The Chinese stock market may outperform the housing market in the next decade, reversing the trend seen in the previous decade, economists said. Discussions on whether investors should “sell housing to buy stocks” have spread across domestic media recently. in the past decade this strategy was not successful. From 2008 to 2018, the benchmark Shanghai Composite Index halved to 2493.90 points. In sharp contrast, the price of second-hand properties increased 3.6 times on average in China’s first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, according to real estate agency Centaline Property.

As of February 21, the Shanghai Composite Index was up 10% this year, with turnover doubling to more than CNY200 billion per trading day. Meanwhile, the total area of properties sold in 30 major cities declined 14% year-on-year in January, according to Shanghai-based housing market data provider CRIC. Dong Dengxin, Director of the Finance and Securities Institute at the Wuhan University of Science and Technology, said financing stock investments by selling properties is too radical for many investors. “Family wealth should not be allocated largely on one type of asset.” “But, over the next decade, the Chinese stock market will offer more investment opportunities than the housing market”, as excessive money supply – the major driver of property prices in the past decade – will not continue. “In the next decade, the housing market will remain stable and be effective in preserving wealth. Room for appreciation will fluctuate with the growth in broad money supply, or M2,” Dong said.

Jiang Chao, Chief Economist at Haitong Securities, said decelerated money supply growth will weaken inflation expectations and thereby the attractiveness of real estate, which outperforms financial assets during inflationary times. Moreover, properties now have the highest valuation among major asset categories in China, whereas stocks are the cheapest.

Yang Delong, Chief Economist at Shenzhen-based First Seafront Fund, added that as China’s economic upgrade deepens over the next decade, the competitive landscapes of various industries will become more dominated by top players, whose profits will continuously grow and buoy the stock market. In the mid term, the A-share market is likely to see an overall positive performance this year amid policies to bolster growth and the growing profits of listed companies, said Gao Ting, head of China Strategy at UBS Securities. But short-term stock market fluctuations are still inevitable, the China Daily reports.

The Port of Shanghai, the world’s largest port by TEU volume, has announced it will cooperate with the Port of Ningbo, the world’s largest port by cargo turnover, in the development, operation and management of the northern part of the Xiao Yangshan port area, which could significantly boost the efficiency of cargo transit on the Yangtze river, and lower costs. The operators of the two ports, Shanghai International Port Group (SIPG) and Zhejiang Seaport Investment & Operation Group, reached an agreement to cooperate on the comprehensive development of the northern Xiao Yangshan area. Zhejiang Seaport Group will invest CNY5 billion in Shanghai Shengdong International Container Terminals Co, a wholly-owned subsidiary of SIPG. Following the investment, SIPG will hold 80% of the JV, with Zhejiang Seaport Group retaining the remaining 20%.

Up to 70% of Shanghai port’s throughput comes from the Yangtze River Delta region, and nearly half of the goods in Yangshan require additional transportation by water. In the operational southern side of Yangshan port, no berths are set aside for feeder vessels, which has hampered its efficiency and economic performance, said Liu Ming, Deputy General Manager with a logistics company under SIPG. “Feeder ships for regional transportation have to wait for a berth to reach their destinations, which is a waste of time and money,” said Zhou Dequan, Research Director from the Shanghai International Shipping Institute. The northern side of Xiao Yangshan, though not as deep as the southern side, could well be developed into an international transportation hub for transition between rivers across the region, Fang Huaijin, Vice President of Shanghai International Port Group, said.

As development of the northern side of Xiao Yangshan starts, the first phase of the project will extend 1.2 km along the coastline, and have a total turnover capacity of 3.5 million to 4 million TEU, according to SIPG Chairman Chen Xuyuan. Compared to road transition, transport by water will lower costs by CNY200 to CNY300 per TEU, and shorten the logistics procedure, the China Daily reports.

As the Chinese government is reducing subsidies for sales of new-new-energy vehicles (NEVs), some manufacturers have raised prices to safeguard their profits, but analysts expect that prices will drop again eventually. The subsidy may drop as much as 50% from the previous year, which means CNY70,000 less for one electric car sold. Startup Xpeng Motors has announced that the selling prices of its first model Xpeng G3 will increase to CNY155,800-199,800 from CNY135,800-165,800 at the beginning of this month, up almost 15%. Sitech Dev, another startup based in Guizhou province, has raised the prices of its first model DEV1 by CNY5,000 to CNY6,000 since January 24. Shanghai-based Nio has been coaxing potential customers to place orders as early as possible to prevent price hikes. Nio announced that the customers can enjoy the same subsidy as in 2018 as long as they buy a Nio ES8 this month and get the license plate before the release of the 2019 national new energy vehicle subsidy policy. BYD, China’s leading electric vehicle maker, has similar measures: car buyers who get the license plate before March will receive the same subsidy as they would have in 2018.

Yu Qingjiao, Secretary General of the Zhongguancun New Battery Technology Innovation Alliance, said that price hikes will not become a trend, but a temporary phenomenon, and the prices of new energy vehicles will decline as a whole, as upstream industries, including the battery, electric motor, electric control and intelligence system, have lowered their costs steadily, and market competition may get more intense as Tesla finishes the initial construction of its Shanghai Gigafactory by summer. As a result, Chinese electric carmakers will have to lower prices to keep and enhance their product competitiveness, Yu added.

According to a report by Ways – a provider of business analysis for the automotive industry in China – the cost of the power battery system was CNY3 per watt-hour in 2015, CNY1.2 in 2018, and is expected to be reduced by 20% by 2020, which means that the cost of an electric vehicle with a 60-kilowatt-hour battery is estimated to drop by CNY20,000 to CNY30,000.

A Senior Executive of BYD said that with the gradual reduction and final elimination of government subsidies and the rapid upgrading of the new energy industry, carmakers without core technology or comprehensive competitiveness are very likely to fall behind. Those over-reliant on subsidies and without any ambition and capability to develop valuable new energy products will be squeezed out of the market, the China Daily reports.

China’s innovation-driven development strategy has put down strong roots and has a promising future with the guidance and support of the central government, Gan Yong, former Vice President of the Chinese Academy of Engineering (CAE) said, adding that he had seen many scientific breakthroughs over the last six years and had high expectations for the future of technological development. Gan said China’s strengths in core technology research were too widely dispersed, and he urged the establishment of a generic research and development platform to pool the advantages and boost China’s international competitiveness. He said he believed opto-electronic devices and microprocessors would be among the most competitive areas internationally, with artificial intelligence (AI) being the key technological trend.

Chinese President Xi Jinping three years ago already described the innovation-driven development strategy as a fundamental measure to accelerate and invigorate the country’s economic transformation. The President also said that China must be bold in exploring some key areas of science and technology. Meanwhile the Chinese government released an outline for China’s innovation-driven development, underlining the crucial role of advancing mass innovation and entrepreneurship and pledging that China will become an “innovation country” by 2020 and a global “innovation leader” by 2030.

The country’s commitment to innovation has already led to a number of scientific achievements, such as the world’s first quantum communications satellite, Micius, which was launched in 2016, and the completion of one of the world’s most powerful supercomputers, Sunway TaihuLight. The Global Innovation Index 2018 – published by Cornell University together with the World Intellectual Property Organization (WPO) and business school INSEAD – listed China among the world’s 20 most-innovative economies. It ranked 17th, up from 22nd in 2017.

Wan Jianmin, Vice President of the Chinese Academy of Agricultural Sciences, pointed out breakthroughs
in basic agricultural research: genetically modified insect-resistant cotton helped reduce the use of pesticides by more than 900,000 metric tons, and new varieties of disease-resistant corn, wheat and rice have greatly reduced the annual use of pesticides. “Now it is mainly the government that invests in agricultural science and technology innovation, because agriculture is not considered a profitable industry and progress comes slowly,” Wan said, as reported by the China Daily.

Shanghai posted rapid growth in attracting foreign funds in January, with the number of new foreign-funded projects jumping 69.1% year-on-year to 563 in the month. Total contracted foreign investment in Shanghai surged 197.6% to USD10.97 billion, and the actual use of foreign capital rose 33.5% to USD1.422 billion, according to the Shanghai Commission of Commerce.The robust development of foreign investment in January was boosted by the rapid growth in the foreign-funded services industry. In January, the services sector saw 552 foreign-funded projects newly launched in the city, posting actual foreign investment of USD1.284 billion, an increase of 24.8% over the same period last year. The sector accounted for 90.3% of the overall foreign investment, becoming the main force for growth.

The commercial services industry received USD645 million of foreign investment, an increase of 66.5% from a year earlier, accounting for 45.4% of the market, while the science and technology services industry attracted USD146 million, up 263.8% to account for 10.3%. The real estate sector and trade were also among the major areas of investment. The manufacturing sector also saw actual foreign investment surge 315.7% to USD126 million, accounting for 8.8% of the total. The manufacturing sector saw two mega projects: Sisal Chemical received USD58.37 million, and newly set-up BHSENS posted an actual use of USD16.91 million.

Meanwhile, Shanghai witnessed the establishment of four new regional headquarters by multinational corporations, two new foreign investment companies and two more foreign-funded research and development (R&D) centers. By the end of January, a total of 674 regional headquarters of multinational corporations had been set up in Shanghai, among which there were 90 Asia-Pacific headquarters.

Shanghai’s efforts in optimizing the business environment and enhancing the efficiency of government services were the major driving forces for the surge of foreign investment in January, the Commission said. In 2018, the city launched a total of 5,567 foreign-funded projects, 41.7% up from the previous year, with the support of preferential policies, including the city’s “100 measures” aimed at promoting opening-up and attracting new foreign investment, the Shanghai Daily reports.