中國-休閑商品與服務(wù)業(yè)-中國旅游、住宿與休閑業(yè)：市場情緒將走向何方

c GlobalResearch

11March2019Equities Equities ChinaLeisureGoods&ServicesXinChen+86-213-8668864IngridZhang+86-213-8668853+86-213-8668872EdwinChen,+86-105-8328186Titus+86-105-8328777HerbertLU+86-213-8668873UBSEvidenceLabinside:Whereissentimentheading?Industryoutlookremainschallenging,butrisksareskewedtotheupsideUBSEvidenceLab'slatestsurveyof~3,000domestictravellersfoundthattheYangtze/Pearlriverdeltasareregionsmostaffectedbytradetensionanddeterioratingbusinesssentiment.However,oureconomistsexpecteconomicgrowthtobottominandthesurveypointstoapotentialreboundinbusinesstraveldemand,especiallyintier1cities,encouragedbydomesticpolicystimulusandpositiveprogressduringUS-Chinatradetalks.Weexpectleisuretravelgrowthtoremainresilientandarecautiouslyoptimisticinbusinesstransientdemandrecovery,especiallyinDuty-freeindustryplayerstopmost-preferredlistduetofavourablegovernmentpolicies.Businesstravel:Tier1citiesbottomingout,privatebusinessremainscautiousForeignenterprisesandprivatecompaniespostedthemostsignificantpull-backinbusinesstraveldemandinthepastsixmonths,whichweattributetotheirhigherexposuretotradedisputesanddomesticpolicytightening.Inthesurvey,61%ofrespondentsexpecttotravelmoreonbusinessinthenext12months(upfrom46%intheprevioussurvey),especiallyintier1citiesandamongforeignenterprises;privatebusinessremainscautiousduetoweaksentiment,whichcouldrecoverasaresultofstimuluspoliciesandapositiveUS-Chinatradedeal,themainnear-termswingfactor.LeisuretravelremainsresilientdespitetheeconomicdownturnDomestictouristnumbers10.2%YoYinH218despitemacrochallenges,aslowdownfromthe2012-17CAGRofandinlinewithourestimates.Thoughthesurveyfoundtier1cityrespondentsandhigh-incomeChinesetradeddown,therewerepositivesurprises:1)domesticleisuretravelisstillgainingwalletshare;and2)middle-to-low-incomehouseholdsandtier3-4citiesbeatexpectations.Weexpectdomestictourismrevenuetorise12.3%/12%in2019/20(vs.thepast-5-yearCAGRof14%),helpedbyconsumptionupgradesandimprovingtransportationinfrastructure.Weareselective–ourtoppicksareCITS,ShanghaiAirportandGBIAWepreferCITS,SHAirportandGBIAandraiseourShenzhenAirportPT(reportlink),supportedbytheduty-freeindustryboom.Wealsolikehoteloperators,asthesupply/demandimprovementremainsundervalued,inourview.Amongtouristdestinations,wepreferSongchenggivenitsprovenabilitytoexpandandstrongpipelineandliftPTofOCTonitsgoodpositioninginthesecularchangeoftourismconsumptionandrecoveryoftier1cities'propertysales(reportlink).Figure1:Ourmost-andleast-preferreddomestictravel-relatedstocksCompany Ticker Rating MktCap(US$bn) Lastclose(LC) PT(LC) 18-20EEPSCAGR 19EPE(x)19EPB(x)19EROE(%)MostpreferredCITS601888.SSBuy17.959.5573.3025%296.222.6SHInt'lAirport600009.SSBuy16.256.1963.5010%233.417.6GBIA600004.SSBuy4.113.0113.90-8%281.75.9Jinjiang600754.SSBuy3.523.5735.1021%171.69.6OCT000069.SZBuy8.86.838.0012%50.817.5Daqin601006.SSBuy19.58.4510.004%91.113.3LeastpreferredLijiang002033.SZSell0.66.455.99-5%201.47.1Emeishan000888.SZSell0.66.645.69-7%221.46.5SDHS600350.SSSell3.64.713.80-14%120.86.5CSA-A600029.SSSell15.27.816.60-3%221.46.6Note:Priceanddataasof8March2019;Source:ThomsonReuters.UBS-SestimatesThisreporthasbeenpreparedbyUBSSecuritiesCo.Limited.ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURESBEGINONPAGE46.UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatfirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ChinaTravel,LodgingandLeisureMOSTPREFERREDLEASTPREFERREDCITS,ShanghaiAirport,GBIA,Jinjiang,OCT,DaqinLijiang,Emeishan,SDHS,CSA-APIVOTALQUESTIONSQ:Willdomesticbusinesstransientdemandreboundin2019-20?UBSaintoininaininbypolicystimulusandpositiveprogressduringrecentandasbyofupasmoreQ:Candomestictourismrevenuesustain10%+growthin2019-20?Weforecastdomestictourismrevenuegrowthof12.3%/12%in2019/20,strongerthanthemarket'sexpectationofasingle-digitrate.Despiteslowinggrowthintouristnumbers,thelatestUBSEvidenceLabsurveyfounddomesticleisuretravelisstillgainingwalletshareandtier3-4citiesoutperformedexpectations.arealsoencouragedbytheresilienceoftheChinesemiddleclass.expectseculargrowthdriverstopartiallyoffsetmacroweakness,especiallygivenstrengtheningpolicysupportandconsumptionupgrades.moreUBS-SVIEWResonatingmarketconcernsovermacroweakness,recentUBSEvidenceLabsurveyconfirmedweakerbusinessandleisuretraveldemandinH218,withTier2-4citiesandmiddleclassconsumptionoutperformingexpectations.see1)businesstransientdemandshowingsignsofrecovery,especiallyinTier1cities,SouthChinaandamongforeignenterprises.,butweremaincautiousinH119duetomacrochallengesandtradenegotiationuncertainty;2)leisuretravelexhibitresilienceagainstsoftereconomicbackdropasweexpected,whichwethinkshouldsustainthenextthreeyearsasseculargrowthdriversplayagainstmacroweakness.EVIDENCEBusinesstravel:InUBSlatestnumberofsaidhadin2.5,3inandforeignsawlargerthanotherasindexforthatforSOEsincreased.EastandSouthChinaotherregions,asalargertoexportandcompanies.SinceSeptemberthegovernmenthasaofstimulustoSMEs.DevelopmentIndexhasbeenhasdeclined.Leisuretravel:totheMinistryofandTourism,domesticYoYininlineestimatesandexpectations.UBSEvidencelatestdomesticallocatingagreaterofincomedomesticandtiercityleasttoeconomiccycle.Thealsoagreaterintentiontoinnextmonths,accommodationand2WHAT'SPRICEDIN?OuranalysissuggestsChinatourismcompaniesremainundervalued.US-Chinatradefrictionisthemainfactorweighingoninvestorsentimentandisoverlypricedinatthisstage,inourview.MarketconcernsoverChina'seconomicoutlookshouldeaseaspolicysupporttakeseffect,especiallyiftheoutcomeofUS-Chinatradenegotiationsisbetterthanexpected.ContentsOURTHESISIN4PIVOTAL5Q:Willdomesticbusinesstransientdemand2019-20? 5UBSEvidenceconfirmedbusinesstravel62019outlook:sentimentskewspositive,privatecompaniesandEastChinaremainpressured PIVOTALQ:domestictourismrevenuessustain10%+growth2019-20? 22Amildslowdownbutgrowthstillindigits 23Outlook:macroeffectlikelytospell,butweremainpositiveonseculargrowthSECTORANDSTOCKIMPLICATIONS 38Sectorviews 38Stockrecommendations 40WHAT'SPRICEDChinatourism 41Chinaairports 43Chinarailwayandroadsector 44Chineseairlines 44WewouldliketothankJerryLiu(jerry.liu@)andEricLin(eric-p.lin@)forprovidingsomeoftheinformationusedinthisreport.

XinChen+86-213-8668864IngridZhang+86-213-8668853+86-213-8668872EdwinChen,+86-105-8328186Titus+86-105-8328777HerbertLU+86-213-8668873ChinaTravel,LodgingandLeisure UBS-SResearchOURTHESISINPICTURES returnChangeinnumberoftripstakeninP12M(Dec-18vs.Jun-18)0.50-0.5-1.5nesssureLeinesssureLei-2.5TierTier1TierTierSouthwest&…SOEsForeignenterprisesPrivatecompaniesPublicinstitutionsLowMid

Surveyrespondentsfromtier1cities,EastChinaandprivate/foreigncompaniesreportedthebiggestdeclineinnumberoftripstaken100%

CityTier

Region

Companytype

MHI80%60%40%20%0%

87%4%9%87%4%9%14%15%27%38%58%48%

Privatecompanies

Foreignenterprises/JV

NegativeNoeffectPositiveeffect

UBSEvidenceLab'sCFOsurveyshowsforeignenterprisesandprivatecompaniesarethemostexposedtoUS-ChinatradefrictionShareofhouseholdincomegoingtoleisuretravel(%,P12M)24 23 21.9 212220.121200.2ppt0.2ppt 18.6 18.7 17.618.318.017.317.5TotalMHICityTierRegion181716

19.1LowMidHighTier1Tier2Tier3/4LowMidHighTier1Tier2Tier3/4EastNorthSouthNE

20.8

19.0

SWSW&CentralLowPublicinstitutionsPrivatecompaniesenterprisesSOEsLowPublicinstitutionsPrivatecompaniesenterprisesSOEsSouthwest&CentralTierTier2Tier1sureLeinessBusiMHIRegion typeRegion typeCityTier-10%0% 10%20%30%40%CityTierSourcesforexhibitsabove:NationalBureauofStatistics,UBSEvidenceLab,UBS-SestimatesChinaTravel,LodgingandLeisureUBS-SResearchPIVOTALQUESTIONSreturnQ:Willdomesticbusinesstransientdemandreboundin2019-20?UBS-SVIEWLikely.EvidenceLab'slatestsurveyshowedbusinesstransientdemanddeclinedvs.theprevioussurvey,lessthanthemarketexpected,especiallyintier2-4cities.Thehardest-hitregionsaretheYangtze/Pearlriverdeltas,whichweattributetotradetensionsanddecliningprivatebusinessconfidenceinH218.Wearecautiouslyoptimisticaboutapotentialrecoveryinbusinesstravelfrequencyandbudgetin2019-20,thoughEastChinaandprivatecompaniescouldbelaggards.Weexpectmarketconcernstograduallydissipate,helpedapossibleUS-Chinatradedealanddomesticpolicystimulus.EVIDENCEThenumberofbusinesstripstakenbyrespondentsinP12MfelltoinlatestEvidenceLabdomestictravelsurveyfrom3intheprevioussurvey.Thenumberofbusinesstripstakenbytier1cityresidentsinP12Mfell1.5comparedwiththelastsurvey,muchmorethantheflat/-0.2seenintier2/lower-tiercities.Tier1citytravellers'per-nighthotelbudgetsdecreased28%vs.the-9%/+10%changeforrespondentsfromtier2/tier3-4cities.InthelatestUBSEvidenceLabsurvey,foreign/privately-ownedenterprisesregisteredthebiggestdeclinesacrosscompanytypesintermsofbothnumberofbusinesstripstakeninP12Mandper-nightaccommodationbudget.SOEsandpublicinstitutionsremainedstrongonthesemeasures.AccordingtoChinesecustoms,ZhejiangProvince/JiangsuProvince/ShanghaiinEastChinaandGuangdongProvinceinSouthChinacontributed64%ofChina'stotalexports.Tier1cities'aggregateshareofChina'sexportsin2018was25%,with8%/10%fromShanghaiandShenzhen,respectively.TheSmallandMediumEnterprisesDevelopmentIndex(SMEDI)wasflattishataround93in2018despitethemoderatecontractioninrecentquarters.Meanwhile,theconfidencelevelofentrepreneursatprivately-ownedbusinessesdeclined,whileSOEconfidenceincreased.InNovember,PresidentXiJinpingreaffirmedhissupportfortheprivatesector.SinceSeptember2018,thegovernmenthasintroducedaseriesofstimulusmeasures,includingtaxcuts,supportsforinfrastructureinvestmentfunding,andmeasurestostabilizeemployment.WHAT'SPRICEDIN?US-Chinatradefrictionisthemainfactorweighingoninvestorsentimentandisoverlypricedinatthisstage,inourview.MarketconcernsoverChina'seconomicoutlookshouldeaseaspolicysupporttakeseffect,especiallyiftheoutcomeofUS-Chinatradenegotiationsisbetterthanexpected.ChinaTravel,LodgingandLeisure11March2019c6UBSEvidenceLabconfirmsbusinesstravelhasdeclinedChinaTravel,LodgingandLeisure11March2019c6EvidenceLabconducteditssecondsurveyof~3,000domestictravellersacrosstier1-4citiesinChinabetween14December2018and5January2019.Itfoundthatthenumberbusinesstripstakenbyrespondentsinthepast12months(P12M)edgeddownto2.5,adeclineof0.5comparedwiththeprevioussurvey.Thiscorroboratesthemarket'sconcernthatmacroweaknesshasledtoadecreaseinbusinesstravel.Figure2:ChangeinnumberofbusinesstripstakeninP12M4.0ChangeinnumberofbusinesstripstakeninP12M(Jun-18surveyvs.Dec-18survey)Flat-0.5-2.52.0Flat-0.5+0.2-0.7 -0.7-0.5Tier1 Tier2 Tier3/4 East North Total CityTier NortheastSouthwest&CentralState-ownedcompanyForeign Private-ownedenterprises businessCompanytypePublicinstitutionsNote:"Red"indicatesdecline,"green"indicatesincrease;"grey"indicatesflatSource:UBSEvidenceLabChinaDomesticTravelSurveySkyturneddarkerforChineseeconomyinH218EvidenceLabconductedthefirsteditionofthesurveyinJun2018andthesecondeditioninDec2018-Jan2019.WethinkthesurveyresultsmainlyreflectChina'seconomicwoesinthesecondhalfof2018,particularlythefollowing:US-Chinatradewarescalation:TheUSgovernmentannounced:1)penaltiesagainstZTEon7June;2)a25%tariffonUS$50bninimportsfromChina,withthefirstUS$34bntakingeffecton6July;and3)a10%tariffonanadditionalUS$200bninimportsfromChinaeffective24September.Inan18September2018note,UBSeconomistsestimatethatadditionaltariffsof25%on$50bnplus10%on$200bnofChineseexportswillhavea0.5pptdragonChineserealGDPgrowthinthefollowing12months.Withtheadditionaltariffsgoingupto25%,weestimatethedragtoriseto0.8pptsin2019.Softereconomicgrowthandweakercorporateearnings:domestically,tighterregulationanddeleveragingeffortsinH118sawinfrastructureinvestmentslowedsharplyfrom15%in2017to2%in2018,asautosalesandproductiondroppednotablyonautotaxbreakexpiration.Asaresult,GDPgrowthdeceleratedfrom6.8%in2017to6.6%in2018,withquarterlyGDPygrowthweakeningsequentially.Growthofindustrialprofitsoftenedto4%inH218from17%inH118aseconomicgrowthweakens.Waningbusinessconfidence:TheslideintheChineseentrepreneurconfidenceindexindicatesthattradetensionandeconomicweaknesshavetakenatollonbusinessconfidence,whichinturnhashurtcompanies'willingnesstoinvest.Figure3:China'squarterlyGDPgrowth,2016-18 Figure4:Bothexportsandimportssoftened7.0

RealGDPgrowth%(quarterlyYoY)

Tradebalance(USDbn) Growthrate(%3mma)6.9 6.8 6.7 6.6 6.5 201620172018Mar-16Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-186.4201620172018Mar-16Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18

80Nominaltradebalance(LHS)Nominaltradebalance(LHS) RealimportgrowthRealexportgrowth(adjforover-invoicing)6050403020100-10-20-30-402012 2013 2014 2015 2016 2017 2018

20151050-10Source:Wind Source:CEIC,UBSestimatesFigure5:USD/CNYexchangerate Figure6:IPgrowthmoderatedinQ4,weigheddownmainlybyautoproductionUSD/CNY7.6USD/CNY6.020085.62008

Productiongrowth(%y/y3mma)PowergenerationCementPowergenerationCementCrudeSteelAuto2520151050-10-1520092010201120122013201420152016201720182015 2016 2017 20182009201020112012201320142015201620172018Source:ChinaForeignExchangeTradeSystem Source:Wind,NationalBureauofStatisticsFigure7:OperatingprofitgrowthofindustrialenterprisesdeceleratedinH218

Figure8:ChinaEntrepreneurConfidenceIndex2018operatingprofitgrowthVisibsinceleVisibsinceleeleration20%18%16%14%Feb-18Mar-18Apr-18May-18Jun-1812%Feb-18Mar-18Apr-18May-18Jun-18

1301251201151101051002016-032016-062016-092016-122017-032017-062017-092017-122018-032018-062018-092018-12952016-032016-062016-092016-122017-032017-062017-092017-122018-032018-062018-092018-12Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18ChinaEntrepreneurConfidenceIndexJul-18Aug-18Sep-18Oct-18Nov-18Dec-18Source:Wind,NationalBureauofStatistics Source:Wind,NationalBureauofStatisticsHowhavemacrochallengesaffectedbusinesstravel?PerformancedivergedbetweenSOEsandprivately-owned/foreignenterprisesUBSEvidenceLab'slatestsurveyshowsstate-ownedenterprises(SOEs)andprivate/foreigncompanieshavebeenheadingindifferentdirections:Numberoftrips:Intermsofnumberofbusinesstripstakeninthepasttwelvemonths,privately-ownedandforeignenterprisesbothregisteredadeclineof0.7comparedwiththeJune2018survey.Incontrast,SOEssawanincreaseto3.1from2.9intheprevioussurvey.Accommodationbudget:Thelatestsurveyshoweda15%decreaseinper-nightaccommodationbudgetvs.theJune2018survey,withforeignenterprisesandprivately-ownedbusinessesdown23%/17%,respectively,andSOEsdown14%.Publicinstitutions(governmentorganizations,schools,etc.)sawa5%riseintheirper-nighthotelbudgets.Figure9:NumberofbusinesstripstakeninP12M Figure10:AccommodationbudgetpernightforbusinesstripsinP12MNumberofbusinesstripstakeninP12M3.02.52.01.51.03.02.52.01.51.00.50.0-0.5+0.2-0.7-0.7-0.33.02.9 2.92.6Total State-owned Foreigncompany enterprisesPrivate-ownedbusinessPublicinstitutions

Accommodationbudgetpernight1000 Rmb

Jun-18 Dec-18800 600400200Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-180Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Source:UBSEvidenceLab Source:UBSEvidenceLabSOEsSOEsarelessexposedtoUS-Chinatradefriction.AccordingtoChinesecustoms,intotal,SOEsexported25%/40%asmuchasforeignenterprises/privatecompaniesin11M18.UBSEvidenceLabconductedaChinaCFOsurveyof200manufacturingcompanieswithsignificantexportbusinessorsupplytoexportersinNovember2018(see17December2018note).OverhalfofthesecompaniesarelocatedinChina'sexportregionsandnearlyhalfexportdirectlytotheUS.Inthesurvey,48%ofSOEshadbeennegativelyimpactedbyUS-Chinatradefriction,wellbelowthe58%/87%ofprivatecompaniesandforeignenterprises/jointventures(JVs).ForSOEs,boththebusinessclimateindexandentrepreneurconfidenceindexreboundedinQ418.Figure11:EffectofUS-ChinatradefrictionsFigure12:Figure11:EffectofUS-ChinatradefrictionsFigure12:Totalexportsbycompanytype(2014-18,first11months)100%7Rmbtrn Foreign6 enterprises80% 58%Negativeeffect560%87%4 Private40%companies38%27%Positiveeffect3220%SOEs15% 14% 4%0% 9%0SOEs Private Foreigncompaniesenterprises/JV11M14 11M15 11M16 11M17 11M18Source:UBSEvidenceLabChinaCFOSurveySource:Chinesecustoms1Figure13:2016-18ChinaBusinessClimateIndex Figure14:2016-18ChinaEntrepreneurConfidenceIndexChinaBusinessClimateIndex135ChinaBusinessClimateIndex130125120115110105Mar-16100Mar-16

ChinaEntrepreneurConfidenceIndex135ChinaEntrepreneurConfidenceIndex130125120115110105Mar-16Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18100Mar-16Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Chinaaverage SOEs Privatecompanies Chinaaverage SOEs PrivatecompaniesJun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Source:Wind,NationalBureauofStatistics Source:Wind,NationalBureauofStatisticsPrivately-ownedbusinessesPrivately-ownedbusinessesaremostlysmall-/medium-sizedandaretypicallymoresensitivetocyclicalfactorsthantheirbiggercounterparts.In2018,continueddeleveraging,stricterenvironmentprotectionrequirements,tightersocialsecuritycollection,andotherfactorsputpressureonprivatecompanies.AsevidencedtheChinaBusinessClimateIndexandChinaEntrepreneurConfidenceIndex(Figure13-14),privatecompaniesseemtobestillstrugglingdespitePresidentXi'sNovemberspeechreaffirmingthegovernment'ssupportforprivatebusiness.TheChinaSMEDevelopmentIndex(SMEDI),compiledbytheChinaAssociationofSmallandMediumEnterprises,isanindicatoroftheoverallhealthoftheprivatesector.IttracksSMEs'profitability,macrosentiment,costburdenandfiveotherfactors.TheSMEDIwastepidin2018.Acloserreviewofitssub-indicesshowstheprofitabilityofSMEsdeterioratedinH218andentrepreneursareincreasinglyconcernedaboutthemacroenvironment.Figure15:ChinaSMEDevelopmentIndex Figure16:Sub-indicesofSMEDI97 96 95 94

110 80MacroeconomysentimentindexProfitabilityindex(RHS)2014MacroeconomysentimentindexProfitabilityindex(RHS)20142015201620172018106 7493 92 20142015201620142015201620172018Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4

104 71Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4102 68Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Source:ChinaAssociationofSMEs Source:ChinaAssociationofSMEsForeignenterprisesAsshowninFigure12,in11M18,foreignenterprisesexported4x/1.6xasmuchasSOEsandprivately-ownedbusiness,indicatingtheyaremoresensitivetotradeuncertainty.InUBSEvidenceLab'sChinaCFOsurvey,75%offoreignenterprises/JVsreportedhavingbeennegativelyaffectedbythetradewar.Mostoftheseenterprises/JVshavetakenorplantotakemeasurestolowerspending(suchaslayingoffemployees,cuttingwagesand/orcapex,etc.).Inaddition,morethan80%ofsurveyedforeignenterprises/JVshavemovedorareconsideringmovingexportproductionoutofChina,whichcouldmeanlesscapexand/orbusinessactivityinChina.Figure17:NegativeimpactsofUS-Chinatradewaronforeignenterprises

Figure18:PlantomoveexportproductionoutofChinaAlreadylaidorplantolayoffemployeesAlreadycutwagesAlreadycutdomesticcapexNoneoftheabove

0%20%40%60%80%100%5%20%5%5%20%5%

100%80%60%40%20%

SOEs

Private-ownedenterprises

Foreignenterprises/JVs

Donotknow0%0%1%2%39%20%35%37%61%44%24%ConsideringmovingHavealreadymovedSource:UBSEvidenceLabChinaCFOSurvey Source:UBSEvidenceLabChinaCFOSurveyPublicinstitutionsThenumberofbusinesstripstakenbyrespondentsfrompublicinstitutionsfell0.3intheP12M,betterthantheoverallnationwidedecreaseof0.5.Unlikeothertypesofcompanies,publicinstitutionssawanincreaseinbusinesstraveltotier1cities,withBeijing/Shanghai/Shenzhenshowingsignificantgrowth.ThenotablegrowthwitnessedinShanghai,forexample,waslikelyduetothefirstChinaInternationalImportExpo(CIIE)inNovember2018,whichwasattendedbymanyChinesepublicofficials.EastChinahasbeenweak;SouthChinahasoutperformedexpectationsTheYangtzeRiverDeltainEastChinaandthePearlRiverDeltainSouthChinaaretheeconomicpowerhousesoftheChineseeconomy.UBSEvidenceLab'slatestsurveyondomestictravelshowsthatwhilebothregionsremainthecountry'smostdynamic,thepull-backinbusinessactivityisevident.Figure19:PlacesvisitedonbusinesstripsinP12M-byprovinceFigure20:ChangeinvisitorsreceivedinP12M(Dec-18surveyvs.Jun-18survey)Source:UBSEvidenceLabChinaDomesticTravelSurveySource:UBSEvidenceLabChinaDomesticTravelSurveyEastChinaregisterednotabledeclinesinbothbusinessdeparturesandbusinessvisitorsreceived.However,inSouthChina,thenumberofbusinesstripstakeninpasttwelvemonthswasdown0.4comparedwiththeprevioussurvey,betterthanweexpected.ThedecreaseinGuangdongwaspartiallyoffsetbygrowthinHainanandGuangxiprovinces,whichweattributetofavourablepoliciesintroducedinHainan(seeour16April2018note).Intermsofplacesvisitedinthepasttwelvemonths,EastChinaandSouthChinareceived16%/6%fewervisitorscomparedwiththeprevioussurvey,whileNorth/NortheastChinawerelargelyflat.Figure21:NumberofbusinesstripsinP12M(bydepartureregion)

Figure22:PlacesvisitedonbusinesstripsinP12M3.5

Southwest&Central

60%40%20%0%

East

South3.02.52.01.51.00.50.0-0.5-0.9-0.6-0.4-0.0-0.53.03.02.52.01.51.00.50.0-0.5-0.9-0.6-0.4-0.0-0.53.02.93.0TotalEastNorth South NortheastSouthwest&CentralJun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18Jun-18Dec-18 Jun-18 Dec-18Source:UBSEvidenceLabChinaDomesticTravelSurvey Source:UBSEvidenceLabChinaDomesticTravelSurveyWeattributetheweakerperformanceofEastandSouthChinamainlytotheirrelativelyhighvulnerabilitytotradetensionandprivately-ownedbusinesshealth.TradetensionAccordingtoChinesecustoms,ZhejiangProvince/JiangsuProvince/ShanghaiinEastChinaandGuangdongProvinceinSouthChinaaccountedfor64%China'stotalexportsin2018.TheescalationofthetradewarstartinginJune2018likelymadeentrepreneursinexportregionsmorecautiousintheirinvestmentdecisions,resultinginlowercapexandweakerbusinessactivity.BusinessturnoverattheChinaImportandExportFair(alsoknownasCantonFair)oftenservesasaleadingindicatorofChineseexports.Businessturnovergrowthinthespring/autumnsessionsslowedto0%/-1%in2018from7%/8%in2017.Figure23:BreakdownofChineseexports(2018) Figure24:GrowthofCantonFairbusinessturnovermutedin2018Southwest&Central13%Northeast2%North13%

East40%

YoYgrowthofCantonFairbusinessturnover40% 30% 20% 10% 0%-10% -20% -30% 2005200620072008200920052006200720082009201020112012201320142015201620172018South32%Note:Thebreakdownofexportsisbasedonthelocationoftheenterprise'soperationsratherthanthefinalsettlementlocationSource:Wind,Chinesecustoms

Source:

SpringSession AutumnSessionFigure25:BreakdownofChineseexportsbyvalue(2018)100%90%80%70%60%50%40%30%20%10%

NortheastChina,2%8%2%tralBeij4%3%ing,8%2%tralBeij4%3%ing,Shandong,6%NGuthChina,32%Jiangsu,16%EZhejiang,astChina,3%Shanghai,8%Souangdong,6%orthChina,uthwest&CenChina,14%So 2% Note:Thebreakdownofexportsisbasedonthelocationoftheenterprise'soperationsratherthanthefinalsettlementlocationSource:Wind,ChinesecustomstototheinoftheinfollowedinSouthandandSouthChinaaclose3,upandFigure26:Breakdownofforeignindustrialenterprises'operatingprofit–byprovince,2016Figure27:Breakdownofforeignindustrialenterprises'operatingprofit–byregion,2016Others,17%Sichuan,3%Hubei,3%Tianjin,3%Fujian,4%Beijing,5%5%Shandong,9%Jiangsu,23%Guangdong,15%Shanghai,13%Southwest&CentralNortheast0%5%South23%East50%North22%Source:NationalBureauofStatisticsSource:NationalBureauofStatisticsFigure28:PlacesvisitedonbusinesstripsinP12M–foreignenterprises,byregionFigure29:PlacesvisitedonbusinesstripsinP12M–SOEs,byregionSouthwest&CentralNortheastEastSouthNorthSouthwest&CentralNortheastEastSouthNorthDec-1860%40%40%20%20%0%0%