東京三菱中国情報月報 12月号- [employment] no change seen from previous month...

1 MUFG Bank (China), Ltd. The Bank of Mitsubishi UFJ, Ltd.

BIWEEKLY DIGEST

[Economy]

July Main Economic Indicators Show Continued Recovery

- [Production/Investment/Consumption] Four Months Consecutive Growth in

Production; Investment and Consumption Still Down but Show Further Improvement

- [Prices] Sharper Year-on-Year (YoY) Rise in CPI; Smaller YoY Fall in PPI

- [Employment] No Change Seen from Previous Month Unemployment at 5.7%

- [Trade] Exports Grow, While Imports Turn Negative Again

- [Inward Foreign Direct Investment/FDI] Fourth Consecutive Month of YoY

Increases at 12.2%

PBOC: Demand Gradually Recovering in Current Economy, Support for the Real

Economy Is to Be Enhanced

[Industry]

July Auto Sales Up 16.4% YoY; New Energy Vehicles Return to Growth, Up 19.3% July Housing Prices for 70 Medium- to Large-Sized Cities: Decrease in Number of

Cities Enjoying with Rising Month-On-Month (MoM) Prices from 61 to 59, Smaller Increases in First- and Second-Tier Cities

Science and Technology: China is Advancing Steadily

[Finance/Exchange]

Balance of Payments for First Half of 2020: Deficit in Travel Falls 44% YoY Due to COVID-19

Foreign Reserve Balance Up in July for Fourth Consecutive Month Internationalization of RMB Progresses in 2019: RMB-Denominated; Cross-Border

Settlements for Securities Investment Up 49%

September 8th 2020

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CHINA BIWEEKLY

RMB Internationalization Business Promotion Office

Global Business Division

CHINA BIWEEKLY(September 8th 2020）


[Economy]

◆July Main Economic Indicators Show Continued Recovery

On August 14, the National Bureau of Statistics (NBS) released main economic indicators for July 2020, which show a trend of stable recovery with continued growth in production, declines becoming milder in investment and consumption, and the unemployment rate unchanged from the previous month. However, as the world is threatened by the second wave of COVID-19 that has shown no sign of waning, there are growing uncertainties in the world economy, which has pushed down indicators reflecting individual consumption and other domestic demand below levels seen in the previous year. Therefore, it is believed necessary to watch whether the current recovery will continue at this pace for the rest of 2020.

[Production/Investment/Consumption] Four Months Consecutive Growth in Production; Investment and Consumption Still Down but Show Further Improvement

Industrial production for July showed no change from the previous month at 4.8% growth year-on-year (YoY), remaining in positive territory for four consecutive months. For the January to July period, however, investment in fixed assets decreased by 1.6% YoY (January-June: down 3.1%), and the total retail sales of consumer goods decreased by 1.1% YoY (June: down 1.8%). Although both of them have remained negative, the sizes of the drops have been shrinking for five consecutive months (Fig. 2).

YoY (%) YoY (%)

(RMB Bn) 28,160.3 ▲3.1 (RMB Bn) 32,921.4 ▲1.6

(RMB Bn) (Undisclosed) 2.1 (RMB Bn) (Undisclosed) 3.8

(RMB Bn) 15,786.7 ▲7.3 (RMB Bn) 18,418.6 ▲5.7

Primary (RMB Bn) 829.6 3.8 (RMB Bn) 980.6 7.7

Secondary (RMB Bn) 8,501.1 ▲8.3 (RMB Bn) 10,011.9 ▲7.4

Tertiary (RMB Bn) 18,829.6 ▲1.0 (RMB Bn) 21,928.9 0.8

Industrial production (value added)** - - 4.8 - - 4.8

Total retail sales of consumer goods (RMB Bn) 3,352.6 ▲1.8 (RMB Bn) 3,220.3 ▲1.1

Consumer price index (CPI) - - 2.5 - - 2.7

Industrial producer price index (PPI) - - ▲ 3.0 - - ▲ 2.4

Industrial producer purchase price - - ▲ 4.4 - - ▲ 3.3

Exports (USD Bn) 213.57 0.5 (USD Bn) 237.63 7.2

Imports (USD Bn) 167.15 2.7 (USD Bn) 175.30 ▲ 1.4

Trade balance (USD Bn) 46.42 - - (USD Bn) 62.33 -

Inward foreign direct investment (executed basis) (USD Bn) 16.72 3.7 (USD Bn) 9.05 12.2

* Year-to-date total from January

** Independently-accounted state-run companies and non-state-run companies with annual sales of RMB20Mn or more

Source: NBS

(State-owned sector)

(Private sector)

By industry

Investment in fixed assets (excl. by rural

companies)*

[Fig. 1] Main Economic Indicators for July

ItemJune 2020 July 2020

Amount Amount

Notes: Fixed asset investment figures use year-to-date totals from January

Source: NBS

Industrial production and consumer sales figures use cumulative Jan-Feb totals for Feb

only

Investment: ▲1.6

Production: 4.8

Consumption:

▲1.1

▲ 25

▲ 20

▲ 15

▲ 10

▲ 5

0

5

10

15

2 3 4 5 6 7 8 91011122 3 4 5 6 7 8 91011122 3 4 5 6 7 8 91011122 3 4 5 6 7 8 91011122 3 4 5 6 7 8 91011122 3 4 5 6 7

2015 2016 2017 2018 2019 2020

[Fig. 2] Growth in Fixed Asset Investment, Industrial Production, and Retail Sales of Consumer Goods

Fixed asset investment Industrial production (value-added)

Retail sales of consumer goods(%)

Source: NBS

Infrastructure

▲1.0

Manufacturing

▲10.2

Real estate 3.4

▲ 40

▲ 30

▲ 20

▲ 10

0

10

20

Jan

-Feb

Jan

-Ma

rJa

n-A

pr

Jan

-Ma

yJa

n-J

un

Jan

-Ju

lJa

n-A

ug

Jan

-Se

pJa

n-O

ctJa

n-N

ov

Jan

-Dec

Jan

-Feb

Jan

-Ma

rJa

n-A

pr

Jan

-Ma

yJa

n-J

un

Jan

-Ju

lJa

n-A

ug

Jan

-Se

pJa

n-O

ctJa

n-N

ov

Jan

-Dec

Jan

-Feb

Jan

-Ma

rJa

n-A

pr

Jan

-Ma

yJa

n-J

un

Jan

-Ju

l

2018 2019 2020

[Fig. 3] Growth in Fixed Asset Investment by Category

Total fixed asset investment

Infrastructure

Manuracturing

Real estate

(%)



Industrial production is further divided into automobiles rising 21.6% YoY, electric machines/equipment increasing 15.6% YoY, and computers/communications/other electronic equipment going up 11.8% YoY, indicating a remarkable recovery in core sectors of automobiles and electronics.

Taking a closer look at investment by sector for January to July 2020, real estate grew by 3.4% YoY, remaining in positive territory for two months straight. Although both infrastructure (down 1.0%) and manufacturing (down 10.2%) show negative YoY results, their indicators improved for the fifth month in a row with the gaps closing by 1.7 points (infrastructure) and 1.5 points (manufacturing) over the January to June period (Fig. 3).

As for consumption for July, consumer goods turned positive YoY at 0.2% (June: down 0.2% YoY) after being in negative territory since February 2020. Among consumer goods, sectors with high YoY rises include automobiles (12.3%), communication devices (11.3%), drinks (10.7%), and cosmetics (9.2%). Although the dining sector’s YoY drop has softened to 11.0% (June: down 15.2% YoY), it is still suffering from a delayed recovery in consumption since it relies on social gathering and physical contact.

[Prices] Sharper Year-on-Year (YoY) Rise in CPI; Smaller YoY Fall in PPI

The consumer price index (CPI) for July rose 2.7% YoY, a 0.2 point increase over the previous month, recording increases for two months straight (Fig. 4). By category, foods were up 13.2% YoY (June: up 11.1% YoY), and non-foods showed no change from the previous year (June: up 0.3% YoY), indicating that food prices are continuing to push up prices as a whole.

Among foods, pork prices remain high, increasing 85.7% YoY (June: up 81.6%). The NBS explains that pork prices were raised by not only an increased demand in the dining sector, which has started reopening their doors, but also disrupted distribution due to flooding in various parts of the country. Also affected by flooding, the prices of fresh vegetables showed a significant rise of 7.9%.

The industrial producer price index (PPI) for July fell 2.4% YoY, a decline that was 0.6 point smaller than in the previous month (Fig. 4). The NBS attributes the smaller decline to improvements in international prices for oil and other items, as well as recovering domestic production and demand.

[Employment] No Change Seen from Previous Month with Unemployment at 5.7%

The surveyed unemployment rate in urban areas as of the end of July was 5.7%, unchanged from the month before. However, the NBS noted that it still views the employment situation as harsh. The NBS pointed out that the number of people newly employed in urban areas for January to July 2020 was 6.71 million, 1.96 million fewer than for the same period in 2019. The NBS also referred to the surveyed unemployment rate as of the end of July for those aged 20 to 24 going up by 3.3 points YoY, as new graduates from vocational schools or universities entered the labor market.

[Trade] Exports Grow, While Imports Turn Negative Again According to the trade statistics bulletin (USD denominated) released by the General Administration of Customs (GAC) on August 7, exports rose 7.2% YoY (June: up 0.5% YoY) to USD 237.63 billion for July 2020, while imports turned negative again (Figs. 5 and 6), falling 1.4% (June: up 2.7%) to USD 175.3



billion. For year-to-date trade from January to July, exports declined 4.1% YoY (January-June: down 6.2% YoY) to USD 1.33638 trillion, and imports fell 5.7% YoY (January-June: down 7.1% YoY) to USD 1.10625 trillion, recording a trade surplus of USD 230.13 billion (Fig. 5). For the January-July period, several products achieved notable YoY figures in exports, such as textiles including face masks (up 31.3% to USD 90.08 billion), medical equipment (up 47.3% to USD 10.41 billion), and integrated circuits (up 11.4% to USD 61.22 billion). In effect, the growth of products relating to personal protective equipment (PPE) and to semiconductors pushed up the overall YoY growth in exports. In imports, China saw a remarkable YoY increase in agricultural products (up 13.5% to USD 95.55 billion), including meat (up 94.8% to USD 18.52 billion), foods (up 16.2% to USD 26.67 billion), and soybeans (up 13.3% to USD 21.4 billion). Besides these, there were also high YoY rises in cosmetics (up 22.6% to USD 10.39 billion) and unwrought copper and copper products (up 21.4% to USD 21.79 billion).

Taking a closer look at total exports and imports for January to July 2020 by country and region, trade with the ASEAN region rose 3.1% YoY to USD 356.8 billion, surpassing the USD 342.76 billion generated by trade with the EU (down 3.1% YoY) and thus remaining China’s largest trade partner (Fig. 7). For the January to July period, trade with Japan and the U.S. continues to fall in both directions. Exports to Japan went down by 3.0% YoY to USD 79.27 billion and imports from Japan down by 1.5% to USD 94.99 billion, while exports to the U.S. went down by 7.3% YoY to USD 221.29 billion and imports from the U.S. fell by 3.5% YoY to USD 67.71 billion (Figs. 7 and 8). On January 15, 2020, the U.S. and China signed a “phase one trade agreement” through bilateral trade talks. This deal aims to increase China’s imports from the U.S. over the next two years by more than USD 200 billion over 2017 (USD 186.29 billion). For now, however, this target appears to be difficult to achieve.

Amount YoY

Exports 237.63 7.2%

Imports 175.30 ▲1.4%

Trade balance 62.33 -

Amount YoY

Exports 1,336.38 ▲4.1%

Imports 1,106.25 ▲5.7%

Trade balance 230.13 -

Source: GAC

[Fig. 5] Summary of Trade Statistics for

July 2020

Trade Statistics for July 2020 (USD Bn)

Trade Statistics for Jan.-Jul. (USD Bn)

(USD Bn)

Country/

regionExports YoY Imports YoY

Trade

balance

Total

exports

and

imports

YoY

U.S. 221.29 ▲7.3% 67.71 ▲3.5% 153.58 289.0 ▲6.4%

Japan 79.27 ▲3.0% 94.99 ▲1.5% ▲ 15.72 174.27 ▲2.2%

South Korea 61.85 ▲4.3% 94.57 ▲4.6% ▲ 32.72 156.42 ▲4.5%

Hong Kong 137.91 ▲9.3% 3.52 ▲33.6% 134.39 141.43 ▲10.2%

Taiwan 32.40 7.2% 102.54 9.1% ▲ 70.15 134.94 8.7%

Germany 47.18 2.6% 54.02 ▲11.5% ▲ 6.84 101.20 ▲5.4%

Vietnam 57.23 8.5% 37.99 25.1% 19.24 95.22 14.6%

Australia 27.60 5.3% 66.92 ▲4.4% ▲ 39.32 94.52 ▲1.8%

Malaysia 28.08 ▲1.8% 40.32 2.5% ▲ 12.24 68.40 0.7%

Brazil 17.09 ▲10.2% 45.79 2.8% ▲ 28.70 62.88 ▲1.1%

Note: Top 10 countries/regions by total export and import amounts

[Fig. 8] Import and Export Amounts and Growth Rates by Country/Region

for Jan.-Jul. 2020

Source: GAC



[Inward Foreign Direct Investment/FDI] Fourth Consecutive Month of YoY Increases at 12.2%

According to an announcement made by the Chinese Ministry of Commerce (MOFCOM) on August 16, the amount of inward foreign direct investment (FDI) for July was USD 9.05 billion, up 12.2% YoY (June: up 3.7% YoY), exceeding last year’s figures for four months straight. This was also the first double-digit growth seen this year (Fig. 9). Year-to-date FDI from January to July was down by 2.3% YoY (January-June: down 4.0% YoY) at USD 76.98 billion.

Looking by industry for the January to July period (in RMB denominations), investments in the service industry increased by 11.6% YoY, accounting for 77.4% of all investment, including high YoY rises in research, development and design services (57.6%) and information services (22.2%).

By country/region for the same period (in RMB denominations), the largest YoY growth was in investments from the UK (up 48.6%). ◆PBOC: Demand Gradually Recovering in Current Economy, Support for the Real Economy Is to Be Enhanced

PBOC released its China monetary policy execution report for 2020 Q2 on August 6, indicating outlooks for the economy and monetary policy.

Regarding the economic outlook, the report described the current economy as being in a phase of “rapid recovery in supply and gradual recovery in demand,” and that the economic growth rate will highly likely recover up to the potential level in the second half of 2020. The report expected the construction of new infrastructure, of urbanization, and of infrastructure for transportation and water supply to become new growth engines. It indicated a view that there are no long-term contributing factors for inflation or deflation, as the prices which temporarily skyrocketed mainly due to the rise in the price of pork has now calmed back down. It also pointed out that the downward pressure on the economy continues to be strong, in the midst of growing uncertainty in the world economy and the capacity for the domestic service industry to recover being insufficient.

Regarding the future monetary policy, the report stated that the prudent monetary policy will be made more flexible and accurate, and in particular, focus efforts on enhancing support measures for medium, small and micro-enterprises to make more funds flow into the real economy. Meanwhile, the real estate market will not be used for short-term means to stimulate the economy, and real estate finance will be managed carefully, maintaining stability in real estate prices and market forecasts. Additionally, the establishment of a new “dual circulation” economic model will be accelerated, in which domestic and global economic circulations are mutually promoted by advancing the integration of finance, science and technology, and industry, by balancing domestic and global economies, and by having domestic and overseas economies linked together based around the domestic economic circulation.

[Industry]

◆July Auto Sales Up 16.4% YoY; New Energy Vehicles Return to Growth, Up 19.3%

On August 11, the China Association of Automobile Manufacturers (CAAM) announced that sales of automobiles in China for July rose 16.4% YoY to 2.112 million units (June: up 11.6% YoY to 2.3 million units), recording the fourth consecutive month of growth and the highest increase since February 2017 (up 22.4% YoY). Year-to-date sales for January to July decreased 12.7% YoY to 12.365 million units, a smaller drop than the 16.9% decrease in the January to June period (Figs. 1 and 2).

By category, sales of passenger cars for July showed accelerated growth at 8.5% YoY to 1.665 million units, marking the third consecutive month of growth (June: up 1.8% YoY to 1.764 million units). The growth of commercial vehicle sales remained strong at 59.4% YoY, increasing to 447,000 units (June: up 63.1% YoY to 536,000 units), helping to push up overall sales (Fig. 2).



Breaking down passenger cars by vehicle type, there were high sales increases YoY in sedans (up 4.6% to 773,000 units), which returned to positive territory, sports utility vehicles (SUVs) (up 14.0% to 772,000 units), and crossover SUVs (up 8.5% to 35,000 units). By contrast, sales of multipurpose vehicles (MPVs) decreased 0.7% YoY to 85,000 units.

Among commercial vehicles, truck sales rose 71.1% YoY to 415,000 units, marking a 70%-plus YoY increase following the previous month. However, buses declined 15.1% YoY to 32,000 units.

July sales of passenger vehicles by Chinese-owned brands turned positive again, increasing 4.5% YoY to 585,000 units. They accounted for 35.1% of all passenger car sales, and their market share increased by 1.6 points from the previous month. Out of the overseas brands, Japanese brands reportedly sold well, capturing a 25.8% market share (430,000 units), while German brands had 25.4% (423,000 units), U.S. brands had 9.2% (152,000 units), Korean brands had 2.9% (49,000 units), and French brands had 0.2% (4,000 units).

In July, sales of new energy vehicles (NEVs) also showed two-digit YoY growth at 19.3% to 98,000 units (June: down 33.1% to 104,000 units), after their sales had slumped for 13 months. Breaking down the sales of NEVs further, electric vehicles (EVs) rose 24.2% YoY to 78,000 units, and plug-in hybrid vehicles (PHVs) grew 2.7% YoY to 19,000 units (Figs. 2 and 3).

CAAM states that the auto market continues to recuperate thanks mainly to the recovering consumer demand boosted by the government’s stimulus packages. When it comes to NEVs, CAAM analyzes that their sales grew thanks to government promotion campaigns in rural areas and automakers’ sales efforts in response to new NEV regulations. At the same time, CAAM notes that it is possible the effects of the government’s stimulus packages may wane. In preparation for that situation, CAAM requests regional governments to lay out stable policies covering extensive areas, and raises concerns over increasing inventories.

◆July Housing Prices for 70 Medium- to Large-Sized Cities: Decrease in Number of Cities with Rising Month-On-Month (MoM) Prices from 61 to 59, Smaller Increases in First- and Second-Tier Cities

On August 14, the Chinese National Bureau of Statistics (NBS) released the housing price indices for 70 medium- and large-sized cities for July.

The number of cities with rising sale prices for newly constructed residential buildings decreased by two to 59 cities, from 61 cities in the previous month. It has been five months since fewer cities saw housing price rise than in the month before last time. Meanwhile, six cities experienced declines, one city fewer than the seven cities in August. Five cities have seen no MoM housing price change from the month before (Fig. 1).

Taking a closer look at price rises by city size, the first-tier cities* saw smaller MoM price rises from 0.6% to 0.5%, as did the second-tier cities* from 0.9% to 0.5%, while third-tier cities* saw no MoM price

Units sold

(Mn)YoY change

Units sold

(Mn) YoY change

Auto sales 2.112 16.4% 12.365 ▲12.7%

Passenger cars 1.665 8.5% 9.533 ▲18.4%

Commercial vehicles 0.447 59.4% 2.832 14.3%

New energy vehicles 0.098 19.3% 0.486 ▲32.8%

Electric vehicles (EVs) 0.078 24.2% 0.378 ▲34.3%

Plug-in hybrid vehicles (PHVs) 0.019 2.7% 0.108 ▲26.4%

Source: CAAM

[Fig. 2] July 2020 Auto Sales and YoY Change

July 2020 Jan.-Jul. 2020



change at 0.8% (Fig. 3). The cities with substantial rises on a MoM basis include Yinchuan (Ningxia Hui Autonomous Region) at 2.0%, Xuzhou (Jiangsu) at 1.6%, and Tangshan (Hebei) at 1.4%. Those with the largest drops include Mudanjiang (Heilongjiang), Nanchong (Sichuan), and Zunyi (Guizhou), each at 0.4%.

Meanwhile, 62 cities—two more than the 60 cities in the month before—saw YoY price increases, while eight cities—one more than the seven cities in the month before—saw YoY price decreases (Fig. 2).

The YoY rate of growth in house prices rose to 3.6% from the previous month at 3.3% for first-tier cities, while declines continued from the previous month in the growth rate of both second-tier cities, from 5.3% to 5.1% growth, and third-tier cities, from 4.6% to 4.5% growth (Fig. 4). On a YoY basis, the cities which saw substantial growth include Yinchuan (Ningxia Hui Autonomous Region) at 17.6%, Tangshan (Hebei) at 16.1%, and Xining (Qinghai) at 13.2%. Significant declines were seen in Jinan (Shandong) at 3.2%, Shaoguan (Guangdong) at 2.9%, and Luzhou (Sichuan) at 2.6%. * First-tier cities: Beijing, Shanghai, Guangzhou, and Shenzhen Second-tier cities: 31 cities including provincial capitals and sub-provincial cities Third-tier cities: The 35 remaining cities of the 70, excluding the above first- and second-tier cities

◆Science and Technology: China is Advancing Steadily

The Japanese National Institute of Science and Technology Policy, a part of Japan’s Ministry of Education, Culture, Sports, Science and Technology, released “Science and Technology Indicators 2020,” a report analyzing science and technology activities in Japan and major countries of the world, on August 7. According to the main indicators in the report, China has shown to be highly active in the field of science and technology, ranking second in R&D expenditure among major countries, and ranking first in the number of academic papers published—surpassing the United States for the first time.

<R&D expenditure>

According to the report, in 2018, China was ranked second among the seven major countries (Japan, the United States, Germany, France, the United Kingdom, China, South Korea) behind the United States for R&D expenditure, which is a fundamental indicator for R&D activities. The total amount (nominal value) increased 10.3% YoY to JPY 58.0 trillion. R&D expenditure for the United States in the first place increased 5.1% YoY to JPY 60.7 trillion, while Japan was ranked third with JPY 17.9 trillion,



up 2.3% YoY.

Breaking down R&D expenditure by sector, the business enterprises sector accounted for the largest percentage in all countries. In China, the public organizations sector accounted for 40-50% in the 1990s, but recently its business enterprises sector has increased to account for almost 80%. In 2018, the expenditure of the business enterprises sector in China was the highest among the major countries at JPY 44.9 trillion (Fig. 1).

<R&D talent>

The latest data on the number of researchers, a key foundation for supporting science and technology activities, shows that China has approximately 1,866,000 researchers (2018), the largest number in the world, followed by the United States with 1,434,000 researchers (2017) and Japan with 678,000 researchers (2019) (Fig. 2).

<Number of academic papers>

Regarding the number of academic papers, which is a form of R&D output, China was ranked first in the world for the average number published per year during 2016–2018 period with 305,927 papers, exceeding the United States for the first time. The United States, in the second place, published 281,487 papers (Fig. 3).

<Number of patent families (patents filed in two or more countries)>

China is also steadily climbing up the ranks for the number of patent families. China was ranked 20th for 1993-1995 yearly average, but moved up to be ranked eighth for 2003-2005 period, then fifth for 2013-2015 period. Japan was ranked first for 2013-2015 period, maintaining its number one position since the beginning of the 2000s (Fig. 4).

TotalBusiness

enterprises

Universities

and colleges

Public

organizations

Non-profit

organizations

Business

enterprises

Universities

and colleges

Public

organizations

Non-profit

organizations

U.S. 60.7 44.2 7.8 6.2 2.5 72.8 12.9 10.2 4.2

China 58.0 44.9 4.3 8.8 ー 77.4 7.4 15.2 ー

Japan (OECD estimate) 17.9 14.2 2.1 1.4 0.2 79.4 11.6 7.8 1.3

Germany 14.8 10.2 2.6 2.0 ー 68.8 17.7 13.5 ー

South Korea 10.3 8.3 0.8 1.0 0.1 80.3 8.2 10.1 1.4

France 7.2 4.7 1.5 0.9 0.1 65.4 20.5 12.5 1.6

UK 5.6 3.8 1.3 0.3 0.1 69.1 22.5 6.1 2.2

[Fig. 1] R&D Expenditure by Sector in Major Countries: Nominal Values (2018)

Nominal Values (JPY 1 Tn) Percentage (%)

Source: Created by MUFG Bank based on "Science and Technology Indicators 2020" by the National Institute of Science and Technology Policy, Ministry of Education,

Culture, Sports, Science and Technology

Country/RegionNumber of

PapersShare (%) Country/Region

Number of

PapersShare (%) Country/Region

Number of

PapersShare (%)

1 U.S. 202,530 28.9 U.S. 238,912 24.2 China 305,927 19.9

2 Japan 60,704 8.7 China 84,587 8.6 U.S. 281,487 18.3

3 UK 49,920 7.1 Japan 66,460 6.7 Germany 67,041 4.4

4 Germany 49,305 7.0 Germany 55,674 5.6 Japan 64,874 4.2

5 France 36,668 5.2 UK 53,735 5.4 UK 62,443 4.1

6 Canada 24,799 3.5 France 40,733 4.1 India 59,207 3.9

7 Italy 23,508 3.4 Italy 34,517 3.5 South Korea 48,649 3.2

8 Russia 23,061 3.3 Canada 32,718 3.3 Italy 46,322 3.0

9 China 17,034 2.4 India 29,110 2.9 France 45,387 3.0

10 Spain 15,509 2.2 Spain 26,447 2.7 Canada 41,071 2.7

Note: The number of papers was counted based on the fractional counting method (a method of calculating international co-authored papers by the degree of

contribution to paper creation)

Source: Created by MUFG Bank based on "Science and Technology Indicators 2020" by the National Institute of Science and Technology Policy, Ministry of

Education, Culture, Sports, Science and Technology

[Fig. 3] Number of Academic Papers by Country/Region

Ranking

1996-1998 (Average) 2006-2008 (Average) 2016-2018 (Average)



<Outgoing and Incoming Higher Education International Students>

According to 2016 data, China is sending out the highest number of higher education students to the world among major countries/regions, and students from China account for 20.1% of all international higher education students worldwide. On the other hand, the country receiving the most foreign students is the United States, receiving 23.3% of all international students worldwide. The United States is also the country that receives the highest number of students from China. China itself receives few students from overseas—taking in only 3.3% of all international students.

[Finance/Exchange]

◆Balance of Payments for First Half of 2020: Deficit in Travel Shrinks 44% YoY Due to COVID-19

On August 7, the State Administration of Foreign Exchange (SAFE) released the preliminary data of the balance of payments for the first half of 2020.

<Current Account>

For the January to June period, China's current account recorded a surplus of USD 85.9 billion. SAFE reports this surplus as 1.3% of the nation’s GDP, falling into an acceptable range. The current account includes a surplus of USD 184.4 billion (surplus growth of 2.0% YoY) under trade in goods and a deficit of USD 76.5 billion (deficit contraction of 41.0% YoY) under trade in services. According to SAFE, the deficit under trade in services came largely from a deficit of USD 61.7 billion recorded under travel, which was hit hard by a substantial decrease in the number of overseas tours due to the spread of COVID-19, with the travel deficit contracting by 44.0% YoY.

<Capital and Financial Accounts>

For the January to June period, China's capital and financial accounts recorded a deficit of USD 108.5 billion.

Foreign direct investments recorded a surplus of USD 18.7 billion, including USD 47.2 billion outflow and USD 65.9 billion inflow. In the second quarter of 2020, investments in securities reached a high level of over USD 60 billion. SAFE views this rise as a reflection of growing needs for RMB assets.

Country/

Region

Number of

Patent FamiliesShare

Country/

Region

Number of


Country/

Region

Number of


1 U.S. 26,066 28.7 Japan 57,034 29.6 Japan 61,753 26.3

2 Japan 24,470 26.9 U.S. 48,219 25.0 U.S. 54,150 23.0

3 Germany 15,147 16.7 Germany 27,678 14.4 Germany 26,895 11.4

4 France 5,839 6.4 South Korea 15,979 8.3 South Korea 23,963 10.2

5 UK 4,894 5.4 France 10,210 5.3 China 21,191 9.0

6 Italy 2,658 2.9 UK 8,569 4.4 France 11,167 4.8

7 South Korea 2,582 2.8 Taiwan 6,890 3.6 Taiwan 10,760 4.6

8 Switzerland 2,254 2.5 China 5,921 3.1 UK 8,754 3.7

9 Netherlands 1,914 2.1 Netherlands 5,034 2.6 Canada 5,253 2.2

10 Canada 1,904 2.1 Canada 4,924 2.6 Italy 4,232 1.8

19 Taiwan 426 0.5

20 China 324 0.4

Source: Created by MUFG Bank based on "Science and Technology Indicators 2020" by the National Institute of Science and Technology Policy, Ministry of

Education, Culture, Sports, Science and Technology

…… Omitted ……

[Fig. 4] Number of Patent Families by Country/Region

Ranking

1993-1995 (Average) 2003-2005 (Average) 2013-2015 (Average)



◆Foreign Reserve Balance Up in July for Fourth Consecutive Month

The People's Bank of China (PBOC) announced on August 7 that its foreign exchange reserves at the end of July had increased by USD 42.06 billion over the previous month to USD 3.15439 trillion, marking the fourth consecutive month of growth and reaching the highest level since January 2018 (USD 3.16146 trillion).

SAFE attributes this increase to the fact that other foreign currencies become stronger in comparison to the USD, raising the asset prices of major countries accordingly.

◆Internationalization of RMB Progresses in 2019: RMB-Denominated Cross-Border Settlements for Securities Investment Up 49%

The People’s Bank of China (PBOC) released the “2020 RMB Internationalization Report” on August 14. The report described the status of RMB utilization in cross-border settlements in 2019, and the progress made and future prospects for RMB internationalization. The use of RMB in cross-border settlements increased due to a significant growth in settlements for capital account items, primarily securities investments, in the context of an accelerating opening up of the capital market.

<Summary of cross-border RMB settlements>

The total amount of RMB cross-border settlements in 2019 grew significantly, up 24.1% year-on-year (YoY) to RMB 19.67 trillion. The ratio of RMB in all currencies used for cross-border settlements rose 5.5 percentage points from the previous year to 38.1%, marking a record high level. Of cross-border RMB settlements, while the amount of settlements for current account items rose 18.2% YoY to RMB 6.04 trillion, settlements for capital account items rose more prominently, up 26.7% YoY to RMB 13.62 trillion. Furthermore, securities investments, as part of the capital account items, grew significantly—increasing 49.1% YoY to RMB 9.51 trillion (Figs. 1 and 2).

Settlement Amount YoY (%)

RMB 19.67 trillion 24.1%

Current account items* RMB 6.04 trillion 18.2%

Trade in goods RMB 4.24 trillion 16.0%

Trade in services RMB 0.9515 trillion 23.8%

Transfer of revenue RMB 0.8048 trillion 23.5%

Other RMB 0.0437 trillion ‐

Capital account items* RMB 13.62 trillion 26.7%

Direct investment RMB 2.78 trillion 4.5%

Securities investment RMB 9.51 trillion 49.1%

Other RMB 1.33 trillion ‐

[Fig. 1] 2019 Cross-Border RMB Settlement

Amounts/Breakdown

Item

Total*

Source: Created based on "2020 RMB Internationalization Report"

by the PBOC

Note: Amounts are rounded down to the 10 billion (0.01 trillion)



In the currency rankings for global payments as of July 2020 announced by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the share of RMB in payments was 1.86%, the fifth most used in the world following USD (38.77%), EUR (36.46%), GBP (7.00%) and JPY (3.46%). The ratio of RMB in the foreign currency reserves of IMF member countries was 1.95% as of the end of 2019, rising 0.06 percentage point from the previous year. It was positioned fifth in the world after USD (60.90%), EUR (20.58%), JPY (5.70%), and GBP (4.62%).

<Securities investments>

The increase in securities investments owes to the accelerating opening-up of China’s capital market in the past few years.

In November 2014, a two-way stock trading scheme between Shanghai and Hong Kong (Shanghai-Hong Kong Stock Connect) was launched, and in December 2016, Shenzhen-Hong Kong Stock Connect, a similar scheme between Shenzhen and Hong Kong was launched. The amount of RMB settlements in 2019 made via these schemes rose 22.0% YoY to RMB 1.03 trillion. In July 2017, a bond trading scheme between Mainland China and Hong Kong, Bond Connect, was launched. Up to 491 overseas companies were participating in Bond Connect as investors as of the end of 2019. Furthermore, the Renminbi Qualified Foreign Institutional Investor (RQFII) program that allows foreign investors to invest in RMB in Mainland China’s securities markets lifted the upper limit for investment amount in September 2019, making the program even more convenient for overseas investors.

The investment balance of RMB financial assets by non-residents at the end of 2019 resulted in an 82.4% YoY increase for stocks at RMB 2.1019 trillion, and a 26.7% YoY increase for bonds at RMB 2.2629 trillion.

<Use of RMB settlements by region>

A regional breakdown of RMB settlements shows that domestically Shanghai is at the top with 50.1%, followed by Beijing with 14.3% and Shenzhen with 8.6% (Fig. 3). Looking overseas, Hong Kong has the largest share with 44.9%, followed by Singapore with 10.3% and Germany with 3.4%. Japan is in the sixth place with a 3.1% share (Fig. 4). RMB settlements with the Belt and Road Initiative (BRI) regions increased 32.0% YoY to RMB 2.73 trillion, and those with neighboring countries rose 18.5% to RMB 3.6 trillion.

<Use of RMB settlements by enterprises>

In a survey on the use of cross-border RMB settlements by enterprises conducted by PBOC in 2019 Q4, 84.6% of enterprises conducting foreign trade (including both domestic- and foreign-invested enterprises) responded that they want the main currency for foreign settlements to be RMB. The most common reason for selecting RMB, given by 64.7% of all respondents, was that companies wanted to avoid RMB exchange fluctuation risk in light of the U.S.-China trade conflict. Other common reasons provided were “convenient settlement procedures,” “reduction of settlement costs,” and “convenient financial management.” About 90% of foreign-invested enterprises that responded have used cross-border RMB for settlements.

Ranking Region Settlement Amount Percentage

1 Shanghai 98576.7 50.1%

2 Beijing 28143.1 14.3%

3 Shenzhen 16855.1 8.6%

4 Guangdong 15764.3 8.0%

5 Jiangsu 7337.7 3.7%

6 Zhejiang 6856.7 3.5%

7 Shandong 2795.2 1.4%

- Other 20373.4 10.4%

Source: "2020 RMB Internationalization Report"

[Fig. 3] 2019 Cross-Border RMB Settlements

Breakdown by Region in China

　　　　Source: "2020 RMB Internationalization Report"

Hong Kong, 44.9%

Singapore, 10.3%

Germany, 3.4%

Taiwan, 3.3%

Macao, 3.2%

Japan, 3.1%

UK, 3.0%

S. Korea, 2.3%

U.S., 1.7%

Netherlands, 1.3%

Switzerland, 1.3%

Ireland, 1.0% Other, 21.2%

[Fig. 4] 2019 Cross-Border RMB SettlementsBreakdown by Counterpart Country/Region



<Development of the Cross-Border Interbank Payment System (CIPS)>

In 2015, PBOC adopted the Cross-Border Interbank Payment System for RMB (CIPS). 984 financial institutions in 97 countries and regions participate in the system as of the end of July 2020. There are 33 direct participating banks, and 951 indirect participating banks which trade through the direct participating banks. By region, the top three regions were Asia with 731 banks, Europe with 124 banks, and Africa with 37 banks.

<Future policy to promote RMB internationalization>

PBOC’s 2020 RMB Internationalization report stated that RMB internationalization will be promoted step-by-step, based on market principles while emphasizing support for the real economy. The report specifically mentioned further enhancing convenience by lifting the limit for RMB use in trade investment, promoting securities investment in Mainland China by overseas investors through opening up domestic financial markets and streamlining the connection of infrastructure between China and other countries, enhancing the monitoring of cross-border fund transfers, and other initiatives.

The report also stated that the free trade zones, the Guangdong-Hong Kong-Macao Greater Bay Area, neighboring countries, and the BRI regions outside China are expected to become the new growth areas for RMB cross-border settlements.

東京三菱 中国情報月報 12月号- [employment] no change seen from previous month...

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東京三菱中国情報月報 12月号- [employment] no change seen from previous month...