- ’New economy’ makes up about a third of total output: study
- Index is being developed as Premier Li champions innovation
China’s new economy is powering ahead even as old industrial sectors drag on growth. Problem is, the performance of up-and-coming industries is often overlooked in official data that’s skewed to measuring things like steel or coal output.
An index being developed by investment adviser CEBM Group and Chengdu-based Business Big Data is seeking to flesh out coverage of sectors like information technology, green energy and advanced materials. It finds these and other so-called "new economy" industries now account for about a third of China’s output, with higher investment in research and development and better wages that lure and retain talent fueling their rise.
The nation’s new statistics chief has criticized his bureau for failing to keep up with developments in the new economy and is pushing for better data. Getting a better read on the new industries is key to reflecting a fuller picture of the economy and will provide an "important reference for policy-making," Premier Li Keqiang said after meeting with one of the index compilers at an innovation incubation center on a trip last month to Chengdu.
"The new economy has great potential to grow and has inspired the public to be more creative and innovative," Li said during the trip, asking officials to look into ways they can provide more official statistics to the research team to support their work, according to a post on the State Council’s website.
The new index is aiming for official launch in August. Readings so far have been on a trial basis as compilers seek to iron out their methodology.
Bloomberg measures illustrate the divide between old and new. An index collating real estate investment, textiles exports, thermal power production, ferrous metal production and the output of state-owned enterprises has lagged behind another that groups medicine consumption, vehicle exports, clean-energy production, communication and computer output and the sales of private enterprises.
Li and President Xi Jinping are backing new economic drivers as they cut excess capacity in areas like steel and coal, with hundreds of thousands of jobs set to be lost. Li’s focus on new data has spurred various private attempts to develop an updated version of the Li Keqiang Index -- a measure using data on bank lending, rail freight and electricity use that stems from comments Li made back when he was a party official in the northeastern province of Liaoning.
While encouraging, it’s unrealistic to expect emerging sectors to fully offset the drag from traditional industries, according to Shen Yan, a professor at Peking University and one of the researchers contributing to the new economy index’s development.
"The industrial chain of emerging industries is shorter, so it creates smaller spillover effects on other sectors," she said. It’s also difficult for the new economy to create jobs to absorb those being shifted out from traditional sectors, due to the advanced education and skills needed in the emerging industries.
Indeed, the pay differential between new and traditional industries is widening, according to a sub-index of the gauge. New economy employees earned 14 percent more than staff in traditional sectors in April, it shows.
Another sub index ranks cities within China. It showed Shanghai is pacing growth in the new economy, followed by Shenzhen and Beijing, as cities in coastal provinces took eight of the top ten spots. Inland, Wuhan and Chengdu were among the better performers.
"Talent, high technology and investment are the key factors driving the development of the new economy," said Lu Feng, a professor at the National School of Development of Peking University. "We expect growth of the new economy to accelerate as more capital is invested, technologies are upgraded and education improved."
— With assistance by Yinan Zhao