Alibaba Group Holding is pioneering a new manufacturing concept: the Xunxi digital factory, where artificial intelligence (AI), robotics and other advanced technologies are used in the production process. The Global Times published a report on an Alibaba factory in Hangzou producing tailor-made clothes. Designers can view analog renderings of so-called digital fabrics on a computer screen, without the need for a time-consuming dyeing process. Garment workers have high-tech assistants, such as AI-enabled cutting machines and networked sewing equipment, which help them to fine-tune their work. Managers can track progress remotely on a computer or via a mobile phone, without the need to stay on site.

Powered by Alibaba’s cloud computing infrastructure and Internet of Things (IoT), the Hangzhou-based factory, which was unveiled in September after three years’ preparation, offers small- and medium-sized enterprises (SMEs) a digitalized end-to-end manufacturing system that allows for fully-customized, demand-driven production. The data and technology used by the Xunxi factory lead to enormous reductions in lead times. It usually takes 90 days for the goods to be ready for delivery to stores. Now they can decide which products to manufacture and the scale of production within just two weeks, thus reducing the accumulation of inventory. Alibaba claims to be able to reduce the order delivery time by 75% through its solution.

Digitalization is clearly one of the leading strategic priorities for companies globally, according to a report by Baker McKenzie. Moreover, the Covid-19 pandemic has accelerated this trend, while competitive pressures increase. Data from the Chinese Ministry of Industry and Information Technology (MIIT) showed that the added value of the manufacturing industry in 2019 reached CNY26.9 trillion, accounting for 28.1% of the world’s total, helping China remain the world’s largest manufacturing country for ten consecutive years. But after 40 years of development, this model is gradually facing challenges. The labor shortage in domestic manufacturing has increased year by year, and rising labor costs have further led to a new round of production migration to Southeast Asian countries with lower labor costs.

China aims to promote the modernization of its industrial chain, and improve the quality, efficiency and core competitiveness of its economy. “Data is the core of new manufacturing and harnessing data insights is the key to capturing new opportunities in the shift in consumer preference for personalized rather than mass-produced goods. New manufacturing transforms traditional manufacturers with data-driven intelligence and technology to move toward a more agile model of production based on real-time demand,” said Alain Wu, CEO of Xunxi Digital Technology Co. under Alibaba Group.

The apparel industry is the starting point of Alibaba’s Xunxi model, as it is one of the biggest product categories on Alibaba’s platforms, facilitating the sale of one out of every four pieces of clothing purchased in China. Wu noted that the factory can help businesses better understand changing consumer preferences, reduce research and development (R&D) costs and capture the fast-evolving opportunities around personalized manufacturing. In the past, excess inventory has led to a 30% loss in revenue across the industry. Alibaba said that its ultimate goal is to become a one-stop production solution provider for apparel merchants on its Taobao and Tmall markets.

On September 14, 2020, the World Economic Forum (WEF) included Alibaba’s Xunxi in its Global Lighthouse Network. Lighthouse factories are at the forefront of the world in large-scale adoption of new technologies, and they have excellent and in-depth innovations in business processes, management systems, and industrial internet and data systems, the Global Times reports.

The fifth plenum of the 19th Central Committee of the Chinese Communist Party (CCP) adopted a resolution on the 14th Five Year Plan (2021-25), which in March 2021 will be submitted to the annual session of the National People’s Congress (NPC), China’s legislature, to be turned into a legal document. The resolution also included long-range economic objectives for the economy till 2035. While the full details of the plan will only be published in March next year, the broad outlines are already being discussed in Chinese media. Further developing the domestic market and promoting the Belt and Road Initiative (BRI) abroad are two of the highlights of the plan. Moreover, there is a strong emphasis on innovation and China’s own technological development to become less reliant on foreign technology and on the promotion of a green economy which by 2060 should be carbon neutral.

China’s leaders also promised to actively participate in the reform of the global economic governance system. China will widen market access for foreign enterprises and turn itself into a “gravitational field” that attracts the world’s high-quality production factors and resources and a fertile ground for foreign investment by building a market-oriented, rule-based and international business environment, the China Daily reports. Contrary to previous five-year plans, the 14th Five Year Plan did not include an annual growth target, which was set at 6.5% in the in the 13th Five Year Plan.

Two of China’s new development strategies outlined in the plan are the “dual circulation” model – with a focus on domestic demand – and the innovation-driven core national strategy – which calls for major breakthroughs in core technologies. Both strategies have been widely discussed domestically and globally as a major shift in China’s development strategy. At the first ever press conference organized by the Central Committee of the Chinese Communist Party (CCP), Han Wenxiu, Deputy Director of the Office of the Central Commission for Financial and Economic Affairs, said that “dual circulation” does not mean “only domestic circulation,” and that China will continue to open up its market at a higher-level to foreign businesses. “No matter how the international situation changes, we will never waver in our basic national policy of opening-up,” Han said.

The communique mentioned the words “reform” and “opening-up” more than 20 times, which sends a clear message to the world that China will stick to deepening reforms and expanding opening-up to enhance mutual benefits and win-win cooperation with other countries, Foreign Ministry Spokesman Wang Wenbin said at a news conference. John Ross, former Director of economic and business policy for the Mayor of London and currently a Senior Fellow at the Chongyang Institute for Financial Studies at Renmin University of China, said he believes China will remain committed to economic globalization, which is the best road for global development. Koh King Kee, President of the Center For New Inclusive Asia, a Kuala Lumpur-based think tank, said that the blueprint promotes green and high-quality development while pushing for more balanced growth through rural vitalization, urbanization and coordinated regional development. Ning Jizhe, Vice Chairman of the National Development and Reform Commission (NDRC), said that “The country will comprehensively promote consumption toward the green, healthy and safe spectrum, develop service consumption and encourage new consumption models and new business forms. We will place more emphasis on promoting the stability of policies and market expectations as well as on smoothing out economic circulation”.

Since the reform and opening-up policies were adopted over four decades ago, China’s economy has heavily relied on revenue from exports based on its massive manufacturing sector as well as investments in roads, railroads and other infrastructure. Up until 2006, exports still accounted for over 35% of China’s GDP, but that proportion dropped to a little over 17% in 2019 – meaning about 83% of GDP came from internal circulation, experts said. While external factors may have played a role in that decline, the chief reason was the rapid rise of China’s consumption power following decades of wealth accumulation. China’s per capita GDP exceeded USD10,000 in 2019, the urbanization rate reached 60%, and the population of the middle-income group surpassed 400 million. In 2019, Chinese shoppers spent about CNY41.2 trillion on consumer goods, contributing nearly 58% to China’s GDP growth that year, the Global Times reports. “We have said that China had a chance to surpass the U.S. as the world’s largest consumer market, and the epidemic might lead China to inch closer to, and even slightly exceed, the U.S. domestic market,” He Maochun, Professor at the Institute of International Studies of Tsinghua University, said, noting that sluggish production, epidemic impact, trade policies, and unemployment have seriously undermined U.S. spending power.

The transaction volume of technical contracts in China exceeded CNY2 trillion for the first time in 2019, setting a record high. This reflects the market’s huge demand for technologies and shows the great potential of the nation’s technical market. China will expand international scientific cooperation on climate change, energy, public health and other topics of global concern by setting up new research funds to support scientists around the world to jointly tackle these subjects, Wang Zhigang, Minister of Science and Technology, said. At the same time, China will strengthen intellectual property protection, optimize its legal and policy environment to support research and innovation and provide more opportunities and convenience for foreign scientists to work in the country. He added that planners placed self-reliance in science and technology at the forefront of all projects in the five year plan, but that this does not mean that China is closing itself off from the world, the China Daily reports.

The number of Chinese billionaires is increasing at a record pace – despite the effects of the coronavirus pandemic – thanks to booming share prices and new stock listings, according to the Hurun China Rich List 2020 published last week. There were around 2,400 individuals with a net worth of more than CNY2 billion in August, giving them a combined net worth of USD4 trillion – more than the annual gross domestic product (GDP) of Germany. More wealth was created this year than in the previous five years combined, with China’s rich-listers adding USD1.5 trillion, roughly half the size of Britain’s GDP. Jack Ma, founder of Alibaba, retained the top spot for the third year in a row, with his personal wealth jumping 45% to USD58.8 billion partly due to the impending mega-listing of fintech firm Ant Group. Ant plans to raise an estimated USD35 billion through a dual listing in Shanghai and Hong Kong. Jack Ma was followed by Ma Huateng (USD57.4 billion) of gaming firm and WeChat owner Tencent, who made an extra 50% despite concerns about his firm’s U.S. prospects.

Booming stock markets and new listings have created five new dollar billionaires in China each week for the past year, said Rupert Hoogewerf, the Hurun Report’s Chairman. “The world has never seen this much wealth created in just one year. China’s entrepreneurs have done much better than expected. Despite Covid-19 they have risen to record levels”, Hoogewerf said. China has accelerated capital market reforms to aid a virus-hit economy and accelerate economic restructuring. To expedite initial public offerings (IPOs), regulators launched a U.S.-style IPO system on Shanghai’s Nasdaq-style STAR Market and Shenzhen’s ChiNext. Chinese corporate listings in Hong Kong and on Nasdaq have also turbocharged the fortunes of company founders. Zhong Shanshan, who recently listed his bottled water maker Nongfu Spring Co in Hong Kong, shot straight into the top 3 with USD53.7 billion. The wealth of He Xiaopeng surged 80% to USD6.6 billion after the listing of his electric vehicle maker Xpeng Motors in New York during the summer.

The report also highlights China’s accelerated shift away from traditional sectors like manufacturing and real estate, toward e-commerce, fintech and other new economy industries. Wang Xing, Founder of food delivery app Meituan, quadrupled his wealth and jumped 52 places to 13th in the list with USD25 billion, while Liu Qiangdong, Founder of online shopping platform JD.com doubled his fortune to USD23.5 billion. Health-care entrepreneurs also moved up the list on the back of the pandemic, with Jiang Rensheng, Founder of vaccine-maker Zhifei, tripling his value to USD19.9 billion. The coronavirus boosted the fortunes of Alibaba’s Ma and other internet entrepreneurs as the shutdown to fight the virus propelled demand for online shopping and business tools. The fortune of Eric Yuan of California-based video conference platform Zoom rose by more than USD10 billion to USD16.2 billion, the Shanghai Daily reports.

China will remain steadfast in opening up to the world, and continue to ease market entry to the services sector and expand imports of high-quality services, Chinese President Xi Jinping said at the Global Trade in Services Summit of this year’s China International Fair for Trade in Services (CIFTIS), the first major offline international trade fair in China following its effective containment of Covid-19. “It is against such a backdrop that China decided to hold this important international trade event despite many difficulties in preparation,” Xi said. “It shows China’s willingness to join hands with all of you in this trying time, and work together to enable global trade in services to thrive, and the world economy to recover at an early date.”

China’s services sector remains strong, boosted by the first employment increase since January. The Caixin/Markit services purchasing managers’ index fell slightly to 54.0 in August from 54.1 in July, which was the highest reading since April 2010, but still remained positive for a fourth consecutive month. “The Caixin China General Services Business Activity Index came in at 54 in August, almost the same as the previous month‘s 54.1. The ongoing resumption of work and normalization of market demand continued to promote the post-epidemic economic recovery,” said Wang Zhe, Senior Economist at Caixin Insight Group. The official non-manufacturing PMI expanded at its fastest pace since January 2018 last month with a reading of 55.2 for August, up from 54.2 in July. China will import more than USD10 trillion worth of services over the next 15 years. During the past 15 years, the average annual growth rate of China’s service trade exports reached 9%, 2.9 percentage points higher than the global level. During that period, China imported USD4.5 trillion worth of services, contributing 12.9% to the growth of global service trade imports. In 2019, there were 17 service trade pilot zones in China, and their trade volume accounted for over 75% of the national total. This year, the number of service trade pilot zones will increase to 28.

The industrial sector’s share of China’s GDP could drop to 35% by 2025 from 39% in 2019, while the share of the services sector is expected to rise to about 60% in 2025 from 53.9% in 2019. The contribution of China’s digital economy to the national economy is projected to rise from about 6% in 2019 to 11% by 2025.

The 2020 China International Fair for Trade in Services (CIFTIS) was held in Beijing from September 4 to 9, the nation’s first major in-person gathering in the sphere of international economic and trade since the epidemic began. Sub-forums were organized on such topics as digital trade, financial services, tourism, 5G, and culture and sports. New technological applications from over 50 companies and institutions including General Electric, Huawei, Qualcomm, Standard & Poor’s, Baidu and iFlytek were unveiled during the event. The fair highlights Beijing’s accelerated efforts to deregulate its services trade, Li Jun, Director of the Institute of International Trade in Services at the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce (MOFCOM) told the Global Times. The gathering created “a global platform” for services providers to tap into an increasingly important part of China’s trade. The nation’s services exports shrank 2.2% year-on-year to CNY912.79 billion in the first half, while its imports of services were down 21.7% to CNY1.31 trillion. The decline was mostly attributed to shrinking imports and exports of travel services during the period, as coronavirus lockdowns and social-distancing rules were implemented across the globe to restrict mobility. Both imports and exports of knowledge-intensive services, accounting for more than 40% of total services trade – such as financial services, telecoms, computers and information services – recorded a gain in the first six months. China’s move to give overseas investors more access to financial services is a notable example of its staunch support for free services trade, setting it apart from a rising wave of protectionism, Li commented.

Citibank (China) Co announced it has received a domestic fund custody license from the nation’s securities regulator, making it the first U.S. bank to be granted such a license. With the license, Citi can build additional value-added services around custody, such as fund administration and other outsourcing services, Vicky Tsai, head of securities services for Citi China, told the Global Times. “In anticipation of an influx of global financial institutions setting up in China, where the aggregate scale of assets managed in mutual funds, wealth management products and other programs now reaches approximately USD16 trillion, Citi has been investing heavily in its local custody, clearing and fund services capabilities,” Tsai said, adding that the license enables the U.S. bank to support its global clients in their custody needs as they enter one of the world’s fastest-growing fund markets.

China avoided a recession after its economy grew by 3.2% in the second quarter of 2020, indicating a recovery from the damage caused by the coronavirus pandemic. The economy had shrank by 6.8% in the first three months of the year, the first contraction since the end of the Cultural Revolution in 1976. The median forecast of analysts polled by Bloomberg had predicted growth of 2.4% in the second quarter. However, despite the rebound in the second quarter, the Chinese economy still shrank by 1.6% year-on-year in the first half of the year. The data confirmed that China will probably be the first major economy to achieve positive economic growth, with the United States, the European Union as well as Japan still struggling to reopen their economies. At the National People’s Congress (NPC) session in May, Premier Li Keqiang did not set an economic growth target for 2020.

In other figures released by the National Bureau of Statistics (NBS), industrial production rose by 4.8% in June after a 4.4% rise in May. Retail sales fell by 1.8%, better than the 2.8% decline in May. Fixed asset investment (FAI) fell 3.1% in the first six months of the year, an improvement from the 6.3% decline in the first five months. The surveyed jobless rate in urban areas stood at 5.7% in June, down from 5.9% in May and the recent peak of 6.2% in February. China’s government has set a target of creating 9 million new urban jobs in 2020, compared to 11 million last year, the South China Morning Post reports.

The internet and the digital economy are emerging as the new forces driving China’s economic development with faster growth of new industries, new forms of business and new business models, the NBS said. The China New Economic Driver Index, which measures the performance of the digital economy, jumped 23.4% in 2019 from a year earlier to 332 points. The Internet Economy Index, one of the five sub-indexes, surged 42% to 856.5, to contribute 80.5% to the growth of the combined index last year. The number of mobile internet users in China had reached 1.32 billion by the end of 2019, up 3.5% year-on-year. The country also recorded CNY34.8 trillion in e-commerce transactions in 2019, up 10.1% from a year earlier. Those transactions reached CNY1.99 trillion, an increase of 12.4% over the previous year. The sub-index for innovation-driven development rose 15.6% year-on-year to 201.4. National expenditure on research and development (R&D) was equivalent to 2.19% of GDP in 2019, 0.05 percentage points higher than the previous year. The number of patents granted per 10,000 R&D personnel reached 3,448, up 1.5 times from 2014. The overall value of contracts in the technology market increased by 26.6% in 2019. The other three major sub-index for economic vitality, human resources, and transformation and upgrading increased by 7.4%, 8.3% and 1%, respectively, from the previous year, the Shanghai Daily reports.

Real estate investment in Shanghai plunged 48% in the first half of 2020 to around CNY39.8 billion, according to a reports by Savills. “For the rest of this year, transaction volumes are expected to pick up as long as motivated sellers adjust pricing to meet the needs of investors who are currently sitting on the sidelines,” James Macdonald, Senior Director of Savills China Research said.

China’s foreign trade rose 5.1% year-on-year in June, with exports growing by 4.3% and imports by 6.2%. In the first half of 2020, overall foreign trade shrank by 3.2% year-on-year to CNY14.24 trillion due to the Covid-19 pandemic, with exports valued at CNY7.71 trillion, a drop of 3% from a year earlier, while imports fell by 3.3% to CNY6.53 trillion, the General Administration of Customs said. Director Li Kuiwen said that despite the overall foreign trade figure moderating in the six-month period, China’s foreign trade has been rebounding to achieve positive growth for three consecutive months since April. China’s foreign trade imports and exports added up to CNY7.67 trillion in the second quarter, down 0.2% year-on-year, but the decline narrowed compared with the 6.5% drop in the first quarter. China’s foreign trade with ASEAN topped CNY2.09 trillion, an increase of 5.6%, to account for 14.7% of China’s foreign trade in the first six months. Trade with the European Union added up to CNY1.99 trillion, down 1.8%. Trade with countries along the Belt and Road dipped 0.9% to total CNY4.2 trillion. In the first half of the year, private enterprises contributed CNY6.42 trillion to China’s exports and imports, up 4.9% year-on-year, accounting for 45.1% of the total foreign trade value, which was 3.5 percentage points higher than in the same period last year. Foreign-invested enterprises contributed CNY5.55 trillion to China’s foreign trade, accounting for 39%. State-owned enterprises accounted for 15.6% of the total.

Bilateral trade between China and the U.S. in the first half of the year fell 6.6% year-on-year. From January to June, China’s exports to the U.S. plummeted 8.1% to CNY1.25 trillion, while imports from the U.S. were down 1.5% to CNY395.62 billion, according to customs data. The U.S. is China’s third-largest trading partner. The trade figure would have been much lower if China hadn’t bought substantial amounts of soybeans to meet its promises in the phase I trade deal with the U.S. In total, China imported 45.04 million tons of soybeans in the first half of this year, up 17.9% on a yearly basis.

Foreign direct investment (FDI) saw an 8.4% year-on-year increase in the second quarter. In June, FDI inflows expanded 7.1% year-on-year to CNY117 billion. While FDI fell 1.3% in the first half to CNY472.18 billion, the decline narrowed by 9.5 percentage points from the first quarter. FDI from Singapore jumped 7.8% and from the United States by 6%. In the first half of 2020, China’s non-financial outbound direct investment (ODI) fell 0.7% year-on-year to CNY362.14 billion, the Ministry of Commerce (MOFCOM) said.