China's producer price index (PPI), which measures costs of goods at the factory gate, quickened growth pace year on year in January, fresh evidence of strengthening demand in the world's second-largest economy, official data showed Tuesday.
The PPI rose 6.9 percent year on year in January, an increase on the 5.5 percent registered in December 2016, according to the National Bureau of Statistics (NBS).
This represented the fifth straight month expansion of the PPI on a year-on-year basis and the highest reading since August 2011.
On a month-on-month basis, the PPI edged up 0.8 percent, with the growth pace narrowing down from the 1.6 percent recorded in December 2016.
NBS senior statistician Sheng Guoqing attributed the monthly PPI gain to factors including the carry-over effect of last year's price changes, spiking prices of metal, fuels, chemicals and other raw materials.
Factors including rebounding domestic demand and reducing outdated capacity helped push up the PPI and the index is likely to remain high in the coming months, according to Wen Bin, a senior researcher at China Minsheng Bank.
The January PPI figure outstripped market expectations, and Chinese policymakers should be alert to inflationary pressure caused by rapid PPI growth, according to Wen.
The PPI figures came alongside the release of the consumer price index, which rose 2.5 percent in January year on year, partially due to holiday effects.
China's used car sales hit a record high in 2016, posting 10.3 percent growth year-on-year, as local authorities have been removing barriers on cross-provincial-border vehicle sales.
Statistics from the China Automobile Dealers Association show that 10.39 million used cars were sold last year. Industry insiders expect yet more to be sold this year.
Although the sector's growth did not keep up with surging new car sales, which saw a 13.7 percent growth rate in 2016, it was the first double-digit growth in used car sales for the past several years, said Luo Lei, the association's deputy secretary-general.
"The hard-won achievement was mainly a result of local governments gradually opening their markets to used cars from other regions," said Luo.
The State Council, China's cabinet released an eight-article guideline in March 2016, instructing local governments to lift any limitations on the flow of used vehicles between provinces by the end of May. China has 172 million cars, but local bans have curbed the free flow of used cars, resulting in insufficient supply. However, the policy has not worked out, according to Luo. He said the association's monitoring shows that while seven provinces, including Sichuan and Heilongjiang, have fully removed the barriers, many others have failed to do so.
Luo said those seven provinces saw double-digit growth in their used car sectors, which was significantly higher than that recorded in the provinces that did not remove the limitations.
Industry insiders say local authorities have failed to lift the ban because used cars usually have higher emissions and contribute less to the local economy than new cars. Luo said more regions will catch up now that the Ministry of Commerce and the Ministry of Environmental Protection have issued orders to implement the State Council's guideline. He expects sales this year to hit a new high as a result.
"Used car transactions accounted for 5.8 percent of China's total car sales last year. As local authorities remove their bans, it may return to the normal level of 7.3 percent, which will be 12.5 million vehicles," Luo said.
Xiao Zhengsan, secretary-general of CADA, calls for more attention to be given to the sector's development, saying used cars will contribute to China's automotive market's growth.
"China has become the world's largest auto market, but if its growth is driven by stimulus policies, it is not healthy," said Xiao.
According to Xiao, used cars and car finance will prove to be two critical and healthy market forces. "I will say, if we fail to do a good job in used cars, then it is impossible for us to do a job in terms of new cars sales. In one or two years you will see if I am correct," he said.
In developed markets such as the United States, used car sales are usually more than double those of new cars, while in China, they represent less than 40 percent of new car sales.
China will improve its logistics network to reduce costs for wholesalers and retailers.
The government will reduce the ratio of the retail and wholesale sectors' overall logistics costs on total GDP to 7 percent by 2020, according to a plan released by the Ministry of Commerce and other ministries.
High logistics costs hold back enterprises' growth. The ratio of China's total logistics spending on total GDP stood at 14.5 percent in the first three quarters of 2016, much higher than the average 8-to-9 percent level in developed economies.
China will expand its commercial logistics network and improve efficiency through IT application.
The government will also establish several national and regional commercial logistics hubs and invest more in infrastructure development.
Titans clash over mobile payments
The competition in China's mobile payment market is growing tougher with the standardization of China UnionPay's quick-response code technology in December. The head-to-head digital hongbao wars between the two dominant players WeChat and Alipay during the Spring Festival holidays provides one piece of evidence. Behind the cutthroat turf war, both of the platforms have broader ambitions, including creating tailored financial products based on their collections of big data. In the near future, the industry will also be subject to tighter regulations.
It was not so long ago that the red envelopes, or hongbao, that people handed out during the Spring Festival holidays were actual red envelopes.
But over the last few years, many of the red envelopes stuffed with cash have existed only virtually on online payment platforms.
During this year's Spring Festival, a record of 46 billion electronic hongbao were sent and received via Chinese mobile social platform WeChat, which is operated by Tencent Technology Co, the Xinhua News Agency reported on Saturday. The figure was up 43 percent year-on-year.
Internet giants such as Tencent have promoted the use of virtual hongbao to expand their stakes in China's fast-growing mobile payment market, as local shoppers are now using their smartphones to pay for everything from taxi fares to medical expenses.
In 2016, China's third-party payment market is estimated to reach 20.3 trillion yuan ($2.96 trillion), up 45 percent from 2015, according to research firm Enfodesk. It projected that the market will grow by more than 20 percent annually to 33 trillion yuan by 2018.
The huge market base has lured a number of companies, making the turf war for China's mobile payment market more cutthroat.
Early market entrants including WeChat and Alipay, which are run by Tencent and Alibaba respectively, have developed swipe-and-go payment systems based on quick-response (QR) codes. The two companies, which together control more than 70 percent of the market, have strived to secure their predominant position by spending heavily on discounts.
As a result, the use of credit cards has declined, rattling the country's bank card association.
On December 12, 2016, China UnionPay announced its own standards for QR code payments. The move was followed by promotional campaigns involving more than 20,000 stores from December to February, a peak time for shopping.
It is not the first time that China UnionPay stepped up efforts to tap the mobile payment market. In December 2015, the bank card association rolled out its near-field communication (NFC)-based Quick Pass mobile payment tool, which enables consumers to make payments by tapping their smartphones against payment terminals.
But the NFC-based technology was not as popular as QR codes.
"That's probably why UnionPay developed its own QR code last year," said Li Yi, a research fellow at the Internet Research Center under the Shanghai Academy of Social Sciences.
Li was not optimistic that commercial banks would be able to break in. "WeChat and Alipay have a lock on the huge market thanks to an early entrance," he told the Global Times on Monday.
But UnionPay still stands a chance in the mobile payment market because its technology is safer and more trustworthy, Li noted.
An employee from a commercial bank, who preferred not to be identified, agreed. "UnionPay also has an advantage in large payment transactions because WeChat and Alipay are more frequently used in payment of small amount," the bank employee told the Global Times on Monday.
For example, the two digital wallets account for around 80 percent of the mobile payment market which are under 5,000 yuan, according to the employee.
However, Liu Dingding, an independent Internet industry analyst, pointed out that the cooperation between UnionPay and commercial banks is crucial to the bank card association's goal of getting to the top.
Currently, UnionPay and the commercial banks have a "strange bedfellows" relationship, Liu said.
"UnionPay is looking to promote QR code with banks, but the logistics behind major banks' moves are different - they seek to expand the user base of their own mobile applications so that they can engage with clients directly, which means banks may also cooperate with WeChat and Alipay if UnionPay's promotion has not achieved their desired result," Liu told the Global Times on Sunday.
To date, the battles in the mobile payment market between the two tech giants, Alibaba and Tencent, have also intensified.
Head-to-head against WeChat's hongbao-grabbing activities during the Spring Festival, Alipay continued last year's collection of five good fortune games with the introduction of augmented reality technology. Participants can split a 200 million yuan prize by scanning the street-side "fu" signs, or the Chinese character of fortune, that are ubiquitous during the holidays.
To attract users, the two digital wallets are also locked in a competition for offline payment points for businesses such as restaurants, supermarkets and department stores. Therefore, both platforms turned to third-party services providers who specialize in "offline promotion" and merchants services for potential offline business growth.
For example, WeChat announced in April a plan to attract third-party services providers with more than 300 million yuan in investments. Alipay also plans to provide 1 billion yuan in rewards to third-party services providers over the next three years.
But behind the tit-for-tat competition, both Alipay and WeChat have broader ambitions.
One is the collection of big data related to transactions, which enable those platforms to invent and tailor financial services such as marketing strategies, investment and loans to their clients, Liu said.
Tencent has been struggling with how to generate revenues based on its huge consumer bases. In an interview with Caixin magazine in January, Huang Li, director of WeChat Payment, refused to elaborate on the business blueprint for the platform, only noting that the company is considering a strategy "as a whole."
In the near future, the country's third-party payment market will face greater regulatory control.
In January, the People's Bank of China (PBC) announced a new regulation that requires third-party payment companies to deposit clients reserve funds in bank accounts that do not generate interest. The new rules are intended to ensure institutions do not put the money into "risky" financial services. It is expected to takes effect in April.
An Alibaba spokesperson refused to comment on the policy's effect on its business. He said that the company "welcomes the policy and will actively impose it."
According to a report published by research firm TrendForce, following the policy implementation, major domestic payment providers, including Alibaba and Tencent, will suffer a blow, as the policy prevents them from using the funds to generate interest income or grow their business.
But Li disagreed. "Large-scale firms do not rely on interest from client funds. So the new measures will only hurt small third-payment firms."
Yet the policy is likely to tip the scales in UnionPay's favor, Li noted.
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