The overall stable economic operation and steady development of the industry - A summary of the operation of the mechanical industry in the first half of 2019
Since the beginning of this year, in the increasingly complex domestic and international development environment, the mechanical industry has been under pressure to move forward. At the beginning of the year, production and sales continued the downward trend of the previous year, with a certain rebound in March and fluctuations after April. Product production differentiated, the decline in efficiency indicators narrowed, investment growth slowed down and stabilized, and the price index hovered at a low level. Except for a few industries with significant fluctuations, the overall operation of the mechanical industry economy remained stable in the first half of the year, with major economic indicators remaining within a reasonable range.
Looking ahead to the second half of the year, with the implementation of policy measures such as promoting the deep tapping of domestic market potential, expanding final consumption, stabilizing manufacturing investment, improving industrial basic capacity and industrial chain level, as well as the implementation of tax reduction and fee reduction policies, the operating environment of the mechanical industry economy will be improved, and the vitality of enterprise development will be further released. However, it should be noted that the deep-seated problems that have plagued the development of the industry, such as supply-demand contradictions and structural contradictions, have not been significantly improved, and the pressure to achieve stable operation throughout the year still exists.
1、 Overview of Industry Operations in the First Half of the Year
（1） Low speed growth in added value
Since the beginning of this year, the growth rate of added value in the mechanical industry has fluctuated greatly, rising from 2% in January and February at the beginning of the year to 6.3% in the first quarter, and then falling back to 4.2% in the first half of the year. Not only is it 4.2 percentage points lower than the same period last year, but it is also lower than the national average level of industry and manufacturing during the same period. Among the five major categories of national economic industries mainly involved in the mechanical industry, the added value of general equipment manufacturing, specialized equipment manufacturing, electrical machinery and equipment manufacturing, and instrument and meter manufacturing increased by 5.1%, 8.3%, 10%, and 9.6% year-on-year, respectively, higher than the average level of the mechanical industry; The added value of the automobile manufacturing industry decreased by 1.4% year-on-year, lower than the average level of the mechanical industry.
(II)Uneven increase or decrease in product production
Since the beginning of this year, the production of major products in the mechanical industry has continued to weaken. Among the 120 key products monitored by the mechanical industry from January to June, only 48 products had a year-on-year increase in production, accounting for 40%; 72 products with a year-on-year decrease in production accounted for 60%. From a trend perspective, the number of mechanical products with increased production since the first half of the year has continued to decrease, with the proportion dropping from 44% at the beginning of the year to 40% in the middle of the year; And the growth rate of products with increased production also shows a downward trend.
The main product output shows the following characteristics: firstly, the production of lifting equipment, petrochemical equipment, and general equipment products maintains rapid growth. In the first half of the year, the production growth rate of cranes, specialized equipment for refining and chemical production, and petroleum drilling equipment all exceeded 20%; The production growth rate of general equipment such as blowers, gas compressors, and compressors and valves used in refrigeration equipment is around 10%. The second is that after rapid growth, the growth rate of engineering machinery, environmental protection machinery, and instrument products has generally declined and differentiated. In the first half of the year, the production of excavators in construction machinery products continued to grow at a rate of nearly 20%, but the production of loaders, compaction machinery, and concrete machinery has shown negative growth; Among environmental pollution prevention and control equipment, the production growth rate of air pollution prevention and control equipment exceeds 90%, but the growth rate of water quality pollution prevention and control equipment and solid waste treatment equipment is only about 2%, and the production of noise and vibration control equipment is negative; The production of electrical and environmental monitoring specialized instruments and meters in the instrumentation equipment has significantly increased, but the production of industrial automation control systems, testing machines, and other products has decreased by more than 10%. The overall production of power generation equipment, transmission and transformation equipment, and machine tool products is sluggish. In the first half of the year, the production of power generation equipment (including hydroelectric generators, steam turbine generators), power plant boilers, power plant steam turbines, as well as large power transformers, transformers, power capacitors, high-voltage switches and other transmission and transformation equipment all decreased. The production of machine tool products continues to experience comprehensive negative growth, with a decrease in the production of all seven major products according to statistics. Fourthly, the decline in automobile production and sales exceeded expectations. In the first half of the year, the production and sales of automobiles reached 12.132 million and 12.323 million respectively, a decrease of 13.7% and 12.4% compared to the same period last year, far exceeding the expectations at the beginning of the year. The fifth is that agricultural machinery products show signs of bottoming out and rebounding, with half of the 10 main products counted increasing or decreasing.
（3） Economic benefits have declined
In the first half of the year, the mechanical industry achieved a revenue of 10.53 trillion yuan, a year-on-year increase of 1.29%; The total profit achieved was 619.537 billion yuan, a year-on-year decrease of 8.58%. The growth rate of two indicators has significantly declined compared to the previous year, with the growth rate of total profit turning negative for the first time in over a decade. Compared with the national industry, the growth rate of operating revenue and total profit in the mechanical industry is 3.42 and 6.19 percentage points lower than the national industrial average during the same period, respectively.
（4） Fixed assets investment is slowly stabilizing
At the beginning of 2019, fixed assets investment in the machinery industry continued the growth trend of the previous two years with a relatively high growth rate, but after entering March, the investment growth rate fell back and stabilized in June. In the first half of the year, fixed assets investment in general equipment, special equipment, instrumentation and automobile manufacturing industries increased by 2.8%, 7.2%, 14.2% and 0.2% respectively in the five major categories of national economy mainly involved in the machinery industry, and investment in electrical machinery and equipment manufacturing industry decreased by 8.1% year on year. Compared with the national industrial investment growth rate, the investment growth rate in the specialized equipment and instrumentation industry is higher than the industrial average level.
According to data from the National Online Approval and Supervision Platform for Investment Projects, the total investment amount of investment projects approved nationwide in the first half of this year was 67.15 trillion yuan, a year-on-year increase of 29.9%; The total investment amount of investment projects related to the mechanical industry was 3.12 trillion yuan, a year-on-year increase of 20.9%, lower than the average growth rate. Recently, our association conducted a special questionnaire survey on some key connected enterprises, and the results showed that the current factors restricting industry investment are: firstly, insufficient funds, making it difficult to complete investment solely with the company's own funds; Secondly, the problem of difficult and expensive financing still exists; The third is insufficient investment willingness and unclear direction.
（5） The decline in imports is stabilizing, and exports are generally stable
In the current situation where the growth momentum of the international economy and trade is slowing down, the external environment is complex and severe, and unilateralism and trade protectionism are intensifying, the import and export of the machinery industry are declining. In the first half of the year, the mechanical industry achieved a total import and export volume of 370.77 billion US dollars, a year-on-year decrease of 3.57%. Among them, imports amounted to 149.651 billion US dollars, a year-on-year decrease of 8.6%; Exports reached 22.1.119 billion US dollars, a year-on-year increase of 0.17%; Achieved a trade surplus of 71.469 billion US dollars. From the perspective of growth rate, the decline in foreign trade imports of the mechanical industry in the first half of the year has stabilized, while exports have remained generally stable; However, compared with the previous year, the growth rate of imports and exports in the mechanical industry has significantly decreased by 17.93, 23.35, and 13.9 percentage points.
In the first half of the year, the mechanical industry imported 15.374 billion US dollars from the United States, a year-on-year decrease of 16.47%; Exports to the United States amounted to $35.376 billion, a year-on-year decrease of 11.55%; The decline in imports and exports is greater than the average level of imports and exports in the machinery industry.
2、 Steady progress in industry development
（1） Strategic emerging industries drive industry development
In the first half of the year, the strategic emerging industries related to the mechanical industry (a total of 117 subcategories of the national economy) achieved a revenue of 7.73 trillion yuan, a year-on-year increase of 3.48%, 2.19 percentage points higher than the overall mechanical industry, and accounted for 73.4% of the mechanical industry's revenue, an increase of 1.56 percentage points compared to the same period last year. Excluding the automotive industry, the strategic emerging industries in the mechanical industry achieved a revenue of 5.77 trillion yuan in the first half of the year, a year-on-year increase of 6.28%; The total profit achieved was 322.204 billion yuan, a year-on-year increase of 7.14%. The driving role of strategic emerging industries in the stable development of the mechanical industry has been enhanced.
（2） Overall good development by industry
Since the beginning of this year, the main economic indicators of the mechanical industry have been operating at a low level, with a significant impact from the decline in the automotive industry. Excluding the automotive industry, the 13 sub sectors of the mechanical industry achieved a cumulative operating income of 6.55 trillion yuan in the first half of the year, a year-on-year increase of 6.06%; Realized a total profit of 366.676 billion yuan, a year-on-year increase of 6.96%; Both are higher than the growth rate of mechanical industry and national industrial related indicators. The growth rate of operating revenue in the engineering machinery, heavy mining machinery, food packaging machinery, and robotics and intelligent manufacturing industries has all exceeded 10%, indicating that the overall operating situation of the machinery industry is good.
（3） Continuous promotion of the conversion of new and old kinetic energy
Under the joint influence of various factors such as policy guidance and market pressure, the transformation of old and new driving forces in the industry continues to advance. The automobile industry, as the primary sub industry of the mechanical industry, has been continuously weakening since last year, and the decline in automobile production and sales in the first half of this year has continued to deepen. However, the production and sales of new energy vehicles have maintained a high-speed growth, with a cumulative sales of 614000 and 617000 vehicles in the first half of the year, an increase of 48.5% and 49.6% year-on-year, respectively; The operating revenue increased by 17% year-on-year. The power generation equipment manufacturing industry has been in an overall adjustment period in the past two years, with a significant decline in production and efficiency. However, in the first half of the year, the production of wind power equipment maintained a growth rate of 18.45%, and the growth rate of industry revenue and total profit both exceeded 50%. In addition, mechanical enterprises are actively expanding and extending their service areas, such as Shaangu Group, which developed its service-oriented manufacturing business. In the first half of the year, its operating revenue increased by 59.2% year-on-year and its total profit increased by 73%.
（4） Actively responding to changes in the foreign trade environment
In the recent period, the continuous trade friction between China and the United States has had an impact on the development of foreign trade. Machinery industry enterprises are actively responding to changes in the foreign trade environment, strengthening and deepening cooperation with traditional trade partners through various channels, and actively expanding new trade partners and seeking new development. In the first half of the year, private enterprises in the mechanical industry achieved a 7.33% growth in foreign trade exports; The number of excavators exported by XCMG Group to North America has doubled; TBEA Group undertook the "Datka Keming" power transmission and transformation project in Kyrgyzstan and the Dushanbe Thermal Power Plant project in Tajikistan along the "the Belt and Road"; Yuchai Group's engines have successfully matched new ships in South Korea, opening the door to the Korean market.
（5） A batch of major technological innovation achievements are put into use
Major technological equipment is a fundamental and strategic product that is related to national security and the lifeline of the national economy. It is an important symbol of a country's comprehensive strength and core competitiveness. In recent years, the mechanical industry has continuously made breakthroughs in the independent research and development of major technological equipment, and innovative achievements are gradually being put into use. In the first half of the year, the Changji Guquan ± 1100 kV ultra-high voltage direct current transmission line, developed and constructed by State Grid Corporation of China, China Xidian Group, TBEA and other units over a period of 6 years, successfully achieved full voltage power transmission, marking China becoming the world's first country with the ability to transmit tens of millions of kilowatts of electricity within a range of 3000 to 5000 kilometers. The XCA1600, a 9-bridge 1600 ton all terrain crane developed by XCMG Group, successfully completed the installation of a 140 meter high and nearly 90 ton wind turbine at the Baixiang Wind Farm in Hebei Province, setting a world record for the installation height of all terrain cranes for wind power. The W12X92 marine crankshaft, manufactured by Shanghai Electric Marine crankshaft Co., Ltd., has officially been taken offline. The crankshaft adopts a splicing structure, with a total length of 23.5 meters and a weight of 488 tons, making it the heaviest marine crankshaft in the world.
3、 Problems and pressures still exist
（1） The problem of insufficient demand continues
The weak market and insufficient demand have been persistent issues that have plagued the development of the machinery industry for a period of time. The growth rate of fixed investment in China in the first half of this year was 5.8%, while the investment in equipment and tools decreased by 1.9%, reflecting the overall trend of cold demand in the mechanical product market. According to the cumulative order data of key contact enterprises in the mechanical industry, since 2019, the year-on-year growth rate of cumulative orders of mechanical enterprises has significantly declined, with a 10% year-on-year decrease at the beginning of the year. The decline in the first quarter has narrowed, but it continued to deepen in April and May, with a decrease of 7.72% in the first half of the year, indicating that the problem of insufficient orders is still continuing.
（2） Reduced capacity utilization
Due to insufficient orders and sluggish production, the industry's capacity utilization rate has decreased. In the second quarter, the utilization rates of production capacity in general equipment manufacturing, automotive manufacturing, electrical machinery, and equipment manufacturing industries, which are mainly involved in the national economy, were 78.3%, 76.2%, and 79.3%, respectively, a decrease of 0.5, 2.1, and 0.9 percentage points compared to the first quarter; The capacity utilization rate of the specialized equipment manufacturing industry was 78.6%, an increase of 0.2 percentage points from the first quarter.
（3） High cost pressure, difficult price transmission, and low enterprise efficiency
In the first half of the year, the purchase price index of black metal materials, the main raw material of the mechanical industry, maintained a year-on-year growth rate of 1.3% -2.6%, and continued to rise month on month; Meanwhile, labor costs continue to increase. In the first half of the year, the operating costs of the mechanical industry increased by 1.53% year-on-year, higher than the growth rate of main business revenue and total profit during the same period. In addition, financing costs continue to rise, with interest expenses increasing by 7.45% year-on-year in the first half of the year. During the same period, the producer price index of the mechanical industry continued to decline year-on-year, with a decrease of 0.2% in June, making it difficult for cost and expense pressures to be transmitted externally. This has led to a decline in the profitability of the machinery industry, with a profit margin of only 5.89% from January to June, a decrease of 0.63 percentage points compared to the same period last year.
（4） Difficulty in collecting accounts and decrease in capital turnover rate
One of the most prominent issues currently affecting the production and operation of machinery enterprises is the large amount of accounts receivable and the difficulty in recovering them. In the first half of 2019, the total amount of notes and accounts receivable in the mechanical industry reached 5.62 trillion yuan, a year-on-year increase of 4.08%, accounting for one-third of the total amount of industrial notes and accounts receivable in China. Since 2006, the turnover rate of working capital in the mechanical industry has been above 2 times. In 2018, it was only 1.53 times, and in the first half of 2019, it continued to decline to 1.46 times, indicating a significant decrease in operational efficiency.
4、 Annual trend forecast
Since the beginning of this year, the economic operation of the mechanical industry has been under certain pressure due to the influence of the automotive industry. Although the main indicators are still within a reasonable range, the severity of the situation has exceeded the expectations at the beginning of the year. The operating trend index of the mechanical industry in June was 98.24, which has been below the critical value for the fourth consecutive month, indicating that there is still downward pressure on the industry's operation in the future. At the same time, positive factors are also accumulating. Macroeconomic policies are increasing support for the manufacturing industry, industrial policies are gradually being implemented, and corporate confidence is starting to rebound. After undergoing adjustments, the entire industry will continue to move towards high-quality development.
1. The following judgments are made regarding the development of the main sub industries in the mechanical industry in the second half of the year:
2. The automotive industry, as the largest sub industry of the mechanical industry, will gradually narrow its decline in production and sales in the second half of the year, driven by policies to promote automobile consumption, and the operating situation will improve.
3. The electrical and electrical industry, as the second largest sub industry of the mechanical industry, is unlikely to see significant changes in the production and sales of power generation equipment. However, the production and sales of transmission and transformation products will be significantly improved under the drive of related construction projects.
4. The petrochemical general equipment industry, as the third largest industry in the mechanical industry, is operating well driven by the rebound in investment in the petrochemical industry and is expected to maintain stable and rapid growth throughout the year.
5. The heavy mining industry mainly serves energy and raw material industries such as steel, coal, non-ferrous metals, and building materials. Due to the effectiveness of structural adjustments and improved economic benefits in these industries, investment demand has increased. Therefore, the current heavy enterprise orders are relatively abundant, and it is expected to achieve a stable but rising operating trend throughout 2019.
6. The machine tool industry is in a critical period of transformation and upgrading, with market demand fluctuating and enterprises facing significant difficulties in development. Since the beginning of this year, market demand has declined, resulting in a decrease in orders and delayed delivery by users. It is expected that the downward trend will continue in the second half of the year.
7. The construction machinery industry has experienced rapid growth in the past two years, and relevant indicators have been at a high level. However, driven by the country's increased infrastructure construction, it will still maintain a certain degree of growth.
8. With the continuous increase in the number of agricultural machinery in the agricultural machinery industry, the production and sales of major agricultural machinery products have significantly declined in the past two years, and the industry's operation has been sluggish. However, due to the recent introduction of a series of policies to support and benefit agriculture, as well as stable subsidies for purchasing agricultural machinery, the overall policy environment is improving; At the same time, the comparison base of relevant indicators has been at a relatively low level, and some products have shown signs of bottoming out and rebounding. It is expected that the agricultural machinery industry will achieve slight growth in the second half of the year.
comprehensive analysisIn 2019, although the mechanical industry faced significant economic difficulties and pressure, favorable factors still existed. It is preliminarily expected that the overall economic operation will be relatively stable throughout the year, with industrial added value striving to reach around 6%, and operating revenue, total profit, and import and export trade maintaining moderate growth.
2019 marks the 70th anniversary of the founding of the People's Republic of China and a crucial year for the comprehensive construction of a moderately prosperous society. The entire mechanical industry will resolutely implement the strategic deployment of the central government, adhere to the overall tone of seeking progress while maintaining stability, take the implementation of the overall development tasks of the industry in the 13th Five Year Plan as guidance, focus on the long-term, strengthen the industrial foundation, optimize the industrial structure, promote the transformation of new and old industrial drivers, and lay a solid foundation for high-quality development. Source: China Machinery Industry Federation
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