China Market Watch: Conflicting Manufacturing Indexes, Aircraft Needed for Outbound Tourism Boom

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China in need of 3,200 more aircraft as outbound tourism booms

China’s National Tourism Administration has estimated that China will have 200 million outbound tourists by 2020, after having already become the world’s largest source of outbound tourists in 2012.

This means that China will offer many long term growth opportunities for both domestic and international airlines, as well as aircraft engineering and manufacturing.

A report published by the international aircraft leasing company Avolon estimates that China will require another 3,200 aircraft to keep up with the growth of outbound tourists over the next 10 years. Over half of these aircraft have not yet been ordered.

China currently has around 2,800 passenger aircraft, consisting heavily of narrow bodied craft as opposed to wider jumbo jets, providing many opportunities in the relatively underserved segment.

Annual growth of the country’s aircraft fleet has maintained around 11 percent since 2010, with heavy competition amongst domestic players and outside pressure from international carriers.

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China’s manufacturing indexes report conflicting growth patterns

China’s National Bureau of Statistics’ (NBS) gauge of manufacturing for May gave growth data that exceeded estimates, maintaining a PMI of 51.2 for the second month in a row.

Meanwhile, the private Caixin manufacturing index reported a decline, to 49.6 down from 50.3 in April. This was the lowest reading since June 2016.

Readings above 50 on the PMI index indicate expansion, and though the Caixin manufacturers PMI uses a smaller collection of manufacturing companies, observers use it as the first available monthly indicator of the strength of China’s economy.

The NBS’ May PMI readings were concurrent with that of April, and are based on data from heavier industry, while the Caixin PMI focuses more on light industry.

Though the two readings post contradictory data, all trade, manufacturing, and investment activity indicators indicate a slowing of growth from the first quarter of this year.

The manufacturing sector has come under significant pressure in the month of May, and is on a steady downwards trajectory.

20 percent growth in China’s e-commerce in 2016

China’s e-commerce transactions grew by 19.8 percent year-on-year in 2016, cementing it as the largest e-commerce trading market in the world, according to a report published by the Ministry of Commerce.

China accounts for around 40 percent of e-commerce transactions worldwide, amounting to an RMB 2.45 trillion (US$360 billion) market, up 23.7 percent on 2015.

Over half of China’s population use smartphone, around 63.8 percent of which regularly shop online on their phones. This figure grew by 12.9 percent over 2015.

The rapid development of China’s popular e-commerce platforms Taobao, Tmall, and are most responsible for the country’s e-commerce boom.

The most commonly traded commodities across these platforms are clothing, food and drink, home furnishings, electronic appliances, mobile phones, and baby products.

China has outspent the West online by embracing e-commerce as a main driving force in retail and consumption, aided by the popularity of digital payment services and affordable delivery fees.


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