[0.840-3.740][S01] Capsule toys are popular even among foreign tourists.
[7.570-9.830][S01] Actually, something unusual is happening.
[10.120-15.260][S01] Some manufacturers say they aren't hit hard by rising crude oil prices linked to the Middle East situation.
[18.860-22.970][S01] This is a product from a boutique capsule toy maker, the Cat Sculpture series.
[25.960-31.210][S01] They use plastic, which has been soaring in price, but they say there is almost no supply anxiety.
[33.970-38.740][S01] A manufacturer that works with regional mascots and trades with China revealed the reason why.
[40.720-43.010][S02] Naftha prices haven't really gone up there.
[52.130-56.420][S02] They seem to have the impression that it's just related to fuel products like gasoline,
[56.620-61.240][S02] and since production of Chinese-made toys has been dropping for about four years straight,
[61.610-66.370][S02] demand was already low, but now it's suddenly rising, so it's balancing out.
[66.640-69.760][S02] They are just using up the leftover raw materials efficiently.
[78.820-81.840][S01] The background to this is China's domestic economic slump.
[83.150-85.010][S01] This is a plastic market in China.
[87.840-93.480][S01] Many shops are shuttered, and because of price wars, they can't lower prices and are left with massive inventory.
[96.090-101.710][S01] Amid this, surplus resin meant for home appliances and building materials is flowing into the toy industry.
[106.720-112.160][S01] Since capsule toys are small and don't use much resin, existing stock is enough to absorb current demand.
[115.280-118.540][S01] The reality of the Chinese economy seen through capsule toys.
[119.010-120.740][S01] We will analyze the bottom of this.
[120.860-121.440][S03] Yes.
[122.340-128.370][S03] As we just saw, the surplus resin caused by China's domestic slump is flowing into toy manufacturing, right?
[129.970-131.910][S03] How should we interpret this situation?
[136.510-140.770][S03] Well, it's true that demand for resin in sectors like furniture and building materials
[140.770-143.540][S03] has dropped significantly due to the real estate slump,
[143.810-149.060][S03] so that supply is indeed flowing elsewhere, but I think the supply side issues are also quite significant.
[155.240-159.770][S03] Companies expanded their facilities significantly, including those involved in exports,
[159.840-161.660][S03] which led to a state of oversupply.
[161.970-166.140][S03] The balance between supply and demand collapsed, resulting in excess inventory.
[168.860-172.810][S03] I suspect that some of this surplus inventory is being diverted toward exports.
[174.240-174.940][S04] I see.
[179.170-183.940][S04] You mentioned that supply is currently excessive, but I'd also like to look closely at the demand side,
[184.060-187.860][S04] so let's take a more detailed look at the retail sales figures I mentioned earlier.
[191.670-194.370][S04] The purple section, which is primarily petroleum.
[194.870-196.370][S04] This shows a negative figure.
[196.870-198.660][S04] Petroleum products, that is.
[199.870-205.610][S04] Is indeed negative, but the negative impact in the automotive sector, shown in orange, really stands out.
[207.070-207.870][S03] That's true.
[210.170-215.940][S03] Automobiles typically account for about 30% of retail sales, so the significant decline there is notable.
[216.170-218.840][S03] I believe policy factors are largely behind this.
[222.870-227.870][S03] For one, there's a trade-in incentive program for consumer goods that began in 2024,
[228.110-230.410][S03] which has had the effect of pulling demand forward.
[234.070-236.640][S03] Another factor is that since January of this year,
[236.770-241.510][S03] the purchase tax exemption for new energy vehicles was reduced from 10% to 5%,
[241.710-243.540][S03] which I think is also having an impact.
[246.110-251.010][S03] In addition, the rising cost of crude oil seems to be driving a decline in gasoline demand.
[251.340-252.040][S04] I see.
[252.670-256.670][S04] This decline in petroleum products seems to have started around 2024.
[256.970-258.810][S04] Was there a specific trigger for this?
[259.810-262.240][S03] I believe it is primarily due to falling prices.
[264.200-268.330][S03] Beyond that, as demand for gasoline-powered cars continues to drop in China,
[268.510-271.200][S03] the demand for gasoline itself is declining as well.
[271.540-272.890][S03] I think that's what we're seeing.
[274.240-274.940][S04] I see.
[278.140-283.010][S04] While I think it was somewhat understood even before the trial run that there would be a reactionary decline,
[283.240-287.770][S04] were the consumption stimulus measures implemented by China so far effective for a certain period?
[291.040-291.840][S03] That's correct.
[293.390-299.310][S03] As you say, this policy did contribute to supporting consumption starting around the second half of 2024.
[300.540-305.140][S04] Well, from the second half of 2024 through the first half of 2025, that is.
[308.200-310.540][S04] The effects were mainly seen in home appliances,
[310.610-314.410][S04] and while I think it did have the effect of propping up otherwise weak consumption,
[314.610-318.740][S04] it was ultimately a pull-forward of demand that only boosted things for a limited time.
[318.890-322.070][S04] So I don't see it as a policy that fundamentally lifts consumption.
[325.670-326.140][S03] Right.
[327.540-332.040][S03] Where does the fundamental problem lie that keeps it from being a policy that boosts consumption?
[333.200-336.940][S03] Well, I think the impact of the real estate slump is quite significant.
[340.910-346.540][S03] Since around 2021, as shown here, real estate-related indicators have continued to deteriorate,
[346.670-350.410][S03] and since about 70% of urban household assets are held in housing,
[350.540-355.840][S03] when housing prices decline for a long time, the negative wealth effect inevitably cools consumption.
[359.340-360.040][S04] I see.
[361.410-364.670][S04] So, I suppose consumption won't pick up unless that is resolved.
[364.870-369.410][S04] But another indicator, fixed asset investment for July, was also released today.
[374.470-378.740][S04] This specifically represents corporate investment and national infrastructure investment,
[378.870-380.740][S04] but how should we interpret these figures?
[385.370-387.470][S03] Well, the decline widened in July,
[387.570-392.110][S03] and the area where the negative margin is expanding most notably is in infrastructure investment.
[395.240-398.740][S03] Well, infrastructure investment was quite strong in the first quarter,
[398.870-403.940][S03] and it's said that projects related to the five-year plan were moved up, but there was a subsequent rebound.
[408.370-411.540][S03] In addition to that, the impact of typhoons and heavy rain,
[411.640-417.340][S03] as well as the fiscal difficulties in local regions, appear to be affecting the progress of infrastructure investment.
[423.240-427.510][S04] We've looked at the domestic situation, but I'd also like to look at China's exports,
[427.610-433.170][S04] which grew by over 20% in July compared to the same month last year, showing strong performance.
[435.640-436.340][S03] That's right.
[437.410-441.640][S03] In contrast to the sluggish domestic market, exports are performing quite well,
[441.740-446.710][S03] particularly in integrated circuits, computers, computer components, and automobiles.
[449.140-452.870][S03] The strength in integrated circuits and computer components is, I believe,
[452.970-456.440][S03] driven by the rising global demand for AI-related technologies.
[459.110-462.410][S03] As for automobiles, while domestic sales are not very strong,
[462.540-466.810][S03] as we saw earlier, exports are essentially compensating for that domestic slump.
[470.010-474.110][S03] Meanwhile, the Trump administration recently released a report on transshipment,
[474.270-478.340][S03] where goods are shipped to the U.S. via third countries with relatively lower tariffs.
[481.110-484.940][S04] With roughly 12 trillion yen in transshipments coming from China annually,
[485.070-488.840][S04] effectively putting pressure on the Chinese side, how do you view this report?
[492.340-496.740][S03] Well, considering that such high tariffs, exceeding 100% at one point,
[496.910-501.710][S03] were imposed last year, it makes sense that this type of transshipment activity has increased.
[507.040-509.840][S03] Now, regarding simple exports, for instance,
[509.870-514.440][S03] those using quite basic methods like relabeling products to disguise their country of origin,
[514.710-518.040][S03] the U.S. and third countries, including those in Southeast Asia,
[518.110-520.870][S03] have been significantly stepping up their monitoring efforts.
[524.470-528.240][S03] So, I think it's becoming quite difficult to pull that off in the current climate.
[528.410-528.970][S04] Yeah.
[529.470-535.440][S04] As for the volume, rather than illicit exports, there has been a trend of legitimate exports, so to speak.
[538.300-541.660][S04] Ever since the first Trump administration and the start of these trade wars,
[541.710-544.660][S04] Chinese companies and foreign firms based in China
[544.770-549.410][S04] have been gradually shifting their production bases to Southeast Asia and other third countries.
[553.240-556.740][S04] To strengthen production there, they are exporting components from China,
[556.840-561.010][S04] adding legitimate value, and then exporting those goods to the U.S. and elsewhere.
[561.160-562.840][S04] That trend is definitely growing.
[565.840-568.710][S04] Does that mean the countermeasures taken so far have been effective?
[569.970-570.660][S03] That's right.
[571.370-574.840][S03] Well, I don't think they're perfect, but in response to those measures,
[574.870-578.240][S03] I believe the move toward adding legitimate value is gaining momentum.
[578.870-579.340][S04] Right.
[579.940-582.540][S04] How do you view the future impact of the Trump tariffs?
[583.300-586.710][S03] Well, I think there is a high degree of uncertainty moving forward.
[589.270-592.010][S03] For instance, just the other day, as noted here,
[592.110-598.800][S03] the tariffs on China based on Section 301 of the Trade Act, citing forced labor, were set at 12.5%.
[602.970-606.660][S03] There's also talk that more might be imposed later due to excess capacity.
[609.710-615.340][S03] So, the tariff rate, which was 10% until July, could potentially rise to around 20%.
[618.840-622.770][S04] Well, for now, U.S.-China relations are moving towards stabilization,
[622.870-627.010][S04] so I don't really foresee a situation where things suddenly take a turn for the worse.
[631.040-636.740][S01] Even including indirect exports, the fact that shipments from China to the U.S. have grown this much is striking,
[636.870-639.770][S01] especially given the high tariffs and the ongoing trade war,
[639.940-642.410][S01] but I think it shows there is a real need in the U.S.
[644.910-649.070][S01] Is that mainly due to semiconductors, specifically what are called legacy chips?
[649.110-652.240][S03] Yeah, that's right. I think there are movements like that as well.
[656.870-659.970][S03] As you pointed out, regarding general-purpose semiconductors,
[660.070-662.370][S03] while AI-related demand is currently rising,
[662.510-666.710][S03] it's said that these AI servers also use a significant amount of general-purpose chips,
[666.840-670.710][S03] so that demand may be driving the increase in exports from China to the U.S.
[677.660-681.160][S03] Next, we will ask if China can reach its GDP growth target.