Capsule toys are popular even among foreign tourists.
Actually, something unusual is happening.
Some manufacturers say they aren't hit hard by rising crude oil prices linked to the Middle East situation.
This is a product from a boutique capsule toy maker, the Cat Sculpture series.
They use plastic, which has been soaring in price, but they say there is almost no supply anxiety.
A manufacturer that works with regional mascots and trades with China revealed the reason why.
Naftha prices haven't really gone up there.
They seem to have the impression that it's just related to fuel products like gasoline,
and since production of Chinese-made toys has been dropping for about four years straight,
demand was already low, but now it's suddenly rising, so it's balancing out.
They are just using up the leftover raw materials efficiently.
The background to this is China's domestic economic slump.
This is a plastic market in China.
Many shops are shuttered, and because of price wars, they can't lower prices and are left with massive inventory.
Amid this, surplus resin meant for home appliances and building materials is flowing into the toy industry.
Since capsule toys are small and don't use much resin, existing stock is enough to absorb current demand.
The reality of the Chinese economy seen through capsule toys.
We will analyze the bottom of this.
Yes.
As we just saw, the surplus resin caused by China's domestic slump is flowing into toy manufacturing, right?
How should we interpret this situation?
Well, it's true that demand for resin in sectors like furniture and building materials
has dropped significantly due to the real estate slump,
so that supply is indeed flowing elsewhere, but I think the supply side issues are also quite significant.
Companies expanded their facilities significantly, including those involved in exports,
which led to a state of oversupply.
The balance between supply and demand collapsed, resulting in excess inventory.
I suspect that some of this surplus inventory is being diverted toward exports.
I see.
You mentioned that supply is currently excessive, but I'd also like to look closely at the demand side,
so let's take a more detailed look at the retail sales figures I mentioned earlier.
The purple section, which is primarily petroleum.
This shows a negative figure.
Petroleum products, that is.
Is indeed negative, but the negative impact in the automotive sector, shown in orange, really stands out.
That's true.
Automobiles typically account for about 30% of retail sales, so the significant decline there is notable.
I believe policy factors are largely behind this.
For one, there's a trade-in incentive program for consumer goods that began in 2024,
which has had the effect of pulling demand forward.
Another factor is that since January of this year,
the purchase tax exemption for new energy vehicles was reduced from 10% to 5%,
which I think is also having an impact.
In addition, the rising cost of crude oil seems to be driving a decline in gasoline demand.
I see.
This decline in petroleum products seems to have started around 2024.
Was there a specific trigger for this?
I believe it is primarily due to falling prices.
Beyond that, as demand for gasoline-powered cars continues to drop in China,
the demand for gasoline itself is declining as well.
I think that's what we're seeing.
I see.
While I think it was somewhat understood even before the trial run that there would be a reactionary decline,
were the consumption stimulus measures implemented by China so far effective for a certain period?
That's correct.
As you say, this policy did contribute to supporting consumption starting around the second half of 2024.
Well, from the second half of 2024 through the first half of 2025, that is.
The effects were mainly seen in home appliances,
and while I think it did have the effect of propping up otherwise weak consumption,
it was ultimately a pull-forward of demand that only boosted things for a limited time.
So I don't see it as a policy that fundamentally lifts consumption.
Right.
Where does the fundamental problem lie that keeps it from being a policy that boosts consumption?
Well, I think the impact of the real estate slump is quite significant.
Since around 2021, as shown here, real estate-related indicators have continued to deteriorate,
and since about 70% of urban household assets are held in housing,
when housing prices decline for a long time, the negative wealth effect inevitably cools consumption.
I see.
So, I suppose consumption won't pick up unless that is resolved.
But another indicator, fixed asset investment for July, was also released today.
This specifically represents corporate investment and national infrastructure investment,
but how should we interpret these figures?
Well, the decline widened in July,
and the area where the negative margin is expanding most notably is in infrastructure investment.
Well, infrastructure investment was quite strong in the first quarter,
and it's said that projects related to the five-year plan were moved up, but there was a subsequent rebound.
In addition to that, the impact of typhoons and heavy rain,
as well as the fiscal difficulties in local regions, appear to be affecting the progress of infrastructure investment.
We've looked at the domestic situation, but I'd also like to look at China's exports,
which grew by over 20% in July compared to the same month last year, showing strong performance.
That's right.
In contrast to the sluggish domestic market, exports are performing quite well,
particularly in integrated circuits, computers, computer components, and automobiles.
The strength in integrated circuits and computer components is, I believe,
driven by the rising global demand for AI-related technologies.
As for automobiles, while domestic sales are not very strong,
as we saw earlier, exports are essentially compensating for that domestic slump.
Meanwhile, the Trump administration recently released a report on transshipment,
where goods are shipped to the U.S. via third countries with relatively lower tariffs.
With roughly 12 trillion yen in transshipments coming from China annually,
effectively putting pressure on the Chinese side, how do you view this report?
Well, considering that such high tariffs, exceeding 100% at one point,
were imposed last year, it makes sense that this type of transshipment activity has increased.
Now, regarding simple exports, for instance,
those using quite basic methods like relabeling products to disguise their country of origin,
the U.S. and third countries, including those in Southeast Asia,
have been significantly stepping up their monitoring efforts.
So, I think it's becoming quite difficult to pull that off in the current climate.
Yeah.
As for the volume, rather than illicit exports, there has been a trend of legitimate exports, so to speak.
Ever since the first Trump administration and the start of these trade wars,
Chinese companies and foreign firms based in China
have been gradually shifting their production bases to Southeast Asia and other third countries.
To strengthen production there, they are exporting components from China,
adding legitimate value, and then exporting those goods to the U.S. and elsewhere.
That trend is definitely growing.
Does that mean the countermeasures taken so far have been effective?
That's right.
Well, I don't think they're perfect, but in response to those measures,
I believe the move toward adding legitimate value is gaining momentum.
Right.
How do you view the future impact of the Trump tariffs?
Well, I think there is a high degree of uncertainty moving forward.
For instance, just the other day, as noted here,
the tariffs on China based on Section 301 of the Trade Act, citing forced labor, were set at 12.5%.
There's also talk that more might be imposed later due to excess capacity.
So, the tariff rate, which was 10% until July, could potentially rise to around 20%.
Well, for now, U.S.-China relations are moving towards stabilization,
so I don't really foresee a situation where things suddenly take a turn for the worse.
Even including indirect exports, the fact that shipments from China to the U.S. have grown this much is striking,
especially given the high tariffs and the ongoing trade war,
but I think it shows there is a real need in the U.S.
Is that mainly due to semiconductors, specifically what are called legacy chips?
Yeah, that's right. I think there are movements like that as well.
As you pointed out, regarding general-purpose semiconductors,
while AI-related demand is currently rising,
it's said that these AI servers also use a significant amount of general-purpose chips,
so that demand may be driving the increase in exports from China to the U.S.
Next, we will ask if China can reach its GDP growth target.