The return of optimism

With many industrial segments recovering, the Year of the Rooster promises to help the real economy shake off recent troubles and crow again

Economy trackers are highlighting facts and figures to indicate that the Chinese economy is entering 2017 on a strong footing - eclipsing last year's tepid data and unstable financial markets.

For instance, the Purchasing Managers' Index, or PMI, jumped to its highest mark in more than two-years to 51.7 in November, beating economists' expectations. Construction and consumer services hit their highest mark since mid-2014.

More glad tidings are coming from the energy industry, especially its renewable power segment, innovation, pharmaceuticals, overseas mergers and acquisitions and the Belt and Road Initiative, along with measures like supply-side reforms to reduce excess industrial capacity and shed nonviable assets.

To prevent money from pouring into speculative bubbles like equities and property, Beijing has prioritized the real economy as a major drive for sustainable and healthy economic growth, according to the Central Economic Conference in December, which set the tone for economic development in 2017.

These are now seen as positives that could well outweigh concerns like capital outflows, a depreciating currency and rising labor costs.

Gao Qiang, general manger of Shanghai Ruijia Industry Co, an electric toolmaker, says he expects the New Year to be decisive for the company and the Chinese economy.

Ruijia began destocking its AC-powered gardening tools, which represented 90 percent of its inventory, late last year. Instead, it began focusing on new-energy technologies. The efforts are beginning to pay off.

"Customers from the US and Europe flocked to the company's booth, steering clear of AC-power tools and checking prices of tools that use new-energy technologies," Gao reported in November after returning from the China Import and Export Fair in Guangzhou, Guangdong province, the country's largest trade event.

The government's call for industrial upgrades has propelled Ruijia, a 50 million yuan ($7.3 million; 6.8 million euros; 5.8 million) business in rural Shanghai, to embrace renewable energy. "The year 2016 was the nadir for many manufacturers like us. With constant innovation and upscaling, we are already seeing signs of recovery," Gao says.

Ruijia, he says, has already secured three orders from Spain for delivery this year.

Such signs of recovery are emerging all across the $10 trillion-plus economy, which is bouncing back from last year's sagging export manufacturing that created a drag on growth, experts said.

For instance, hectic deal-making activity at PowerArk Group, a photovoltaic firm, kept founder and chief executive officer Brendan Li awake late at night in the runup to Spring Festival.

PowerArk inked major deals with Chinese and Dutch buyers in January. The firm first established its business in Australia in 2011, and made its name as one of the largest authorized solar panel distributors and wholesalers there.

"No other market can rival China in terms of starting a new business, turning it profitable and at the same time contributing to social progress," says Li, who is now overseeing the firm's ambitious plan to list in the next three years.

The explosive growth in energy demand has inspired China to develop clean energy, while optimizing its energy mix, Li says. The photovoltaic industry has greater potential as solar energy is easier to access than other new energy sources like wind, biomass and nuclear, she said.

China is expected to continue to be the world's fastest-growing solar PV market through 2020, according to the National Energy Administration. The ambitious push for renewables is supported by a host of policies and regulations such as the PV Pioneer program, which encourages energy efficiency and domestic renewable energy deployment.

"Thanks to government policies and the ongoing education of the market, the time is ripe for China's PV industry to take off," says Li, who remains bullish that the 500 million yuan business will reach a broader customer base in three years.

Perhaps, China's power industry and related segments exemplify the current sense of optimism more than others. Qi Yifu, president of Delixi-Electric, a low-voltage electrical products and solutions provider, knows how cutting-edge technologies can be more than just cash cows.

The company, headquartered in Anhui province, together with parent Delixi Group, has provided more than 160 patented technologies for the Shenzhou V and Shenzhou VI spacecraft launch projects.

Switch gears, circuit-breakers and transformers manufactured by Delixi have been widely applied in the launch process and in radars, missiles and tracking. "The implementation of supply-side structural reforms creates a favorable macro climate for the whole low-voltage electric industry," says Qi, whose company exports to more than 50 countries.

To outperform its peers, Delixi has established its first authorized retail network and an e-service platform to offer customers a one-stop shopping experience. It is also leveraging big data analysis, a rarity in the low-voltage electricity industry around the world.

Such openness to adopting new processes and mindsets marks Chinese businesses wishing to accomplish the daunting task of going global.

For instance, Luye Pharma, which started out as a maker of traditional Chinese medicine, is now betting on new formulations of drugs for neurological and psychiatric disorders, as well as international partnerships, to attain its goal of becoming one of the world's top 100 pharmaceutical firms by 2020.

hewei@chinadaily.com.cn

(China Daily European Weekly 02/17/2017 page26)