TWS: Dec. 20, 2021

Graph of the Week | Economics

Chinese Millennials Just Aren’t Feeling Manufacturing

With up to 75% of China’s population set to become city slickers by 2030, some economists have argued that concern over China’s shrinking workforce is overblown, as rapid urbanization would bring more efficient utilization of labor resources and boost manufacturing output. However, employment data over the past ten years is testing this argument.

Even as the urban workforce has grown, the supply of labor into the manufacturing sector has remained muted. Even odder, the services sector tells a different story – between 2011 and 2020, the gap between secondary and tertiary industry employment significantly widened.

  • Since 2011, urban employment has steadily increased, rising by more than 100 million jobs.
  • Secondary industry employment – which covers manufacturing, construction, and mining – has decreased by one million jobs.
  • The tertiary industry, or services sector, has gone in the opposite direction and increased by over one million jobs.

A part of the problem stems from a graying population aging out of the workforce, though these woes are compounded by a young, highly educated generation of Chinese that no longer sees the appeal of labor-intensive industry.

Bottom line: Beijing’s bid to use urbanization as an engine of growth for manufacturing has brought a mixed bag of results. The tertiary industry will likely continue to grow as China implements its new “dual circulation” development model and encourages domestic consumption. While Beijing looks to spur AI and high-tech automation integration into its supply chains, it must also seek out other policy prescriptions if it hopes to draw a younger, urban supply of labor into the manufacturing industry.


Markets | Policy

Still More Riches To Be Found for Alibaba?

Behind every closed door is a new beginning at Alibaba. The company’s announcement to overhaul its e-commerce business and shake up senior management sent shares soaring to their largest single-day gain since June 2017.

The company has had one of its worst years on record in 2021 due to industry crackdowns, regulatory overhauls, increased competition, and fears that Didi’s forced delisting could bring the same ill fate to Alibaba. Just last month, analysts worried that Alibaba’s sales for China’s largest sales campaign, Singles Day, only increased by 8% while its competitor, JD.com, increased by 28%.

But the company share price took a sharp U-turn to reach a four-year high on the news that CFO Maggie Wu would be stepping down on April 1, 2022. Alongside Wu’s departure, Alibaba also announced that it would restructure its domestic and foreign e-commerce business under two separate leaderships.

Bottom line: Alibaba, alongside many of China’s largest tech giants still boast strong fundamentals and wield significant influence over markets. However, despite BABA’s recent run-up, questions continue to emerge over whether markets have truly priced in the risk of China’s political economy as Beijing’s sudden crackdowns continue to bring unprecedented commercial damages amid a domestic show of power and mounting geopolitical concerns.


Industry

Bilibili’s Up-Zhu on the Up and Up!

Within China’s quickly growing video streaming industry, one streaming service has pioneered a new model of virtual entertainment. Often referred to as China’s YouTube, Bilibili and its “Up-zhu” video bloggers are on the up and up!

In its early days, Bilibili was a video streaming service that was originally based on topics of animation, comics, and video gaming. Most videos were pirated clips with scrolling comments across the screen, giving fans the feeling that they were watching clips together with friends.

Since, the platform has built out to become rather homogenous. While it still holds the rights to stream a variety of anime and other shows, the platform’s user generated content has been pivotal to its wide-scale adoption. Bilibili’s user creators, known as Up-zhu, combine charming personalities with niche, subculture-targeted content to appeal to a fan base of mostly young adults and teens. Their success has grown platform video streamers from 125 million in 2018 to 850 million in 2020.

Bottom line: A large tech company with gaming as a major source of income? The Bilibili platform is not exempt from Beijing’s regulatory pressure, and investors have been lukewarm at best by the remarkable results in a growing industry.


Industry | Policy

The “Double Reduction” Crackdown and the Future of Private Education in China

China’s private education industry suffered a major blow in July 2021 after the central government released new regulations known colloquially as shuāngjiǎn, or “double reduction.” The policies were focused on reducing the pressures on students in China’s notoriously intensive K-12 education system.

Yet, rather than reduce students’ burden as intended, the regulations have instead increased Beijing’s influence over, and permanently reduced the private sector’s role in, the landscape of Chinese education.

Learn how China’s recent policy has crippled private tutoring firms and sent ripple effects across an economy in which parents prize education in our latest China Insights article:

Full Article

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