It’s been circulating on the internet that Shenzhen’s economy nearly slipped into negative growth in the third quarter.
According to official data, the city’s GDP expanded 6.6 percent year on year in the first nine months of this year. Strangely, there was no figure for the third quarter alone.
By subtracting the first-half GDP from the nine-month number and compare that to last year’s data, it can be estimated that Shenzhen grew just a marginal 0.5 percent in the past quarter.
A number of issues could have led to the sharp slowdown, but the US-China trade war could be the biggest one.
Several tech majors based in Shenzhen, such as Huawei, ZTE (00763.HK) and DJI, were badly hurt by the trade conflict. Upstream and downstream companies were also hit. Initially, firms tapped into parts in the inventory to keep the production going, but when that started to run out, the impact began to surface.
The downturn in the auto industry also played a part. Shenzhen-based BYD (01211.HK), the country’s top electric vehicle maker, posted a 9 percent drop in its third-quarter sales revenue. Net profit slumped by 89 percent during the period.
To rein in property prices, Shenzhen has been implementing numerous cooling measures, including price caps and sales restrictions. That has slowed down the real estate industry, and negatively affected related sectors from materials to construction and finance.
Though a relatively minor factor, the unrest in Hong Kong has also had an indirect impact on Shenzhen. Inbound tours to Hong Kong typically would include Shenzhen as part of the itinerary. The number of such visitors plunged amid months of turmoil in Hong Kong, which also means lost business for Shenzhen.
But Shenzhen should be able to regain its momentum quickly, as a trade deal between the United States and China is expected to be signed soon.
Authorities in Shenzhen also appear to be relaxing the reins on the property sector to counter the slowdown. And, of course, corporate behemoths such as Tencent (00700.HK) and Ping An Insurance (02318.HK) will continue to underpin the city’s economy.
This article appeared in the Hong Kong Economic Journal on Nov 7
Translation by Julie Zhu
[Chinese version 中文版]
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