China update

25 May 2020

Economy

Economic results for April showed China’s industrial economy rebounding but consumer spending only slowly recovering. China’s National Bureau of Statistics (NBS) found industrial production – a measure of output in China’s manufacturing, mining and utilities sectors – grew 3.9% year-on-year in April, reversing a 1.1% contraction in March. Retail sales fell 7.5% year-on-year – an improvement on the 15.8% decline in March.

Fixed asset investment was down 10.1%, after declining 16.1% in January-March. Urban unemployment rose 0.1% to 6% in April after falling 0.3% in March, but estimates of total unemployment are much higher. The data indicates an economy back at work but households not yet confident to return to previous consumption levels. 

China’s Producer Price Index – reflecting the prices that factories charge wholesalers for their products – fell to minus 3.1% year-on-year during April in the worst result since 2016, according to the NBS. This included an 11.6% contraction in the price of excavation equipment and 8.8% drop in raw materials prices.

The Consumer Price Index rose by 3.3% year-on-year in April, down from 4.3% growth in March. Much of the decline was due to a drop in food price inflation. The fall in both producer and consumer price inflation indicates demand across the economy remains weak and is recovering more slowly than output.

It is thought that China’s annual parliamentary ‘Two Sessions’ meeting on 22 May will provide the first consolidated picture of China’s stimulus package, particularly the scale of fiscal spending.

Local government borrowing is likely to hit record highs this year as Beijing increases funds for infrastructure projects to keep regional economies on track. China’s Ministry of Finance announced it would bring forward a further RMB 1 trillion in advance quota of local government special purpose bonds to fund infrastructure projects. This could increase local government debt to nearly RMB 3 trillion for the first five months of the year, compared to RMB 1.9 trillion from a year earlier.

Guangdong Province is leading, issuing RMB 103 billion in bonds on 12 May – a record one-day high for the Shenzhen Stock Exchange and mostly targeting ‘new infrastructure’ such as 5G, AI and the industrial internet.

Transport and logistics / supply chain

A decline in Chinese port throughput of around 5% over the last two months indicates lower demand, particularly for Chinese exports, rather than supply-side issues. The latest data from the China Port Association shows throughput at the eight largest ports declining 4.4% in the first week of May year-on-year.

Air passenger numbers remain low as a result of global travel bans, while air freight continued its steady increases through April. In April, total air passenger numbers was 16.7 million, down nearly 70% year-on-year, although up 3.2% from March. Total air freight was around 484,400 tons, a 19% decrease year-on-year but a 4% increase from March. Importantly, ‘freight only’ increased by 31% year-on-year to 237,000 tons, not enough to make up for the gap left by the reduction in passenger belly freight. There was an average of 1,574 scheduled international freight flights a week in April, up 55% on pre-COVID levels, in addition to 2,225 chartered freight flights.

Consumer behaviour

Despite slow growth in overall consumer spending in the NBS’s national April figures, the 2020 Shanghai Double Five Consumer Festival saw an increase in spending across Shanghai in early May.

During the first 10 days of May, online retail in Shanghai exceeded RMB 40 billion, with courier services up 26% year-on-year. Figures showed that bricks-and-mortar retail spending was recovering in early May. A ‘big data’ analysis of offline retail purchases in Shanghai showed they reached RMB 48.2 billion, equivalent to the same period last year.  

Thrifty minimalism is an emerging trend among Chinese consumers. China Skinny reports that Alibaba’s platform for second-hand goods, Idle Fish, saw its biggest single day’s sales in history last month as consumers decluttered their apartments and others sought bargains. Brands that align with the less-is-more approach – from clean packaging to simple product design and fewer ingredients in food – are likely to benefit from this trend, which points to more thoughtful spending and a refocusing on quality over quantity.

Another indicator that China’s consumers are gaining confidence has appeared in the April auto sales figures. Car sales (which represent around 10% of total retail sales) grew to 2.07 million units in April, up 4.4% year-on-year, ending a 21-month period of falling sales that commenced in 2018. BMW has announced plans for a US$620 million factory to be built in Shenyang, Liaoning Province, in China’s north east. The factory is the latest in a series of investments made under a joint venture between BMW Group and Brilliance China Automotive Holdings Ltd.

There is positive news for China’s e-commerce and tech giants. Tencent’s Quarter 1 revenue jumped 26% year-on-year due to strong online gaming, advertising and fintech revenue. Tencent games experienced year-on-year Quarter 1 growth of 31%.

Resources and energy

China’s coal industry has called for support for domestic producers as supply continues to outpace demand. Domestic production was up 1.3% year-on-year to 1.15 billion tons in January–April, while coal consumption was down 6.8% to 870 million tons. Imports – which account for less than 10 per cent of China’s total coal supply – were up 27% to 127 million tons. As Chinese buyers sought to take advantage of low global prices and disrupted supply from other markets, imports of Australian coal increased 73% year-on-year to 32 million tons in January to April 2020.

Food and beverages

A recent Export Update from Wine Australia shows the value of Australian wine exports globally grew by 3% year-on-year to April 30, 2020. However, Australian wine imports to China year-on-year to March 31, 2020 declined by 14% by value and 8% by volume.

In contrast to the difficulties being experienced by exporters largely using more traditional distribution channels, one winery that sells almost exclusively online recently advised Austrade that it achieved its annual sales target in China for Quarter 1. 

A recent McKinsey survey found 60-70% of Chinese consumers expected to resume or increase their alcohol consumption after the COVID-19 outbreak abates.

Exports to China of Australian beef and sheep meat, have remained strong in the first four months of 2020. According to Meat and Livestock Australia (MLA), the supply of Australian meat in the marketplace should not be adversely affected over the next one to two months by the suspension of four establishments, given the inventory already in China. MLA expects any dip in exports will take some time to materialise, and that the dip will be less than the combined market share (around 25%) of the four suspended meat establishments.

China’s Customs Bureau reported a 170% year-on-year increase in imports of natural honey from Australia in Q1 2020, to a total value of over US$3 million. Global natural honey imports increased 36% over the same period, to a total of US$16 million in the same period. Australia is the second largest source country for natural honey after New Zealand. Hong Kong also saw natural honey imports return to pre-pandemic levels in March 2020.

There is increasing interest in opportunities for plant-based proteins due to food security concerns and the prevalence of lactose intolerance among Chinese consumers. According to the Good Food Institute, the Chinese plant-based meat market has increased at an annual rate of 14.3% since 2014 and has already surpassed RMB 6.1 billion (A$1.3 billion).

Health services

Alibaba Group’s financial arm Ant Financial predicts China will have 450 million users of online digital health services, including diagnostics, health advice and insurance services, by 2025. Ant Financial has developed an online mutual claims system to assist customers with critical and chronic disease to manage and reduce out-of-pocket healthcare expenses.

Construction

Hong Kong’s construction industry is expected to contract 3% in 2020, making it the fourth consecutive year of decline, according to Globaldata. The industry is forecast to start a recovery phase in 2021. To support economic growth and increase the country’s competitiveness, the Hong Kong Government plans to invest HK$1 trillion (US$127.6 billion) in infrastructure by 2028–2029.

Technology

Spending on robots, drones and related services in China is likely to exceed US$121 billion annually by 2024, accounting for 44% of the global total, an IDC report (cited in Caixin) predicts. During China’s fight against the COVID-19 pandemic, robots and drones were used to deliver meals to patients, take body temperatures, disinfect wards in short-staffed hospitals and practice ‘community control measures’ (using drones to deliver automated messages to people who weren’t wearing masks or practising social distancing). Between 2020 and 2024, hardware purchases including robotic systems, after-market robotic hardware and system hardware will make up about two-thirds of China’s total robot-related spending, with buyers coming mainly from the manufacturing, healthcare and retail sectors.

The number of successful startup unicorns in China has dropped to a six-year low as venture capital funds shy away from early-stage funding. According to PitchBook, only four Chinese startups have reached unicorn status (valued at US$1 billion or above) as of 13 May 2020, the lowest number for the same period since 2014. According to data provider Preqin, the number of venture capital investments for the first four months has fallen 35% this year, and investment value has dropped 6.6%. Information from researcher IT Orange showed 27 startups have failed so far this year, and only 170 were founded in the first four months – a drop from 1,980 in the same period last year.

Education

China has launched a national online education platform to facilitate the continued learning of its 180 million middle and primary school students who have been confined to their homes amid the COVID-19 outbreak. Jointly launched by the Ministry of Education and the Ministry of Industry and Information Technology, the free National Cloud Learning Platform for Middle & Primary Schools covers 31 provincial-level regions.


15 May 2020

Economy

According to reports, China’s merchandise exports increased 3.5% year-on-year in April, reversing a 6.6% drop in March. Imports, however, were down 14.2% year-on-year. China imported US$36.7 billion of goods from the United States during the first four months of 2020. This is well behind purchase targets under the first phase of the US-China trade deal (around US$218 billion in 2020).

A survey by financial publication Caixin found the Purchasing Manager Index (PMI) for the services sector was 44.4 for April, indicating consumers remain cautious. Despite the easing of quarantine and travel restrictions, this year’s Labour Day holiday saw domestic trips and tourist spending fall by 41% and 60% respectively, compared to the same holiday period in 2019. 

Data from China’s Ministry of Human Resources and Social Security has highlighted the employment pressures brought on by COVID-19. The Ministry announced it had refunded RMB42.3 billion worth of unemployment insurance payments to 3.2 million companies – three times as many companies than were supported for all of 2019. Authorities are reimbursing companies for up to 50% of their 2019 insurance contributions, if they commit to not lay off workers. Businesses receiving reimbursements had on average 27 workers, meaning the scheme had to date helped subsidise employment for around 86 million workers.

Analysts are predicting that China will announce a major issuance of special treasury bonds – possibly between RMB1-1.5 trillion – as part of a package to stabilise the economy. China last issued special treasury bonds in 2007 to capitalise the China Investment Corporation – a sovereign wealth fund. Analysts are, however, also suggesting a major issuing of special treasury bonds has the potential to raise inflation risks.

Hong Kong’s economy contracted 8.9% year-on-year in Quarter 1 – its worst quarterly decline on record – highlighting the impact on the city’s economy from COVID-19, the US-China trade war and prolonged social unrest. This was the third straight quarterly economic contraction for Hong Kong. The Hang Seng index fell 4% on the announcement of the GDP figures.

Transport and logistics

Outbound airfreight capacity from China was up 6% in the last reporting period (week) on 2019 levels, with more freight charter flights approved to replace lost passenger capacity. Air freight capacity remains highly constrained due to continued high demand for medical supplies and PPE shipments. Air cargo rates continue to rise. Freight forwarder Kuehne + Nagel has reported congestion up to four days at airports across China.

China’s top three airlines (China Southern, Air China and China Eastern) reported a total loss of RMB14 billion (A$3.08 billion) in the first quarter of 2020. First-quarter revenue dropped over 40% for all three airlines (China Eastern was down 48.6%, China Southern down 43.8%, and Air China down 47.0%). 

United Airlines, Air France, Korean Air, Turkish Airlines and Air Canada have all announced plans to resume China routes by the end of June. The number of departure seats across the Asia-Pacific region increased for the first time since COVID-19 began with total capacity of 17.7 million seats, up 5% week-on-week. China Eastern has become the world’s biggest airline by current seat capacity – offering 1.31 million seats – as China’s total seat capacity reached over 9 million per week (over 99% of seats on domestic flights).

China’s courier sector saw a 40% increase year-on-year with over a billion parcels delivered during the May Day holiday. China’s express delivery giant SF Holding reported revenue growth to 40% year-on-year in Quarter 1, while profits fell 28% due to increased costs associated with COVID-19.

Consumer behaviour

There has been a significant increase in the use of video live-streaming services by e-commerce platforms. Newly available first quarter data reveals that over 60% of China’s internet users now use an online live-streaming service. As of March, the number of online live-streaming service users in China reached 560 million users, an increase of 163 million from the end of 2018.

According to China’s Minister of Commerce, local authorities have collectively issued more than RMB19 billion (A$4.2 billion) in consumption vouchers since the COVID-19 outbreak to boost consumer spending.

On May 4, Shanghai launched a two-month consumer campaign, “Double Five Shopping Festival”, which will run until the end of June and involve more than 500 offline stores and over 40 online platforms. Consumers spent RMB10 billion (A$2.2 billion) in first 18 hours of the campaign.

In the auto sector, China’s biggest automaker SAIC Motor Group reported a small 0.5% year-on-year sales increase in April, an indication this sector is starting to recover.

The China Daily reported sales of electronic goods are starting to recover, particularly 5G-capable phones, tablets and laptops. According to the China Academy of Information and Communication Technology, more than 21.75 million smartphone units were shipped out of factories to the market, marking a 240% surge from February. More than 24 new 5G smartphone models were released last month.

The film and cinema industry has been one of the hardest hit sectors of the Chinese economy. Total national box office revenue for Quarter 1 was RMB2.2 billion, down from RMB18.7 billion in Quarter 1 2019. More than 2,200 cinemas (out of around 12,000) are reported to have closed permanently. The reduction in traditional film platforms is seeing film companies shift to online mediums and new media such as short videos and live webcasts.

Impacts on key industries

China’s imports from Australia in April increased 1% year-on-year to US$10 billion, bringing imports for the first four months of 2020 to US$37.8 billion, up 0.3% year-on-year by value. China’s exports to Australia recovered to US$4.4 billion in April, up 20% month-on-month, but remain down 4.2% year-on-year for the first four months of 2020 at US$13.7 billion.

Resources and energy

April imports by volume for coal, iron ore and natural gas were up 22.3%, 18.5% and 1% year-on-year, indicating little impact from COVID-19 related issues. Between January and April compared to the same period in 2019, China’s total iron ore imports increased by 5.4% in volume and 10% in average price. Natural gas imports increased 1.5% in volume, but decreased 15% in average price. Coal imports increased 26.9% in volume while decreasing 4.9% in average price.

China’s coal imports from Australia in Quarter 1 were up 73% year-on-year by volume to 31.8 million tonnes (up 39% by value). Coking coal imports were up 91% to 14.7 million tonnes, and thermal coal imports were up 63% to 16.9 million tonnes.  

The first United States LNG cargo carrier in 13 months arrived at Tianjin port on April 20. Major United States LNG producer, Freeport LNG, announced the launch of its third liquefaction train, which will increase its production capacity to a total of 15 million tons per annum. China is the world’s second largest LNG importer (Japan is the largest), importing more than 60 million tons in 2019, a 12.2% increase from 2018. Australia is China’s largest LNG import source, making up close to 50% of its total LNG imports.

Food and beverage

Meat & Livestock Australia (MLA) reports beef exports to China were up 30% month-on-month in April to 24,000 tons, the highest on record since December 2019. Lamb exports were up 2% month-on-month to 7,000 tons. According to the Department of Agriculture, Water and the Environment, export figures for Australian beef exports for the calendar year to April 2020 amounted to almost 80,000 tons. Brazil, Argentina, Uruguay and Australia are currently China’s top sources of beef.

Euromonitor predicts China’s ‘meat-free’ market, including plant-based products, will be worth around US$12 billion by 2023. Multinational Quick Services Restaurants including KFC and Starbucks are launching plant-based protein products in China. There is also an increasing focus on China’s significant lactose-intolerant population, which presents opportunities in alternative dairy protein.

China’s Customs Bureau reported a 76% year-on-year increase in imports of breakfast cereals from Australia in 2020 Quarter 1, at a value of US$6.78 million. The growing popularity of breakfast cereals amongst China’s affluent middle class has seen the sector grow significantly in recent years. This growth has been reinforced by the COVID-19 crisis, with e-commerce platforms promoting the benefit of western-style breakfasts as boosting immunity and general health. Total 2020 Quarter 1 breakfast cereal imports exceeded US$51 million. Australia is the second largest source of breakfast cereal imports in China after Japan.


11 May 2020

Economy

Consumption: The national first quarter economic numbers show interesting statistics on food consumption. Food and alcohol consumption increased 2.1%. Per capita spending on home-cooked meals increased 15.5% while vegetables increased 20.8%. Spending on meat increased 31.9%, poultry increased 30.3%, and eggs increased 24.4% year on year. China recorded its highest-ever meat imports in a month in March 2020.

SMEs: China’s Ministry of Industry and Information Technology (MIIT) launched a survey of SMEs last week, seeking advice on loans they had sought to access and the challenges they encountered. A growing number of SMEs are struggling with cash flow problems and are advising that banks are reluctant to lend them money. China’s 30 million SMEs account for 80% of the country’s jobs, 60% of GDP and half of the tax revenue, according to MIIT.

Electricity: According to the China Electricity Council (CEC), electricity consumption declined 6.5% in Quarter 1, equivalent to 170 billion kilowatt-hours. As business activity returns across the country, CEC predicts power use will grow 2% to 3% for the full year. China’s major power company State Grid posted a net loss of RMB920 million in Quarter 1, down from a profit of RMB15.3 billion last year, likely due in part to 5% electricity price cuts introduced to support businesses from February 1.

Financial reporting: An increased number of China’s listed firms have delayed filing annual reports past the usual regulatory deadline of April 30. China’s securities regulator announced it would grant companies hard hit by the epidemic a two-month extension. A total of 129 firms have delayed publication of annual reports, up from just four companies who missed the deadline last year.

Transport and logistics

Passenger flights: China’s Civil Aviation Administration (CAAC) announced a continuation of the “one airline, one country, one flight” per week until May 31, 2020. This means an average of just over 100 passenger flights a week in and out of China. More than half of those flights are going to Japan, Korea, Europe and North America. 

There are currently three flights from China to Australia per week – China Southern (ex-Guangzhou), China Eastern (ex-Shanghai) and Xiamen Airlines (ex-Xiamen). The eight largest Chinese airlines reported total Quarter 1 financial loses of RMB21.7 billion (A$4.8 billion) – a third less than previously reported by CAAC due to increased revenue from government subsidies and charter flights for passengers and cargo.

Domestic travel: The May Day holiday has seen an increase in domestic travel due to the easing of restrictions, cheaper fares and the inability to travel for some time. For the May holiday, CAAC estimates that nearly 3 million domestic passengers took to the skies over the weekend. This is a 67% reduction from the 2019 May holiday period, but a substantial increase of around 43% from the numbers who travelled during April’s Qing Ming (Tomb Sweeping) festival holiday on April 4.

Significant incentives are being offered to get people travelling again. C-Trip (China’s biggest travel agency) was offering 80% reduced fares around its domestic network.

Air freight: In April, Shanghai’s Pudong International Airport (China’s main cargo airport) recorded more than 8,000 cargo flights – an increase of 150% on pre-COVID-19 levels. More than half of the outbound cargo flights transported medical supplies and PPE. Customs brokers in Shanghai have raised rates for customs clearance (for exports from China) by up to sixfold. This is due to increased paperwork and processing times associated with COVID-19 related measures such as customs inspection of medical supplies and PPE.

Ports: Crude oil and iron ore throughput at major ports has increased significantly. Dalian and Guangzhou ports saw crude oil throughput jump more than 10% from the previous week while Zhoushan and Rizhao ports saw 20% increases in iron ore throughput. While the rest of the Chinese economy declined through Quarter 1 2020, Zhoushan saw a GDP growth of 10.3% (for comparison, Shanghai port saw a 5.8% GDP decline). There have been significant increases in crude oil and other resource imports, storage rental income, commodity trade levels and ship repair and maintenance.  

E-commerce

China’s Ministry of Commerce (MofCom) released figures on 23 April that illustrate the importance of e-commerce in the modern Chinese economy.

In contrast to the significant declines overall in Quarter 1, 2020, major platforms like Alibaba and JD.com announced online retail sales growth of 10% year-on-year. Sales of food and horticultural products rose 31%. A number of provincial governments are reflecting this continued strength of e-commerce in their stimulus measures, with incentives and subsidies encouraging the evolution of ‘new retail’, including contactless delivery, unmanned retail and self-service gyms. 

China has announced that 46 new integrated pilot zones for cross-border e-commerce would be added to the 59 existing zones to support foreign trade and investment. The zones allow companies to jointly build and share overseas warehouses, amid reduced taxes and export duties.

Live streaming: Chinese consumer trend analysts, China Skinny, report that the modest projected growth in live streaming video users forecast in 2020 (from 504 million to 526 million) is significantly higher as a result of COVID-19. An early indicator is the 300% growth in March month-on-month of new retailers using streaming as a promotional tool.

Major e-commerce platforms like Alibaba and Pinduoduo are strengthening live streaming to facilitate online sales of fresh produce. Farmers in remote areas can use video to engage consumers face to face and introduce their produce.

Restaurants are also utilising live-streaming to boost delivery orders, with a large number of local chains signing up with Alibaba’s live-streaming unit ‘Taobao Live’ in February. A live-streaming session from one hotpot chain Xiaolongkan sold tens of thousands of single-use self-heating hot pot kits within 10 minutes.

Reports predict an 80% decline in car sales in China in 2020. Live-streaming promotions have been used by 1,500 automotive firms constituting around 80% of the car brands being sold in China since February. An average of 300 events are being held every day.

Top travel platforms like Fliggy, Ctrip and Mafengwo are also using live streaming as a promotional tool with a focus on ‘virtual tourism’, to keep interest in travel alive.

Agriculture

China’ Bureau of Customs report that seafood imports declined between 38% and 51% (depending on subsectors) across Quarter 1, 2020, with significant declines in rock lobster imports.

All Australian imports were down, except Australian Atlantic salmon which increased 30% year-on-year. Australian live rock lobster exports increased 179% in March 2020, month-on-month from low numbers. The Guangzhou Seafood Association reports that some seafood wholesalers have tripled their sales in April from March, with frozen seafood recovering sooner due to logistic challenges with live product.

China’s oilseed imports are dominated by soya beans. Rapeseeds (at 4% of oilseed imports) are also important. Australia (behind Canada and Russia) has a 5% market share in terms of volume, but export volumes increased more than 1,000% in 2019 as a result of restrictions on two of Canada’s largest exporters in March last year. China sources are anticipating increasing demand from the feed sector.

International health

China’s overall retail sales of consumer goods were down in Quarter1; however, health supplement sales showed strong growth. Alibaba’s Tmall reported sales growth of 40.8% year-on-year. Australian brands By-Health, Swisse and Blackmores were the three best-selling brands in March 2020, increasing between 46% and 73% year-on-year.

COVID-19 has fundamentally disrupted global markets and supply chains for ventilators and other respiratory products. China has fast-tracked regulatory approvals and expanded production of ventilators both for domestic supply and export. 

Energy and resources

Ports have recorded significant increases in iron ore and crude oil throughput. Financial publication Caixin reported that nearly 10 gigawatt of new coal-fired power generation capacity was approved in Q1 2020, roughly equal to the amount approved for the whole of 2019.

Manufacturing

China’s National Bureau of Statistics (NBS) has recorded Purchasing Managers Index (PMI) at 50.8 following a recording of 52 in March. This indicates China’s manufacturing sector continuing to stabilise through April. The “export orders” sub-index was down to 33.5 from 46.4 in March, pointing to slow export demand as major global markets remain in lockdown.

A PMI survey by leading financial publication Caixin found a small contraction in manufacturing activity in April, with their assessment of PMI coming in at 49.4. Caixin’s survey captures a larger number of SMEs while the NBS survey polls large enterprises.

Environment

China’s government has announced the establishment of the Yangtze River Reservation project, with an initial allocation of RMB32 billion, aimed at protecting the Yangtze River and supporting economic development. This is a region which accounts for over 40% of China’s GDP. Six projects in Wuhan and Chongqing alone, with a total investment of RMB15.2 billion, were launched in the last month.

Financial services

Foreign asset managers and financial institutions can now own 100% of joint venture partnerships in China from April 1, 2020 (from 49%), a year earlier than scheduled. Oaktree became the first foreign distressed debt manager to establish a wholly owned unit in China, while other firms have also indicated plans for full ownership.

Technology

China’s National Network Information Center (CNNIC) has issued the 45th Statistical Report on the Development of China’s Internet Network.

The report contains new data (as of end of March 2020) on China’s internet environment. China now has an estimated 904 million internet users – 75.08 million more than the end of 2018.

The report also notes significant increases in online video usage and live streaming. Users of live-streaming applications have reached 560 million, accounting for 62% of total internet users.

Online shopping users reached 710 million, an increase of 100 million from the end of 2018 and accounting for 78.6% of total internet users.

Users of online education increased 110.2% compared with data released at the end of 2018, reaching 423 million. During the COVID-19 outbreak, more than 10 million daily active users were accessing online education platforms.

Major e-commerce platform JD.com has partnered with Volkswagen to develop a vehicle-mounted smart system that enables users to operate their home appliances from their cars. The smart home system, powered by JD Whale, the company’s IoT platform, will be available to owners of the Volkswagen Passat by the end of 2020.


1 May 2020

Economy and stimulus

According to China’s National Development and Reform Commission, almost all large manufacturing businesses have resumed operations, at around 95% capacity, while 84% of smaller businesses had reopened.

SMEs

According to a survey by Qinghua (Tsinghua) University in Beijing, revenues among China’s SMEs were down 59% in March year-on-year. This has led to speculation that SMEs are not benefiting substantially from lower interest rates. There are also reports SMEs are hoarding cash by investing relief funding into short-term financial products with higher interest rates from the shadow banking sector, rather than using funds to support their own operations.

Household debt

A new report by the People’s Bank of China (PBOC) shows urban households were weighed down by debt prior to COVID-19. A survey of 30,000 households in October 2019 found middle-class wage earners, young mortgage holders and small business owners faced the greatest challenges from debt burdens.

Property made up 59% of household assets but also accounted for three-quarters of liabilities. Only 20% of assets held by households were financial assets, which were easier to liquefy at times of crisis. China’s household leverage, measured in terms of debt to GDP, stood at 54% in September 2019, an increase of 36% on a decade earlier.

Hubei

Hubei Province, the epicentre of the COVID-19 outbreak in China, reported that GDP contracted by 39.2% year-on-year in Quarter 1. Hubei was the seventh largest provincial economy in China in 2019 and is a centre for automotive and pharmaceutical manufacturing, as well as a major inland port and hub for rail links to Europe. This result represents the largest published drop for any province since the founding of the PRC in 1949.

Transport and logistics

Domestic passenger volumes have started to increase across the country. China’s Civil Aviation Administration reported that for the week between April 15–21, air passenger volumes increased by 15.8% from March, at 30.5% of the same period in 2019. There were 1,989 cargo flights (1,050 all-cargo flights, 939 passenger-to-freight flights) last week, a 17.7% increase from the previous week.

Significant increases in all-cargo and passenger-to-cargo flights means there may be delays processing flights and air freight on arrival. Pudong airport is now processing double the number of cargo flights in April 2020, compared to March 2020. The Ministry of Transport has established an ‘international logistics working group’ to develop measures to cope with the additional demand. As well as air cargo, the working group is also tasked to look at improved border processes at ports and increasing the volume and frequency of trains on the rail line between China and Europe.

The Chinese Government continues to focus on ‘new infrastructure’ spending. On April 17, the NDRC released guidance on the integration of airport and rail ‘smart transit’ systems. The policy focuses on the connection between international hub airports, and intercity and intra-city rail services so these networks can reach a radius of 800–1,000km. For regional airports, the target is an interconnected flight/rail transit system reaching 300–500km, while other airports with an annual throughout above 10 million passengers should connect with intercity or intra-city rail transit ‘where possible’.

China’s first full-cargo airport in Ezhou, Hubei province, is expected to commence operations by the end of 2021. It will have an estimated handling capacity of 3.3 million metric tons of freight a year by 2030. This is around the same volume of freight processed at Shanghai’s Pudong airport, one of the world’s busiest airports.

Health

Data released by China’s National Health Commission showed that non-COVID-19 related patient visits to hospitals in January–February 2020 were down 26% year-on-year. Across this period, average hospital bed utilisation rates stood at 60%.

Large numbers of patients are now re-engaging with the hospital system for non-urgent and elective surgeries and industry sources are predicting significant strains on the system. This will continue to drive demand for quality clinical services, training and accreditation services, and digital health solutions, including from Australia. 

China’s NDRC has released a strategy for growth in the digital economy, with a focus on digital healthcare, particularly for first-stage diagnostic services.

Food and beverage

Wine Australia has released its Quarter 1 2020 report. The overall value of Australian wine exports grew in the 12 months to March 31, 2020; however, Q1 figures show a 7% decline year-on-year.

The imported alcohol market in China has declined markedly in Q1 2020, with wine import volumes dropping 30% year-on-year for January–February 2020. Hong Kong saw even more significant declines in sales, from 39% (wine) to 43% (spirits) year-on-year in March. This was due in part to the Hong Kong Government’s decision to extend the ban on bars and pubs through March and April, until May 7.

China Customs statistics show that China imported more than 45,000 tons of infant formula in January and February 2020, a 3% decrease from the same period last year. Australia (with only 3.7% of total import volumes) ranked sixth after the Netherlands, New Zealand, Ireland, France and Germany.

Sales of infant formula on e-commerce platforms have increased markedly in recent months. Dutch company Friso’s sales increased 50% on Tmall and JD.com in March alone. A number of Australian infant formula brands reported sales growth in China in Q1 2020, while sales of infant formula in Taiwan (where Australia ranks fourth in terms of import volumes) remained largely stable.

Agribusiness

According to the Australian Bureau of Statistics (ABS), China imported more than 120,000 breeding cattle (mainly dairy heifers) and nearly 45,000 slaughter cattle from Australia in 2019. Australia’s exports of breeding cattle to China represent 80% in value and 23% in quantity of our total exports in the industry, and demand from China is not slowing.

In January–February 2020, China imported more than 7,500 head of Australian purebred breeding cattle valued at A$18 million, an 18% increase from 2019. Australian live industry sources report they have seen no major impact on demand as a result of COVID-19. Supply issues (particularly the drought) rather than demand have impacted the industry, keeping prices high.

Around 21,000 tons of cotton were exported to China in January and February 2020, representing an 81% decrease from the same period last year, largely as a result of drought in Australia. China is Australia’s largest customer for cotton, taking around 85% of total production in recent years. ABARES forecasts that Australia’s total cotton exports to the world will fall by 45% in 2020–21, as a result of drought-affected harvests.

In addition to supply constraints, Australia’s cotton exports to China face pressure due to high stocks currently on hand and decreased global demand for cotton in 2020. Nantong Cotton Association confirmed with Austrade that many cotton contracts have been postponed, reduced or cancelled by importers, some forfeiting deposits to avoid further losses. Demand is estimated to return in July.

China’s General Administration of Customs (GACC) has announced a policy adjustment around the inspection of imported cotton from April 5. Customs inspections will now be conducted at the importer’s request, rather than at China Customs’ initiation (although China Customs retains the right to inspect where necessary). GACC estimates this change in process will help relieve port blockages and save seven days on average for cotton shipments clearing customs.

E-commerce

Guangzhou-based VIP.com, one of China’s most influential e-commerce platforms, has recently added other product lines (including vegetables and fruit, over-the-counter medical devices, and meat and poultry) to its current fashion and accessory brands. It now competes in the field of general e-commerce platforms dominated by Alibaba and JD.com.

The Guangzhou provincial government has announced a target of training 10,000 new livestreaming influencers and encouraging more new e-commerce media companies to move to the city, in part driven by the success of Shenzhen in the e-commerce and broader technology fields.

Hangzhou-based Wahaha, one of China’s largest beverage makers, has made the move into e-commerce, establishing its own e-commerce platforms at a cost of RMB 200 million in March. 

Online cosmetic sales growing 3,000% from March 18–27, compared to the previous 10 days, as lockdowns end and consumers go out in public.

Energy and resources

The Chinese Government has issued a policy statement around significantly expanding China’s natural gas storage infrastructure. China currently has 27 gas storage bases with a peak capacity of 10 billion cubic metres. This accounts for less than 4% of China’s total natural gas consumption in 2019, and less than a third of the international standard of 12–15%. The Government plans to build another 23 bases, to allow for the total storage of 27bcm by 2025, and 100bcm by 2030. International competition remains strong.

On April 17, BP signed an agreement with Foran Energy to supply 600,000 tonnes of LNG per annum. Several LNG cargos departed for China from the US recently after 13 months of trade suspension.

Digital gaming

The China Audio-video and Digital Publishing Association has released the China Game Industry Report Quarter 1 2020. Due to the outbreak of COVID-19, people spent more time on online games. In Q1 2020, the total income of the China game market reached RMB73.2 billion, a 25.2% increase compared to the same quarter last year. Mobile games dominate the market, with income of RMB55.4 billion. RPG (role play games), MOBA (multiplayer online battle arena) and SLG (simulation games) accounted for 70% of the market.

Education

The Ministry of Education has set a target of 100,000 Chinese postgraduate students enrolling in universities around the country in 2020. This is a small increase from around 95,000 last year but still the largest intake of postgraduate students on record. The focus on postgraduate students comes as all Chinese provinces, including Hubei, announce a resumption in university entrance exams (Gaokao) on July 7–8.

China’s universities and colleges will offer courses in English to international students via an international online teaching platform to promote massive online open courses. The international platform is still under construction, and two online education websites, www.icourse.cn and https://next.xuetangx.com/ will be among the first to be included in the program.

Travel and tourism

Shanghai-based online travel agency Ctrip reported a 282% month-to-month increase in the number of travellers for the May Labour Day holiday. China Railways in Shanghai is expecting more than 1 million passengers to make train trips from Shanghai between 30 April and 6 May. This growth indicates domestic tourism is recovering.


24 April 2020

Economy

Economic data recently published for Quarter One shows China experienced a major slump in activity across all indicators, but also signs of recovery in March.

China’s GDP contracted 6.8% year-on-year in the quarter. Urban unemployment rates remained high but fell slightly, down from 6.2% in February to 5.9% in March. 

A joint survey by Peking University and recruitment platform Zhaopin found new job listings fell 27% year-on-year in the first quarter. This was led by job losses across the entertainment and services sectors, down by 40%, and export-oriented companies, down by 26%.

China is still waiting for a wave of ‘revenge spending’ to assist recovery but given depressed household incomes and wealth, it may be some time before spending commences.

Retail sales fell another 15.8% in March after a 20.5% decline in the first two months of the year. Around 30 Chinese municipalities have issued approximately RMB30 billion in vouchers to drive consumption.

Around 61% of 3,143 households said their income in 2020 would shrink compared with 2019, according to a March survey by the Southwest University of Finance and Economics in Chengdu, an institution known for its work in assessing household consumption trends in China.

A quarter of households surveyed said the drop in earnings would be significant, with 42% planning to reduce consumption this year.

The People’s Bank of China has cut China’s benchmark interest rate by 20 basis points, from 4.05% to 3.85%. 

Transport and logistics

There has been a small decline in cargo volumes through sea ports. A significant rise in freight-only air shipments is unlikely to fill the gap left by the decline in cargo carried in passenger aircraft.

Total cargo throughput at the eight major hub ports decreased by 6.6% and container throughput decreased by 5% from the previous week. Sources advised it may be due to softer demand but quarantining arrangements for ships’ crew may be affecting the speed at which cargo is unloaded.

There have been no reports of backlogs and the Wuhan river port has returned to 90% of pre-COVID-19 volumes.

For quarter one 2020, the Civil Aviation Authority of China (CAAC) reported that the Chinese aviation industry saw a total loss of RMB39.82 billion, with airlines taking the majority of that loss at RMB33.62 billion. CAAC additionally reported that total air cargo throughput for March was 484,000 tons, a 23.4% decrease from March 2019. Non-passenger cargo throughput has risen to 253,000 tons, an increase of 28.4% from March 2019.

Health

Rapid expansion of China’s leading digital health platforms during the COVID-19 crisis is likely to generate commercial opportunities for Australian companies. However, cybersecurity risk, commitment to marketing and business development require careful management. 

Alibaba is offering a range of services internationally, including AI cloud computing services for medical researchers, online health consultations for overseas Chinese communities, and AI-driven drug design and diagnostic products. 

There are emerging opportunities for Australian mobile health, digital diagnostics and telemedicine providers. China led the world in digital health uptake prior to COVID-19, with 94% of Chinese health professionals using digital tools according to a 2019 survey by Philips.

China’s largest gathering of hospital design, management and service delivery companies and organisations, the China Hospital Construction Conference, has been postponed from June to late September 2020 and shifted from Wuhan to Shenzhen. Organisers expect a majority of the program to be delivered digitally. 

Food and beverage

The wholesale price of Australian table grapes in China has dropped by 30–50% (depending on varieties). The Guangzhou Wholesale Market estimates that over 100 containers of imported grapes are currently in stock, and importers are reluctant to place orders with the current low retail price.

Major importers report they are accepting the loss to maintain market share, but smaller importers have ceased orders. In Beijing, Thompson seedless grapes were selling in a local market at RMB16 per kilogram (A$3.65 per kilogram), a low price for imported grapes.

The situation is better in high-end retail supermarkets. Shenzhen HEMA Fresh reports that the total sales volume and value of Australian table grapes sold through its stores remained unchanged through March. Online sales of table grapes increased markedly through quarter one and now represent more than 50% of total revenue from seedless grape sales.

Wine Australia reports that wine exports to China for quarter one 2020 were down 14% by value and 21% by volume compared to the same period in 2019. The decline was more pronounced in February and March.

A decline in imports of live pigs from the mainland to Hong Kong is seeing a significant shift in consumer and distributor demand for imported chilled/frozen pork. This may offer opportunities for Australian pork suppliers. Hong Kong is the fourth largest export destination for Australian pork (Australia exported A$7.8 million of pork to Hong Kong in 2019).

China’s buyers of Australian produce – especially retailers such as HEMA Fresh (which is part of the Alibaba Group) and distributors of Australian fresh milk, yoghurt, salmon and lobster – have advised they welcome the International Freight Assistance Mechanism (IFAM). Distributors of Australian products are keen to see IFAM expand beyond Shanghai to more destinations in China.

Energy and resources

China Customs trade data for quarter one shows that bulk commodity imports including coal, iron ore and natural gas have increased. China coal imports increased 28.4% year-on-year in volume and 21% in value. Iron ore imports increased 1.3% year-on-year in volume and 11.7% in value. Natural gas imports increased 1.8% in volume but decreased 17% in value. 

Infrastructure

Twenty-two provinces have released planned investment projects totalling RMB8.87 trillion in 2020, including projects in traditional sectors such as major infrastructure, transport, environment, urban development and energy. According to the Chinese Ministry of Housing and Urban-Rural Development statistics, as of early April, 90% of building and civil infrastructure projects (186,600 in total) have resumed construction.

Technology

According to ITJUZI.com, investments in tech-based industries, including artificial intelligence, Internet of Things, fintech and web-based services, saw a 31.3% decline to RMB119.1 billion in quarter one 2020, from RMB173.5 billion in the same period last year.

Online enterprise and education services were among the most attractive for investment, as demand for remote working and learning has increased. Semiconductor, artificial intelligence and e-commerce startups also continued to attract investment in the first quarter.

Working for digital gaming companies has become more lucrative in China, thanks to rapid growth in market share and rising revenues. Abacus Research reports that China’s video gaming industry has experienced significant growth in recent years and has probably benefited from COVID-19 restrictions with more people staying home. China is the world’s biggest gaming market and its video games sector is expected to generate US$36 billion in revenue this year.

To help take advantage of the opportunities created by this surging demand for digital gaming, the Shanghai Landing Pad and the International Gaming and Entertainment Association are partnering to run a virtual bootcamp for Australian video game developers in mid-May 2020. Participants will learn about IP protection and business and pitching strategies before being introduced to key industry players including Tencent Game and TapTap. This will be the first virtual bootcamp for the Shanghai Landing Pad.

Education

The Ministry of Human Resources and Social Security has launched a large-scale free online vocational training program for over 5 million people whose livelihoods have been affected by the COVID-19 crisis. Digital training resources cover over 100 job types. There are emerging significant opportunities for education technology companies in China.

Chinese universities will admit more doctoral students in 2020 to meet a target of 100,000 set by the Ministry of Education. In particular, the country will boost the number of postgraduates in the field of artificial intelligence to further advance China’s research capabilities.

Travel and tourism

Jane Sun, CEO of C-Trip, China’s biggest online travel service, has told CNN that Chinese consumer confidence for travel services is returning. A recent survey C-Trip had conducted of its customers found more than 60% of Chinese tourists would be ready to travel again by August.

Given most countries have placed restrictions on travel, Ms Sun sees the majority of this travel being domestic for at least the next six months. Domestic travel currently makes up more than 95% of China’s domestic aviation market. Capacity has recovered to almost 8.8 million seats per week.


16 April 2020

Economy

China’s economy is estimated to be operating at around 80% of its normal output with most people having returned to work. Demand, and prices, for many Australian exports will remain subdued until the economy returns to normal levels and consumer confidence rises.

According to official data, consumer inflation eased to its lowest levels in five months. China’s consumer price index (CPI) rose 4.3% year-on-year in March, down from 5.2% in February.

China’s State Council announced that preferential tax policies supporting small business would be extended to the end of 2023. The measures include waiving VAT on interest payments to financial institutions for loans of RMB 1 million or less, and providing a 10% discount on tax collected from financial institutions for loans of RMB 100,000 or less to agricultural households.

According to Tianyancha, a commercial database, it is estimated that 460,000 Chinese companies went out of business in Q1 2020, almost double the usual rate of corporate failures in a normal quarter. Many of these firms are likely to have been in the food-service and entertainment sectors and customers for Australian exporters of agricultural produce.

Most provinces with the exception of Hubei have announced staged returns for schools beginning from late April. 

Hong Kong Chief Executive Carrie Lam announced a further stimulus package worth HK$137.5 billion to support the city’s economy, with a focus on job retention. The spending package will include a HK$80 billion job security program to subsidise 50% of wages for affected workers for six months.

Transport and logistics

On April 9, China’s Civil Aviation Administration reported that from April 6–12, a total of 4,445 cargo flights filed flight schedules. This represents a 338% increase on pre-COVID-19 averages of 1,014 weekly flights.

According to government sources, major ports in China have achieved 90% of the average throughput of the same period last year. Ningbo Zhoushan Port, the world’s leading port by throughput volume, restored most of its handling capacity in March with a total of 2.28 million TEUs. This was 2.5% less than last year, and comprised 62.66 million tons of cargo, 9.2% less than 2019.

China’s National Railway Group reports that China witnessed an increase in the number of trains, and rail cargo volumes, to and from Europe in the first quarter of 2020. In March, the number of containers and open wagons on China–Europe train lines increased by 36% and 30% year-on-year respectively. These shipments had a 98.9% full container rate.

Agribusiness

A number of countries have announced temporary export restrictions or bans on some agriculture commodities including rice from Vietnam and Cambodia; buckwheat, rice and oat flakes from Russia; wheat flour, buckwheat, sugar, sunflower oil and some vegetables from Kazakhstan; beans from Egypt; and sunflower seed from Serbia. 

It is unlikely that these export bans will significantly impact China’s domestic food supply. The Chinese Government has reassured the population that China’s rice and grain reserves are at very healthy levels.

Opportunities for Australian agribusiness exporters

Export restrictions, increased domestic demand and supply interruptions in Europe and North America do present opportunities for Australian companies.

Australian sorghum, oat and barley are in high demand, although supply side challenges, largely as a result of the drought remain. 

Concerns have been growing about food supply in Hong Kong, given that 95% of Hong Kong’s food and beverages are imported. The cancellation of passenger flights globally has increased pressure on freight options. This presents an immediate short-term opportunity for Australian suppliers to meet supply gaps in Hong Kong.

Research by Meat and Livestock Australia on the impact of COVID-19 on Chinese consumers indicate sustained opportunities for high-value Australian red meat exports. The online survey of 800 affluent Chinese consumers across four Tier 1 cities found that home isolation and lockdown measures have driven some shifts in consumer attitudes and behaviour that have seen stronger demand for Australian red meat, particularly beef.

Before the COVID-19 outbreak, the top three considerations of consumers buying beef was safety, freshness and quality. During COVID-19, there has been a shift in attitudes to safety, boosting immunity and quality

Demand for premium seafood is slowly growing but it remains uneven and prices are still well below pre-COVID-19 levels. The recent closures of a number of large well-known seafood restaurants in Guangzhou and Hong Kong brought on by the COVID-19 outbreak (not necessarily the only reason for the closures) illustrates a shift in consumer attitude.

According to the Guangzhou Catering Association, seafood restaurants, especially large-scale ones, are experiencing significant difficulties. Estimates across the sector suggest that up to 25% of restaurants are now closed permanently across China. The outbreak has changed consumption habits, with people buying raw materials to cook at home.

According to the Wool Market Company, Chinese buyers are continuing to support Australian wool auctions, although prices and volumes are down. The China Wool Textile Association surveyed 17 mills in the week commencing 30 March. According to the survey, all mills have returned to full operation. Disruptions in key export destinations and the cancellation of orders has kept pressure on Chinese textile mills. 

Energy

On April 3, the National Development Reform Commission approved a 5 MPTA LNG Terminal proposal by the Beijing Gas Group. The terminal, located at South Port Industry Zone in Tianjin, includes 10 containment tanks of 200,000 cubic metres and a 229-kilometre transmission pipeline to Tianjin, Beijing and Hebei province.

This RMB 20.1 billion investment, with phase 1 to be completed in 2022, will potentially provide significant opportunities for Australian LNG exporters.

Health and medical

Due to challenges in recruitment and site access in China, the US and the European Union, Australian contract research organisations are reporting increased interest from Chinese biotech firms in conducting clinical trials in Australia. There is also resurgent demand in Hong Kong and Taiwan for locally conducted trials.

The review and approval of non-COVID-19 clinical trials is proceeding as normal in Hong Kong and Taiwan. All Taiwan sites and around 75% of Hong Kong sites are open for recruitment and participant visits. 

China’s Ministry of Commerce advised that new regulations are aimed at ensuring the quality of medical exports and that they apply to all exporters equally. Chinese government agencies have reached an agreement that should result in a number of Australian companies receiving clearance to bring personal protective equipment back to Australia. 

E-commerce

Social media and e-commerce platforms will be crucial tools to Australia’s business recovery post-COVID-19 in the China market.

Despite an already strong online consumer base, even more Chinese have shifted to purchasing goods online. Digital marketing strategies and understanding China’s social media environment will amplify and reinforce branding as well as aid distribution.

Technology

China’s large technology firms are looking to collaborate with international partners to help them develop their China digital strategies. JD.com, one of China’s most successful e-commerce platforms, is seeking to partner with larger firms as well as startups to drive expansion and innovation.

JD.com recently announced a year-on-year increase of 18.6% to 362 million active customer accounts in 2019. JD.com’s small services business unit grew more than 43% in the fourth quarter of 2019. This may also provide a new avenue for Australian tech companies to enter the China market.

PingAn Insurance is also actively looking for international startups that it can incubate, accelerate and weave into its own service offerings, to compete more effectively.


8 April 2020

Ports, aviation, transport and logistics

  • There are now only 108 international passenger flights into China per week under new restrictions to minimise the risk of COVID-19 cases entering the country.
  • The number of weekly international cargo flights has increased to 1,195 (up 28.5% in the past week and 17.85% compared to pre-COVID-19 levels).
  • The Civil Aviation Administration of China (CAAC) is encouraging passenger airlines to use their aircraft for freight-only flights. In the past week, CACC has approved 102 freight-only flights on existing passenger routes – including daily flights to Australia by China Southern from Guangzhou and China Eastern from Shanghai.
  • The Ministry of Transport has issued stricter guidelines for international cargo ships after five crew members of the super-freighter Gjertrud Maersk tested positive for COVID-19. Crew will now not be allowed to disembark from their ships unless the Ministry gives them prior approval. Currently, around 500 ships carrying 7,000 crew arrive in China’s 128 ports daily.
  • Rail transportation is being used as an alternative to air and sea freight, particularly out of Europe. China National Railway Group reported that the ‘China Railway Express’ is maintaining freight connections between China and European countries.

E-commerce

  • Alibaba’s e-commerce platform Taobao is expanding its direct-to-customer selling platform for bargain-seeking consumers due to competition with other platforms such as Pinduoduo.
  • Taobao’s new Taobao Special Offer Edition app allows buyers to purchase unbranded items like electronics and home appliances directly from manufacturers. The app was the most downloaded free app on Apple’s China App Store following its release.
  • In response to store closures worldwide, more of the world’s luxury brands are establishing shops on China’s e-commerce platform TMALL for specific categories and labels.
  • The skincare and beauty sector is expected to rebound quickly. Many brands are focusing on ‘health’ and ‘wellbeing’ as their core message, and on products that suggest a healthy lifestyle, with beauty a part of that lifestyle. Strong anecdotal evidence suggests the growth in online sales will continue. In 2019, online sales accounted for 30% of sales by value for skincare and 38% for colour cosmetics. Last year, the value of China’s beauty, wellbeing and personal care sector was estimated at around US$66 billion.

New infrastructure and technology

  • China’s COVID-19 stimulus spending on infrastructure is projected to be around RMB 3.5 trillion in 2020 (around 3.5% of GDP). Investment has previously been in transport networks (high-speed rail and roads), power production and industrial capacity.
  • New infrastructure investment will focus on 5G, ultra-high-voltage cables, intercity high-speed railway, electric vehicle charging stations, big data centres, artificial intelligence and the Internet of Things (IoT).
  • China’s Academy of Information and Communications Technology (CAICT) forecasts that 5G infrastructure investment will reach RMB 1.2 trillion over the next five years. More than 50% of the world’s 5G base stations are in China, and CAICT forecasts 600,000 more stations will be built by the end of 2020.
  • China’s State Grid will invest more than RMB 400 billion in power grid construction for ultra-high-voltage grids (UHV) and interprovincial electricity projects. Five UHV alternating current projects will commence between March and December 2020.
  • The central government will continue to enhance investment into strategic and significant infrastructure projects. This includes constructing and expanding the intercity rail network to link metropolitan areas to remote regions, bringing higher levels of economic development to those areas and benefitting regional commuters.
  • The new intercity rail network is expected to test IoT-driven technologies, including automated vehicles, new battery and energy storage, and artificial intelligence.

Agriculture and food

  • Local importers and distributors estimate that Australian seafood imports were around 10–20% of 2019 volumes in January/February 2020. There has been some growth from mid-March due to stock depletion and the gradual recovery of restaurant and in-house dining. Other countries (Canada, New Zealand, US) all report low volumes of exports due to soft demand, with logistical challenges for live product.
  • During the pandemic, some dairy suppliers saw strong demand, although dairy exporters had to adapt their logistics business model, due to reduced capacity and higher airfreight costs.
  • Demand for wine remains very soft, especially at the premium end. Wine suppliers estimate consumption for Q1 2020 is at 30% of normal levels, although the consumption rate is slowly recovering. Current sales are estimated to be around 25% of normal levels for bars, 50% for hotels and restaurants and 75% for direct premises, such as supermarkets. There has been growth in e-commerce channels. 
  • According to the Department of Agriculture, Water and the Environment, around 56,000 tons of beef were exported in the first three months of 2020, compared with nearly 52,000 tons for the same period last year – a 7.7% increase by volume.
  • Just over 26,000 tons of sheep meat were exported to China in Q1 2020, a 17% decrease by volume compared with 31,000 tons for the same period last year.

Health

  • According to China’s Ministry of Commerce, as of 4 April 2020, 54 countries and three international organisations have signed medical and PPE procurement contracts with Chinese enterprises. More agreements are expected to be signed with another 74 nations and 10 international organisations in the near future. 

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