Tie Bar,Injection Molding Tie Bars,Hydraulic Presses Tie Bars,Chrome Plated Tie Bars Ningbo Jinyi Precision Machinery Co., Ltd. , https://www.jinyi-machinery.com
Due to the cyclical fluctuations in investment in fixed assets, the cyclical fluctuations in industry demand have caused the machinery industry's production capacity to fluctuate between shortages and surpluses, which in turn drives the industry to expand production, shrink production, reinvest in expansion, and reduce production. In the cycle. The investment promotion effect is obviously another important factor that determines the development cycle of the machinery industry.
After two years of glory, in 2008, the halo of the machinery industry faded. In response to many uncertainties such as the US subprime mortgage crisis, domestic macroeconomic controls, the sharp increase in raw material prices of steel and other materials, and rapid expansion of production capacity, the growth rate of the industry began to slow down, and the growth in total profit began to fall short of the increase in sales scale. How can the profit space be transferred across the entire machinery industry chain, and can the industry fall into the dilemma of increasing income without increasing profits? The author of this article will focus on explaining these issues and discuss with readers the development trend of China's machinery industry.
Since the machinery industry is positively related to investment in fixed assets, in a relatively long period of time, China will continue to expand its economic growth model driven by the large scale of investment in fixed assets. This will inevitably lead to strong growth in demand for mechanical products. It is expected that the average annual growth rate will be over 25% in the next three years.
At the same time, the strengthening of policies has expanded the huge market space for the machinery industry to replace imports and expand exports, turning industry demand into sales revenue for domestic companies. Faced with domestic and international economic uncertainties, as well as imported inflationary pressures such as the sharp rise in steel and crude oil prices, the machinery industry as an intermediate industry will face multiple squeezes after a new round of capacity expansion. Industry profits The level of growth will be difficult to keep up with sales growth.
Investment stimulates rapid growth in demand
The final products of the machinery industry are mostly capital goods (except for a few products such as passenger cars) and are highly positively correlated with investment in fixed assets. In 2007, the growth rate of fixed asset investment in China was 24.8%, which led to a 31.9% increase in the sales value of the machinery industry. In the first quarter of 2008, the growth rate of fixed asset investment in China was as high as 24.6%, and the sales value of machinery industry increased by 30.4%.
According to industry insiders, under the background of steady growth in consumption and a significant decline in net export growth, investment has become the main driving factor in maintaining the growth rate of 8.5% to 10.5% of China's economy. As China's macroeconomic environment provides a huge space for investment in fixed assets, it is expected that the average annual growth rate of fixed assets in China will be over 20% in the next three years. The huge scale of investment in fixed assets will inevitably drive the mechanical industry to maintain a strong growth momentum. It is expected that the average annual growth rate of China's machinery industry will exceed 25% in the next three years.
Policy expansion industry growth space
During the “Eleventh Five-Year Plan†period, China raised the revitalization of the equipment manufacturing industry to an unprecedented level of national and national security. From the "Eleventh Five-Year Plan" to the "National Outline for Medium- and Long-Term Scientific and Technological Development Planning" and then to "The State Council's Opinions on Accelerating the Revitalization of the Equipment Manufacturing Industry," the state has continued to increase the support for the equipment manufacturing industry.
With strengthening policy support, China's equipment manufacturing industry has market concessions, capital investment, and taxation concessions. The company's profitability will be greatly increased, and further funds will be invested in research and development. The strengthening of R&D capabilities has enabled companies to replace their imports with competitive products through independent innovation. As the growth space is opened and profitability is further improved, companies will have more sufficient funds to invest in R&D and independent innovation. In this way, the company will enter a healthy growth track, and then grow into a company with an international competitive advantage.
Currently, two-thirds of China’s investment in equipment depends on imports. During the “Eleventh Five-Year Plan†period, China’s equipment manufacturing industry revitalized its goal of reducing import dependency to less than 30%. The degree of import dependence will be reduced from 67% at the end of the "Tenth Five-Year Plan" period to less than 30% at the end of the "Eleventh Five-Year Plan", which will provide a huge alternative import space for China's equipment manufacturing industry.
Combining the cost advantages of production factors such as labor costs in China, competitive products developed through independent innovation have an international price advantage. With this advantage, Chinese companies can expand the international market, establish international brands, form an international competitive advantage, and further expand their growth space.
At present, the international market share of China's manufacturing industry is 8.25%, of which the equipment manufacturing industry accounts for less than 30% of the manufacturing industry. Compared with developed countries, the international market share of China's equipment manufacturing industry still has more than two percentage points to expand.
Historic Development Opportunities Create High Growth Industry
After more than 50 years of development, China's equipment manufacturing industry has made remarkable achievements, formed a complete range of industries with considerable scale and a certain level, and has become an important pillar industry for China's economic development. In 2007, China's machinery industry completed an industrial output value of 730,044.48 billion yuan, and completed a sales value of 713.839 billion yuan. It has become the fourth largest equipment manufacturing country after the United States, Japan, and Germany. At present, the international competitiveness of China's machinery and electronic products has been greatly enhanced. Among export products, the proportion of machinery and transportation equipment that reflects the level of manufacturing in a country has continued to increase substantially.
At the same time, China’s economy has entered a mature stage of industrialization and is expected to enter the ranks of industrialized countries around 2010. In this phase, the demand for equipment manufacturing industry is increasing, and the growth of domestic demand is the main driving factor for the development of equipment manufacturing industry. The construction of a harmonious society and the introduction of green GDP will stimulate the explosive growth in demand for equipment such as energy conservation and environmental protection, which will bring opportunities for the development of emerging industries.
In addition, internationalized industrial transfer has provided a golden opportunity for the development of China's equipment manufacturing industry. In recent years, the global economy has entered a new round of growth, creating a huge market for equipment manufacturing. China has a large market potential and abundant labor resources. A relatively complete industrial system has been formed. The development of manufacturing industry has unique advantages. China is undertaking a large-scale transfer of the international manufacturing industry. International industrial transfer involves not only manufacturing but also R&D. This will create an unprecedented historical opportunity for China to develop its equipment manufacturing industry.
Lower gross margin will become normal
As China's machinery industry is still in the development stage, most of them are currently positioned at the low end of the industrial chain and are in a weak position in the competitive landscape of the industry chain. This means that it is very difficult for the entire industry to successfully transfer upstream price fluctuations.
Some people pointed out that the rise of the “BRIC†economies, such as China, Russia, India, and Brazil, has brought about global resources and energy shortages, and that input-type cost pressures around the world will exist within a relatively long period of time.
Taking into account upstream component procurement factors, the direct and indirect steel costs of the machinery industry account for 15% to 65% of the total cost. The differences among various sub-sectors are relatively large, with the highest being more than 70%. Without considering the influence of price transmission factors, a 30% increase in steel prices means that the industry's gross profit margin will be affected by about 3.5 to 16.5 percentage points. Therefore, the cost pressure caused by the increase in steel prices will bring tremendous pressure to the industry.
Capacity expansion hinders cost transmission
Whether the cost pressure of rising steel prices can be successfully transmitted to downstream users depends critically on the pricing power of the industry. Since the products of the machinery industry are mostly capital goods, the pricing power of the industry depends critically on the relationship between supply and demand. The main source of supply is capacity expansion.
During the "Eleventh Five-Year Plan" period, China's policy support for the strengthening of the equipment manufacturing industry opened the industry to replace the import and expand the export of the two major markets, stimulating the unprecedented high investment in the machinery industry. From 2005 to 2007, the growth rate of investment in fixed assets of the machinery industry was 64.94%, 37.78% and 45.77%, respectively, which brought a lot of capacity release. In addition, import and export are also an important factor affecting the relationship between supply and demand.
Since 2000, the production efficiency of the machinery industry has continued to increase. Excluding price factors, in 2007 the industrial production efficiency increased by more than 20% compared with 2005, and the increase in production efficiency is the disguised expansion of production capacity.
May return to the era of overcapacity
Since 2006, the import growth rate of the machinery industry has continued to rise. On the one hand, it shows the strong growth in demand for domestic machinery products. On the other hand, it also shows that China's rigid demand for high-end machinery product imports has not been completely changed.
In the first quarter of 2008, on the basis that the growth rate of imports continued to grow to 24.98%, the growth rate of exports fell from 40.90% in 2007 to 35.05%. The narrowing trend in the gap between import and export growth will accelerate the transformation of supply and demand in the domestic industry. .
During the “Eleventh Five-Year Plan†period, China’s policy support for the strengthening of the equipment manufacturing industry opened the industry’s two major markets: import substitution and export expansion. The mechanical industry was driven by unexpected demand and emerged a gratifying situation of tight production capacity, smooth price transmission, and high gross profit margin. . However, with the new round of capacity expansion since 2005 and the further narrowing of the gap between import and export growth, it is expected that the machinery industry will fall back into the era of overcapacity after entering 2009. At that time, machinery enterprises will return to the one-sided buyer's market pattern in which price competition or disguised price competition will be used to compete. The phenomenon of lower gross profit margins and harder profits for enterprises will be reappeared.
Under the pressure of macro-control and imported inflation, China's economy entered a marked slowdown since 2008, and fixed-asset investment and new projects started to decline year-on-year. The slowdown in the growth rate of macroeconomic and fixed asset investment will inevitably bring about a slowdown in the demand growth of the machinery industry. At the same time, the US subprime mortgage crisis has triggered a slowdown in the growth rate of the global economy. In addition, the acceleration of the appreciation of the renminbi has brought about a sharp drop in the growth rate of exports.
Faced with uncertainties in the global economy and imported inflationary pressures such as the sharp rise in raw material prices, the machinery industry as an intermediate industry is destined to face the dilemma of pressure after a new round of capacity expansion and production. The profitability of the company is difficult. Keep up with sales growth. Industry insiders expect that the profits of the industrial chain of the machinery industry will rapidly shift to the upper reaches and the high-end, and sub-sectors will also be clearly differentiated. Among them, sub-industries with barriers to technical barriers and resource endowments, such as mid-to-high-end CNC machine tools and shipbuilding, have little capacity to rapidly expand in a short period of time. Sub-sectors with low barriers to intervention and rapid expansion of production capacity in a short period of time are bound to face the dual pressure of overcapacity and the sharp rise in prices of upstream raw materials.
Related reports: Investment is still the main engine of high economic growth
Eastern Securities Zhou Fengwu
In 2006, the proportions of the three major elements of consumption, investment, and net exports that drove China's economic growth were 39.2%, 42.2%, and 18.7%, respectively. On the basis of steady growth in consumption, investment and net exports have become the main engines that have driven China’s rapid economic growth.
After entering the year of 2008, this double-engined growth model of China's economy will gradually change, and the net exports will obviously weaken. On the basis that consumption continues to maintain a steady growth, the weakening of the net export pull effect means that China's economy must maintain a potential growth of 8.5% to 10.5%. It can only rely on the rapid growth of investment. Therefore, in a relatively long period of time, China’s economy will continue to rely on the large scale of fixed asset investment to achieve a good and rapid growth. The main reason for the increase in investment over the next three years that is expected to exceed 20% is as follows:
First, the demographic dividend provides sufficient liquidity for investment in fixed assets. According to the forecast of relevant departments, China has entered the demographic dividend stage since 1995 and is expected to continue into 2013. In the demographic dividend stage, the willingness to save is greater than the willingness to consume, resulting in excess of savings over investment and excess liquidity in the market. As long as the rate of return on investment is high enough, there will be a large inflow of capital. Therefore, China’s huge savings scale provides adequate liquidity protection for fixed assets investment.
Second, the process of industrialization has created a huge space for investment in fixed assets. After years of rapid development after reform and opening up, China officially entered the stage of heavy chemical industry to undertake the transfer of machinery and equipment industries. The main characteristics of the development stage of heavy chemical industry are consumption upgrade, industrial upgrading, and elimination of backward production capacity. The process of industrialization, which stimulates the process of urbanization and the construction of a new socialist countryside, will also provide a huge space for China's fixed asset investment.
Third, the high rate of return on investment has driven the continued expansion of investment in fixed assets. Due to the low price of China's production factors, it not only brings high investment returns, but also forms an international competitive advantage. Coupled with the rapid growth of domestic economic domestic demand, driven by the formation of China's fixed assets investment production and sales boom, high investment rate of return pattern.
In addition, the high rate of return on investment drives the continued expansion of investment scale. At present, in the army of China’s fixed assets investment, the most active are foreign and private private capital, local governments, and state-owned enterprises. Their investment ratio has been as high as 60% or more, and they are in a state of vigorous growth and have become our country. The main force of fixed asset investment.
Fourth, large-scale investment in fixed assets will not affect the security of financial and economic systems. In the source structure of China's fixed asset investment funds, the proportion of funds in both the state budget and domestic loans has dropped from 40.8% in 1981 to 21.1% in 2007. This means that although China’s investment scale is relatively large, the entire financial system is safe, as long as it does not produce a substantial amount of excess capacity, our country’s economic operation is also healthy.
Although large-scale fixed-asset investment will form a large amount of production capacity in the long-term, our country truly meets the energy-saving, environmental-protection, resource-saving, and environment-friendly production capabilities required by innovative countries, whether they are in consumer goods or production materials. The proportion does not exceed 40%. This means that, under the background of energy conservation and emission reduction, China still has more than 60% of its backward production capacity that needs to be eliminated with new and advanced production capacity. Therefore, the overcapacity that China currently embodies is not a substantial overcapacity.
Editor's Note: The machinery industry is an intermediate industry that connects upstream steel, non-ferrous metals, and other downstream consumer goods. During the process of transferring profits throughout the industry chain, the machinery industry as an intermediate industry is often in a weak position, which is an important factor in determining the development cycle of the machinery industry.