Aug. 18, 2024 (InvestinChina.asia) — A report by Hua Chuang Securities indicates that, in addition to the drag exerted by the real estate sector, a category labeled “other industries” is also significantly weighing on China’s economy.
The “other industries” category comprises seven sectors: scientific research and technical services; water conservancy, environmental and public facility management; resident services, repair, and other services; education; health and social work; culture, sports, and entertainment; and public administration, social security, and social organizations.
In terms of size, the “other industries” accounted for 16.3% of GDP in 2023, smaller than the industrial sector (31.7%) but larger than the rest. Within this category, public administration, social security, and social organizations were the largest, contributing 4.4% to GDP. Education, health and social work, and scientific research and technical services contributed 3.8%, 2.4%, and 2.5% respectively. Culture, sports, and entertainment were the smallest, at 0.7%.
According to the input-output table, 75.9% of the value added in “other industries” came from labor compensation in 2020, compared to 52.1% across the entire economy, indicating that labor compensation is a primary driver of value in these sectors.
The output of “other industries” was allocated as follows: 23.6% for intermediate consumption, 19.9% for household consumption, 51% for government consumption, 6.4% for capital formation, and -1% for net exports. When converted to the expenditure approach, this translates to 26.1% from household consumption, 66.8% from government consumption, 8.4% from capital formation, and -1.3% from net exports. This suggests that “other industries” are highly dependent on consumption, particularly government consumption.
Hua Chuang Securities noted that within the national economic industry classification, the real estate sector was the largest drag, reducing GDP growth by 0.59% in the second quarter. The second-largest drag came from “other industries,” reducing growth by 0.3%. Industries such as manufacturing, information technology, leasing and business services, wholesale and retail trade, and transportation and warehousing all made above-average contributions to second-quarter economic growth.
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