Performance of stocks sheds light on new growth engine in China – Xinhua

This post was originally published on this site

(Xinhua file photo)

BEIJING, May 26 (Xinhua) — China’s Shanghai Composite Index has struggled around 2,800 points for the past two weeks, and a look beneath the surface at companies’ performance sheets reveals the by-product of an uneven landscape.

Driven by China’s restructuring efforts, hi-tech and innovative industries posted rather encouraging results, while traditional industries did not fare so well.

Guangzhou Tinci Materials Technology Co. Ltd., a lithium-ion battery material manufacturer, closed 3.73 percent higher at 56.97 yuan (8.7 U.S. dollars) on Thursday, continuing its upward trend. Its share price has almost doubled in the last 10 months.

Shares in Do-Fluoride Chemicals Co. Ltd., another leading lithium-ion battery maker, doubled in less than two months from 53.05 yuan on March 11 to 106.15 yuan on May 6.h These examples, as a case in point, show the increasingly important role new industries — such as lithium-ion batteries and virtual reality or smart healthcare — are playing in economic growth.

In contrast, traditional sectors like non-ferrous metals saw stock prices falter. Stocks in Ansteel, for example, have slid from a peak of 8.89 yuan on June 19, 2015 to 3.75 yuan at Thursday’s closing.

These varied performances show growth weight is steadily moving from traditional to emerging industries as China has pushed to restructure.

China’s policymakers are attempting to steer the economy away from an labor-intensive and credit-fueled growth model to one based on hi-tech, innovation, stronger consumer spending and the service sector.

Macro economic data in the first quarter provided more proof of the success of this effort.

In the first three months, the hi-tech industry expanded much faster than the industrial sector as a whole. Meanwhile, consumption now makes a bigger contribution than investment to China’s growth, accounting for more than 60 percent of GDP. Services continued to trump the contribution made by industry, expanding 7.6 percent and accounting for 56.9 percent of GDP, official data showed.

However, this does not mean that policymakers will rest on their laurels and ignore outstanding difficulties such as excess capacity, housing overhang, and “zombie” state-owned enterprises with poor profitability.

To tackle these difficulties, local governments are busy making and releasing detailed measures to implement supply-side structural reform as authorities count on the move to counter ongoing economic headwinds and address the sticking points.

Authorities said the focus of the reform should be on destocking, de-leveraging, lowering corporate costs and improving weak links, given that the growth model and consumption demand in China have changed fundamentally — from universal short supply to oversupply in some sectors, and from an emphasis of quantity to a preference for quality — after decades of economic reform.