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Machinery industry achieved stable growth in production and marketing as well as continuous advancement in structural adjustment

Machinery industry achieved stable growth in production and marketing as well as continuous advancement in structural adjustment

 

 

 

http://www.mei.net.cn/ February 17, 2014 11:01:33  

Abstract: On February 17, 2014, the press conference on the situation of full-year economic operation of machinery industry in 2013 was held in Beijing. Mr. Cai Weici, executive vice president of China Machinery Industry Federation (CMIF), Mr. Zhao Chi, executive vice president & secretary general of CMIF, Ms. Zhao Xinmin, director of CMIF Department of Statistics, and Mr. Dong Yang, standing vice president & secretary general of China Association of Automobile Manufactures attended the press conference. In the press conference, the vice president Cai Weici said that, in 2013, the machinery industry achieved slow upturn, moderate growth and stable development, and the principal economic indicators such as production and marketing, benefit, etc. achieved moderate growth. Alsounder the action of the reversed transmission of pressure for easing monetary condition of market, the pace of structural adjustment as well as transformation and upgrading was accelerating. In 2014, the condition that the whole external environment for industry development was tight would be difficult to change obviously. It was expected that in 2014, with the industry-wide effort, the growth rate of production and marketing and profit of machinery industry would reach 12%, and the export growth rate would reach 8%.

 

Press Conference on Situation of Full-Year Economic Operation of Machinery Industry in 2013

In 2013, the domestic and foreign economic situations were complex, difficulties in operation of machinery industry increased significantly, and the pressure for changing the development mode rose sharply. Under this background, the operating requirement of central government on seeking improvement in stability was implemented in machinery industry to go all out to stabilize growth, adjust structure and promote reforms, thereby achieving slow upturn, moderate growth and stable development of the whole industry, and the principal economic indicators such as production and marketing, benefit, etc. achieved moderate growth. Alsounder the action of the reversed transmission of pressure for easing monetary condition of market, the pace of structural adjustment as well as transformation and upgrading was accelerating.

In 2014, the condition that the whole external environment for industry development was tight would be difficult to change obviously. The whole industry would seriously implement the spirit of the Third Plenum of the 18th CPC Central Committee to make an effort to improve the quality of industry development and to actively promote the adjustment and upgrading of the industrial structure.

I. Development Characteristics of Machinery Industry in 2013

(I) Industry production showed moderate growth.

1. The added value growth rate exceeded the national industry average.

In 2013, the added value of machinery industry increased by 10.9% from the last year, the growth rate rose by 2.5% from the last year and was 1.2% higher than the national industry average of the same period (9.7%), and the upward trend was higher than that of the national industry, which changed the situation that the growth rate of the last year was lower than the national industry average. The production and operation situations continued to be well, which contributed to the overall object of seeking improvement in stability for the national industry.

2. The revenue of core businesses grew steadily.

In 2013, the revenue of core businesses of machinery industry reached 20.4 trillion yuan, increased by 13.8% from the last year, and the growth rate rose by 4% from the last year. The revenue of core businesses of the whole year rose again slowly month by month, and the growth pattern was better than expectation.

3. The output of most products increased.

In 2013, among 64 kinds of main mechanical products disclosed by State Statistical Bureau, 39 kinds increased in output, accounting for 60.9%, and 25 kinds decreased, accounting for 39.1%. Detailed analysis indicated, for products closer to consumption relationship and products directly serving automatized and intellectualized reconstruction, such as agricultural machinery, passenger vehicles, instrument, etc., the production and marketing situation was better. But for typical products of investment nature, such as machine tool, engineering machinery, heavy machinery, generating equipment, etc., the production and marketing situation was relatively poor.

The output of larger and medium tractors was 584,600 units, with year-on-year growth of 12%.

The output of numerically controlled machine tools was 209,300 units, with year-on-year growth of 2.2%.

The output of generating equipment was 122 million kilowatt hours, fell by 2.2% year on year.

The output and sales of vehicles were 22.13 million vehicles and 21.98 million vehicles respectively, increased by 14.8% and 13.9% year on year. The output and sales exceeding 20 million vehicles set a new record and led the world for the fifth consecutive year.

(II) Growth rate of profit rose again.

In 2013, under the background of stable growth of production, the growth rate of economic benefits of machinery industry rose again more rapidly than production and marketing. The total profit of the whole year reached 1.41 trillion yuan, increased by 15.6% from the last year, and the growth rate rose by more than 10% from the last year and was 1.8% higher than that of revenue of core businesses of the same period. The profit rate of the revenue of core businesses was 6.93%, which was 0.11% higher than the quick statistics data of the last year. The total tax of the whole year reached 781.7 billion yuan, increased by 19.5% from the last year; the scale of enterprise losses was 10.9%, rose by 0.47% from the last year; and the amount of loss of loss-generating enterprises increased by 15.2%.

(III) Foreign trade grew at low speed.

In 2013, the total import and export volume of machinery industry reached 671.3 billion USD, increased by 3.72% from the last year, and the growth rate rose by 1.18% from the last yearwherein, the export volume reached 372.5 billion USD, increased by 6.24%; and the import volume reached 298.8 billion USD, increased by 0.74%. The trade surplus of the whole year set a new record of 73.6 billion USD.

(IV) Growth rate of fixed assets investment fell stably.

In 2013, the fixed assets investment of machinery industry achieved 3.99 trillion yuan, with year-on-year growth of 17.2%. The growth rate was respectively 2.4% and 1.3% lower than that of the national manufacturing industry and the entire manufacturing industry, and was down 7.7% from that of the machinery industry of the last year, showing notable drop for two consecutive years. The month-by-month trend showed that the drop of growth rate of the second half of the last year became stale.

(V) Orders increased, and price was still low.

In 2013, the year-on-year growth rate of the accumulative orders of key contact enterprises in machinery industry rose again slightly month by month on the basis of low base of the last year, the situation was better than the last year, and the volume of accumulative orders from January to December increased by 10.2% from the last year. From an overall perspective, orders increased still slowly. Slack demand would be one of major difficulties facing the machinery enterprises in 2014. Also, under the pressure of insufficient order and oversupply, the product price continued to slump, and the price index of machinery industry in 2013 followed the downward trend of the last year. By the end of the year, the price index of the month had been lower than 100% for 25 consecutive months.

(VI) The growth rate of financial cost declined, but the problem of difficult payment collection was still not alleviated.

Under the background of high base of the last year, the growth rate of financial cost of machinery industry in 2013 fell back significantlyshowing single-digit growth throughout the year and year-on-year drop in the midyear. Interest expense increased more slowly than that in the same period of the last year and showed single-digit growth, indicating that the situation of more rapid increase in business capital operating cost was alleviated. But the phenomenon that payments to machinery enterprise were in arrears was not changed. By the end of the year, the total receivables exceeded 3 trillion yuan, with year-on-year growth of 17.6%. The receivables accounted for 15.2% of the revenue of core businesses and 31% of current assets of the same period, which indicated the pressure of enterprise capital recovery.

(VII) Pressure of cost rise was still high, and the benefit of core businesses was difficult to increase.

Although the price of upstream products such as raw materials, fuel, etc. was still low, the pressure of cost rise of machinery industry was still high. The year-on-year growth rate of cost of core businesses continued to rise within the year and was higher than the growth rate of revenue of core businesses. The growth rate of cost of core business from January to December was 14.5% and was 0.7% higher than that of the same period. Affected by this condition, the profit rate of core businesses (ratio of profit from core businesses to revenue of core businesses) was only 6.57% and was 0.41% lower than that in 2012.

II. Continuous Advancement in Structural Adjustment

Under the action of the reversed transmission of pressure for easing monetary condition of market, "transformation and upgrading" and "structural adjustment" of machinery industry in 2013 were advanced continuously, and the machinery enterprises were enhanced in capacity for adapting to market change and in endogenous driving force, and frequently showed highlights of structural adjustment.

(I) Upgrading of product structure achieved new progress.

To deal with the challenge of demand declining in traditional products, the development of new products and new processes in machinery industry tended to be active, and the concept that innovation drives development was gradually interiorized. Expanding the market by new products, reducing cost by technical progress and increasing benefit by substitutes for imported goods were becoming a spontaneous choice for more and more enterprises. The examples were shown as below.

A batch of world's top equipment came out: successful development of nuclear power generator with the world's largest unit capacity; smooth development of world advanced reciprocating compressor with high thrust of 150 tons; successful development of world's first 240MVar/1000kV single-phase single-column ultra-high voltage reactor, etc.

Nationalization result of high-end control system was gratifyingdomestic DCS control system for process industry had the strength of participating in international competition and accounted for more than half of domestic market share.

Development of high-end smart device made process: successful commissioning of the first domestic complete large-power underground smart mechanized coal mining equipment in Taiyuan Heavy Coal Machine Co., Ltd.

Nationalization of high-end device was advanced towards deep field: key components under the control of import for a long time, such as outlet device, high-voltage insulating sleeve, etc. of ultra-high voltage power transmission and transformation equipment, made an independent breakthrough; and domestic complete equipment of pressure station of long-distance gas pipeline entered small-lot production and supply phase from assessment test phase.

Pace of coordination and innovation quickened: Xuzhou Construction Machinery Group and Sinopec Group teamed up to develop 4000-ton world's largest crawler crane; China Railway Construction Heavy Industry Group and Shenhua Group teamed up to successfully develop world's first long-distance large-slope mine inclined tunnel boring machine with completely independent intellectual property rights.

(II) Private enterprises showed great vitality.

In 2013, the revenue of core businesses of private enterprises reached 11.6 trillion yuan and accounted for 56.74% of gross output value of machinery industry, with year-on-year growth of 15.4% and increased by 0.77% from the last year. The growth rate was 1.6% higher than the average growth of machinery industry. The total realized full-year profit of private enterprises reached 758.5 billion yuan and accounted for 53.6% of the realized profit of machinery industry, increased by 14.6% from the last year.

(III) Region structure continued to be adjusted towards the expected direction.

In 2013, the region structure of machinery industry continued to be adjusted towards the policy expected direction. From production, the revenue of core businesses of east, middle and west areas respectively reached 13.67 trillion yuan, 4.72 trillion yuan and 2.04 trillion yuan, respectively increased by 12.4%, 16% and 18.7% from the last year. The growth rates of the middle and west areas were higher than that of the east area. The proportion of the middle and west areas in machinery industry was 0.8% higher than that of the last year.

(IV) Technical innovation of enterprises warmed up.

To deal with pressure of cost rise, machinery enterprises actively promoted automatized, informationized and intellectualized reconstruction. "Machine Substitution" rapidly warmed up in the east coastal region such as Zhejiang, etc., which hedged the pressure of cost rise, enhanced the production efficiency and processing quality, and improved the response capacity for market change.

In a word, under the action of the reversed transmission of pressure for easing monetary condition of market, transformation and upgrading of machinery industry made some progress in the last year, but from a general view, it was still necessary to make long-term effort for the whole industry to really enter good development track. The total profit of machinery industry in 2013 rose by more than 15%, but the profit rate was still not high, which was sufficient to indicate that the machinery industry had yet to get rid of trouble.

III. Prediction for Economic Operation Trend of Machinery Industry in 2014

(I) Favorable Factors

First, the situation of macroeconomic environment was favorable for smooth industry development. In general, the domestic macroeconomic trend was stable basically, and reform of the economic system was advanced continuously; there were signs of warming up for the international economy, the economy of advanced economic entities recovered slowly, American and Japanese economy entered low-speed rising path, and euro zone ended downturn and showed signs of recovering.

Next, the policy environment remained stable, which was favorable for industry to advance structural adjustment. The Central Economic Working Conference held in the end of the last year specified an economic policy tone of seeking improvement in stability, and released information of keeping the current policy continuous and stable, providing stable policy environment for industry development.

(II) Adverse Factors

The first was great difficulty in export growth. Although mechanical products in China had a certain degree of international comparative advantage, high-speed export growth that lasted for years had caused increasingly keen trade friction. In addition, continuous rise of RMB exchange rate weakened our competitiveness, so the difficulties in further expanding export of mechanical products in China increased.

The second was increase in financial pressure. Enterprises' receivables at the present stage were still high, and enterprises' working capital was occupied in large amount. Also, exit of American Quantitative Easing Policy caused international working capital to tighten, which spread into our country through trade and capital flow, thereby further increasing pressure of capital liquidity tightening of domestic enterprises.

The third was rapid rise in cost of human and environmental resources, squeezing profit margins. In recent years, the cost of human and environmental resources entered rapid rising path, which would squeeze profit margins of domestic enterprises.

(III) Prediction for 2014 Development

The machinery industry in China was expected to be relatively stable on a medium-speed development platform after experiencing high-speed growth in the 10th Five-Year Plan and the 11th Five-Year Plan and sharp slowdown in 2011 and 2012. The machinery industry in China was expected to extend stable and medium-speed growth situation of 2013 in 2014.

In 2014, the external environment of the machinery industry was difficult to improve obviously, but was expected to remain basically stable. It was notable that the situation of comprehensively deepening reform in 2014 would bring higher requirements for the subjective response capacity of machinery enterprises. "Letting the market play the decisive role in resource allocation" involved huge opportunities and increased the responsibility of assuming risk by market entities. It was expected that in future, differentiation of machinery enterprises would be further aggravated, and mergers and reorganization of enterprises would be continually accelerated. The machinery enterprises must enhance crisis consciousnesspractically strengthen efforts and speed up to improve their own quality and competitiveness.

It was expected that in 2014, with the industry-wide effort, the growth rate of production and marketing and profit of machinery industry would reach 12%, and the export growth would reach 8%.

The Third Plenum of the 18th CPC Central Committee had introduced the blueprint of deepening reform in China. 2014 would be an extraordinary year. We believed that the machinery enterprises would conduct more explorations than the last year and get further progress and more achievements during structural adjustment with the key point of studying high end and consolidating the basis and during development mode transformation with innovation driving, integration of informationization and industrialization and green development as the main orientation.