies to attract more technology related tenants, he said.

    These tenants will not be using “labour-intensive production, but rather modern manufacturing fueled by science and technology. This will create new industries and job opportunities throughout the advanced manufacturing value chain,” Ma said, speaking ahead of a conference on science parks and “areas of innovation” in Beijing.

    Reindustrialisation through innovation and technology is needed to counter Hong Kong’s reliance on finance and real estate, Ma said.

    Hong Kong can attract tenants due to its strong technology infrastructure, rule of law and intellectual property protection.

    Hong Kong based technology expert Paul Haswell of Pinsent Masons, the law firm behind Out-Law.com said: “High rental prices for tenants as well as an infrastructure that is built more for finance companies and retail has meant that whilst there is an abundance of tech innovation in Hong Kong, those innovators can find it hard to find a base from which to build a business.”

    “Hong Kong’s Science and Technology Park offers excellent space and facilities, as well as attractive terms for tech startups, but those startups find it hard to survive once the time comes to expand beyond the Science Park. As such, any plan to utilise Hong Kong’s warehouse and disused industrial space to build an environment where technology business should be encouraged,” Haswell said.