Editor's note: The equipment manufacturing industry is a concentrated expression of a country's comprehensive manufacturing capacity. The ability to develop major equipment is an important standard for measuring a country's industrialization level and comprehensive national strength. In the new stage of the new century, China’s equipment manufacturing industry is facing unprecedented challenges at the same time as it is facing a major historic development opportunity in the process of building a well-to-do society in an all-round way and taking a new road to industrialization.
After China's machinery industry experienced its glory in 2006, the growth rate in 2007 has shown a downward trend. The reasons are mainly due to the following factors: first, the cyclical characteristics of the machinery industry; second, structural price increases have brought about inflation concerns, and the intermediate industries such as the machinery industry, the price transmission capacity Driven by the impact; In addition, the market began to worry about the export growth of the machinery industry in anticipation of the pace of RMB appreciation.
So, did the machinery industry in 2008 re-interpret high growth in 2006, or did it continue to level off as it did in 2007?
Because the machinery industry itself has a certain ability to digest the increase in the cost of labor, raw materials and other factors of production, at the same time because of the demand pulling, which makes shipbuilding, high-end CNC machine tools and other industries have obvious capacity constraints, there is a certain extent of the seller's market structure, This allows the machinery industry to have a certain price transmission capability. Moreover, the proportion of exports from the machinery industry is not very high, which has little impact on the industry. At the same time, the import of some key components also partially offset the impact of the appreciation of the renminbi. Therefore, after entering 2008, many unfavorable factors affecting the machinery industry are expected to dilute, and the market may once again have a long period of prosperity.
A. Huge investment has driven the industry into a long cycle
Machinery industry is highly positively correlated with investment in fixed assets
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 other words, the machinery industry is a typical investment-driven cyclical industry. In 2006, China’s fixed asset investment grew by 24%, driving the machinery industry to reach 5.49 trillion yuan, an increase of 31.4% year-on-year. In the first three quarters of 2007, the growth rate of China's fixed asset investment was as high as 26.4%, and the growth rate of the total output value of the machinery industry was 32.01%.
In 2006, China’s fixed asset investment in urban areas was 9.35 trillion yuan, including 2.204 trillion yuan in equipment and equipment purchase fees, accounting for 21.86%; from January to October 2007, China’s urban fixed asset investment was 8.64 trillion yuan, including equipment and tools. The purchase cost was 1.90 trillion yuan, accounting for 21.96%.
Demographic dividends provide sufficient liquidity
According to authoritative statistics, China has entered the demographic dividend since 1995 and will continue into 2013. By 2013, China will enter the ageing stage of the population structure.
In the demographic dividend stage, the willingness to save is greater than the willingness to consume, resulting in greater savings than investment, excess liquidity in the market, and increased investment impulses. As long as the rate of return on investment is high enough, there will be a large inflow of capital. Therefore, in China's demographic dividend period before 2013, the huge savings scale provided adequate liquidity protection for fixed asset investment.
Industrialization expands investment space
The Chinese economy entered the initial stage of the industrialization process in 1992, and it entered the mature stage of the industrialization process in 1999. Judging from the current development trend, the Chinese economy will enter the ranks of industrialized countries around 2010. After more than two decades of rapid development of reform and opening up, China’s industrialization process has crossed the stage of the internationalization of textiles and garments and the IT industry. It has officially entered the stage of heavy chemical industry that undertakes the transfer of machinery and equipment industries.
The main characteristics of the development stage of heavy chemical industry are the consumption upgrade, industrial upgrading and elimination of backward production capacity, and so on. At the same time, the process of industrialization has stimulated the process of urbanization, which in turn has created a huge space for China's fixed asset investment (see related links).
High return on investment becomes strong driving force
After accepting the international transfer of light industry textiles and IT industry, China is currently undertaking the international industrial transfer of machinery and equipment. Coupled with the domestic economy's rapid growth in domestic demand, the formation of China's fixed assets investment booming production, high investment rate of return pattern. According to statistics, since the reform and opening up in 1978, the rate of return on investment by foreign-funded enterprises in China has been as high as 22%, and the return on equity of domestic industrial enterprises has averaged over 15%.
At present, in the army of fixed assets investment in our country, the most active are foreign capital, private individual capital, local government and state-owned enterprises. Their investment ratio has been as high as more than 60%, and it is in a state of vigorous growth. It has become the main force of China's fixed asset investment. Driven by the high rate of return on investment, as long as the central government does not adopt administrative measures to suppress it, as long as it does not affect the future of local government and state-owned enterprise management, this abnormally high investment enthusiasm for local governments and state-owned enterprises Will not cool down.
Diversification of funding sources dilute the effect of macroeconomic regulation
From the perspective of the source structure of China's fixed assets investment funds, as long as the central government does not take administrative intervention measures, the effects of macro-control on investment in fixed assets will gradually diminish. The macro-control measures adopted by China in the current market-oriented structural adjustment will affect only two parts of the state budget and domestic loans in fixed-asset investment in a short period of time. The proportion of these two funds has dropped from 40.8% in 1981 to 20.7% in January-October of 2007. The proportion of self-raised, issuance of bonds, issuance of stocks, and foreign investment has increased significantly to 79.3%. This means that although China's current 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 economic operation is also healthy.
In addition, the issue of excess capacity has always been the focus of attention. According to statistics, the overcapacity that China currently embodies is only a manifestation, and it is not a substantial overcapacity. Therefore, the structural adjustment emphasized by this macroeconomic regulation is based on maintaining the healthy development of the economy and extending the period of high-speed economic growth as much as possible to achieve a sound and rapid growth.
Investment is still the driving factor of economic growth
According to the composition of GDP, the three major elements of consumption, investment and net exports that stimulated China’s economic growth in 2006 accounted for 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. However, after entering into 2008, this dual-engine growth model of the Chinese economy will gradually change. Due to the lagging effects of the US subprime crisis, the appreciation of the renminbi and the adjustment of export tax rebates, the continued high prices of energy and bulk raw materials, and the global economic slowdown and geopolitical changes, China's net export pull effect will be significantly reduced. .
On the basis that consumption continues to maintain a steady growth, the weakening of the net exports' pulling effect means that we can only rely on the rapid growth of investment to drive the steady and rapid development of our economy. 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 machinery industry is highly correlated with the investment in fixed assets. The large scale of fixed asset investment will inevitably drive the strong growth in demand for machinery products, and the industry will enter a long-term prosperity cycle.
The influence of macro-control can not be ignored
The control of fixed asset investment proposed by macroeconomic regulation and control, and the impact on investment in fixed assets, can still not be ignored. For example, a neutral fiscal policy means that the state’s budget will continue to shrink in the sources of investment funds; tight monetary policy will suppress the growth of domestic loans; the price adjustment of the factors of production brought about by structural adjustment will Gradually reduce the rate of return on investment, and thus affect the investment enthusiasm of all investment entities; China's economic growth will slow down the growth of domestic demand, and then bring about changes in the market environment.
Therefore, people in the industry predict that in 2008 China's GDP growth rate will decline by one percentage point to about 10.5% on the basis of 2007, the corresponding growth rate of fixed asset investment is 24.6%, and the growth of the machinery industry will decline by nearly one percentage point to 30.8%. In general, before 2010, the growth rate of China's fixed asset investment will gradually slow down, but it still maintains a high growth rate of more than 20%. The growth rate of the corresponding machinery industry will also gradually slow down, but the growth rate will remain at a high level of more than 25%.
B. Strengthen policies to expand space for equipment manufacturing
Policy will be a catalyst for the industry boom
During the “Eleventh Five-Year Plan†period, China raised the revitalization of the equipment manufacturing industry to an unprecedented height. From the "Eleventh Five-Year Plan" to the "National Long-term Program for the Development of Science and Technology" and the "Several Opinions of the State Council on Accelerating the Rejuvenation of the Equipment Manufacturing Industry," the state's support for the equipment manufacturing industry is closely linked. Strengthening policy support has not only lessened the impact of macro-control, but more importantly it has expanded the industry's growth space and created the industry's prosperity.
The core of strengthening policy support is independent innovation. For enterprises with independent innovation in the industry, the state gives capital investment, tax incentives, and market support to get rid of the suppression of foreign brands for a long time and achieve endogenous growth.
The state directly invests in scientific research funds and encourages enterprises to invest their own research funds through policies to enhance their R&D capabilities so that they can produce competitive products through independent innovation to replace imports and expand into the international market. At the same time, enterprises with independent innovation ability are directly granted tax concessions such as income tax and value-added tax to improve their profitability and increase their cash flow, so that enterprises can have sufficient funds to invest in R&D.
In addition, laws and regulations that encourage the use of domestically-made first equipment, purchase domestic equipment, implement taxation concessions, limit the level of localization, etc., and adopt domestic and administrative means to vigorously support home-made equipment and expand the market space for China's equipment manufacturing industry.
At present, the independent innovation of China's equipment manufacturing industry is mainly integrated independent innovation and introduction, digestion, absorption and innovation, and there are few original independent innovations. For equipment manufacturing industry, strengthening policy support means having a market, having development funds, and having tax incentives, which will be directly reflected in enhancing the profitability of the company.
Import substitution + export expansion = industry growth space
Currently, 2/3 of China’s equipment investment is dependent on imports, including 100% of optical fiber manufacturing equipment, 85% of integrated circuit chip manufacturing equipment, 80% of petrochemical equipment, and 70 of car industry equipment, CNC machine tools, textile machinery and offset printing equipment. % comes from imported products. In 2006, the import value of machinery and transport equipment in China was 357.021 billion U.S. dollars. From January to October this year, the import volume was 335.118 billion U.S. dollars.
During the "Eleventh Five-Year Plan" period, China's equipment manufacturing industry rejuvenated its goal of reducing import dependency to less than 30%. The degree of import dependence has dropped 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" period. This is a huge alternative to China's equipment manufacturing industry during the "Eleventh Five-Year" period.
At present, China’s manufacturing industry has an international market share of 8.25%, of which the equipment manufacturing industry accounts for less than 30% of the manufacturing industry. The international market shares of the European Union, the United States, and Japan are 4..9%, 10.2%, and 8.2%, respectively. The proportion of the equipment manufacturing industry in the manufacturing industry is 41.9% in the United States, 43.6% in Japan, 46.4% in Germany, and the equipment manufacturing industry internationally. Market share is approximately 2.48% in China, 4.27% in the United States, and 4.26% in Germany. In other words, compared with developed countries, the international market share of China's equipment manufacturing industry still has two points of room for expansion.
Independent Innovation is the Core of Equipment Manufacturing Development
With strengthening policy support, China's equipment manufacturing industry has market support, capital investment, and tax incentives, and the profitability of enterprises in the industry will increase significantly. In this way, companies will have the funds to invest in R&D. The enhancement of R&D capabilities will enable companies to replace their imports with independent innovation to produce competitive products. The company's growth space is opened up, profitability is further improved, and companies have more funds to invest in R&D and independent innovation.
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, companies can expand the international market, establish international brands, and form an international competitive advantage, further expanding their growth space.
International advantage is the competitiveness of equipment manufacturing industry
During the "Eleventh Five-Year Plan" period, various sub-sectors in China's equipment manufacturing industry will be significantly different. Only sub-sectors that are labor-intensive, relatively technology-intensive, and capital-intensive at the same time can achieve alternative import and export expansion, and then open up space for growth and enter a period of high economic prosperity. This is China’s equipment during the “11th Five-Year Plan†period. Manufacturing's international advantages.
China is a large country with a population of 1.3 billion. It is a unique labor resource advantage, and it has created an international advantage in labor costs in China. Looking at the shipbuilding industry, the labor cost in China is 1/7.3 in Japan and 1/8.4 in Korea. Therefore, as far as the status quo of China's equipment manufacturing industry is still unable to compete with the international advanced level, only relying on the advantages of labor resources can participate in international competition. In addition, in addition to the labor costs, the price advantages of resources, energy, and environmental factors are also prominent.
Since the reform and opening up, China's private enterprises have thrived like mushrooms. They relied on cost advantages to launch price competition and quickly occupied the domestic market and even the international market. However, price competition will eventually lead to a meager profit for the entire industry. Only those industries with higher barriers to technical intervention can enable companies to enjoy excessive profits for a long time.
Compared with neighboring developing countries, China’s advantage lies in the fact that after more than 20 years of development since the reform and opening up, per capita GDP has reached 1,800 U.S. and the equipment manufacturing industry has begun to take shape. It already has the capital-intensive industries like the shipbuilding industry. Transfer capacity. Therefore, only relying on the advantages of the scale of funds can constitute barriers to intervention by developing countries in the periphery.
C. Historic Development Opportunities Create High Business Climate
China's equipment manufacturing industry has begun to have strength
At present, the world's manufacturing scale is ranked by the United States, Japan, Germany, and China. China's manufacturing industry has begun to take shape and strength, which provides a realistic possibility for China's development and transfer of equipment manufacturing.
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 of China's economic development. In the 1950s and 1960s, China independently developed a batch of equipment such as a 10,000-ton hydraulic press, a 125,000-kilowatt double-water internal-cooled generator set, and established a relatively complete manufacturing system.
In 1983, the State Council’s major equipment leadership group was established. The first batch of 12 complete sets of equipment for the development of 300,000 and 600,000 kilowatt generator sets, Baosteel complete sets of equipment, 300,000 tons of synthetic ammonia, 300,000 tons of ethylene, Qinshan nuclear power plant, and Three Gorges power station were identified. Since the Ninth Five-Year Plan period, especially since 1998, the former State Development Planning Commission has, in conjunction with the needs of economic construction, successively organized urban rail transit equipment, large ships, 500 kV DC power transmission and transformation equipment, large-scale gas turbines, and 440 tons of polyester equipment for Nissan. The 8000 tons of cement equipment and other equipments have achieved great results. At present, the international competitiveness of Chinese products has been greatly enhanced. One example is the significant increase in the ratio of machinery and transport equipment that reflect the manufacturing level of a country in export products.
Industrialization accelerates industrial upgrading
China’s economy has entered the 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 huge population and the increase in residents’ income have given China a huge market demand. The growth of the economy has created conditions for the escalation of consumer demand. Huge consumer demand will bring about huge production demands, and will bring vast market demand for capital goods such as machinery and equipment and raw materials.
Under the macroeconomic regulatory background, the fixed assets investment in China's manufacturing industry will maintain rapid growth during the “11th Five-Year Plan†period, and the average annual growth rate of industries above designated size will also maintain the level of 14% to 15%. The proportion of GDP will rise to close to 50%, and manufacturing will become the main supporting force for GDP growth.
The acceleration of industrialization has brought about industrial upgrading and industrial revival, which in turn has driven demand growth in the equipment manufacturing industry. This is mainly reflected in the upgrading of light and textile industries to heavy chemical industries; the primary processing of rough frames has been upgraded to sophisticated medium and high level processing; The revival of industries such as aerospace and aviation has drastically boosted the development of China's equipment manufacturing industry.
In addition, emerging industries have opportunities for development, and the construction of a harmonious society and the introduction of green GDP will stimulate the demand for equipment such as energy conservation and environmental protection.
International Industry Transfer Provides Opportunities
Economic globalization has brought about a new round of international industrial transfer. Not only is processing and manufacturing shifting, but R&D (R&D) is also shifting. It is an opportunity for China to develop its equipment manufacturing industry. The adjustment of the economic structure of the developed countries has led to a new round of international industrial transfer, which has provided major opportunities for the development of China’s comparative advantage industries.
With the rapid development of high-tech in the world today, it is unlikely that a country will occupy a dominant position in all high-tech industries. This provides an important opportunity for China’s economic leapfrogging development. On the one hand, we can vigorously develop new and high-tech industries and strive to make breakthroughs in key areas and areas with comparative advantages. On the other hand, use high technology to transform traditional industries, improve industrial quality and industrial structure, and increase industrial technological content and Value, to the high-end development of the industrial value chain.
Economic globalization has accelerated the process of international industrial transfer and some of the world's equipment manufacturing capacity is shifting to developing countries. Especially in recent years, the global economy has entered a new round of growth, creating a huge market for equipment manufacturing.
Related Links: Four Factors Drive Fixed Asset Investment
First, consumption upgrades have driven the rapid growth of investment in fixed assets in the relevant industrial chains.
The "Eleventh Five-Year Plan" proposes that the gross domestic product will increase at an average annual rate of 7.5%, and that the per capita GDP will more than double in 2000. China's per capita GDP will start to move from US$1,000 to US$2,000. This will surely bring about consumption. The overall upgrade, while the consumption upgrade drives the rapid growth of fixed asset investment in the relevant industrial chain.
Second, the elimination of backward production capacity has opened up huge space for investment in fixed assets.
The “Eleventh Five-Year Plan†proposes that the energy consumption per unit of GDP will be reduced by about 20%, the water consumption per unit of industrial added value will be reduced by 30%, the effective utilization factor for agricultural irrigation water will be raised to 0.5, and the comprehensive utilization rate of industrial solid waste will be increased to 60%. Energy conservation and emission reduction have become the top priority of the current government. However, at present, China's energy-saving, environmental-friendly, resource-conserving, and environment-friendly production capacity that truly meets the requirements of an innovative country does not exceed 40% in all industries. In fact, it still has a considerable part of its backward production capacity.
To achieve the goal of energy conservation and emission reduction, the first is to eliminate backward production capacity, such as small thermal power, small steel, small cement. By realizing the new production capacity by investing in fixed assets of advanced production capacity, it is the market that will defeat backward production capacity. At present, China still has more than 60% of its backward production capacity that needs to be eliminated. Therefore, there is huge room for investment in fixed assets here.
Third, industrial upgrading boosted the rapid growth of investment in fixed assets.
After China enters the stage of industrialization, industrial upgrading is mainly reflected in the following aspects: Under the background of macro-control of structural adjustment, new production capacity must meet the requirements of energy-saving and emission reduction, which accelerates the process of industrial upgrading; China is relying on The cost advantage of production factors and the transfer of international industries are currently in the stage of heavy chemical industry transfer from the IT industry to the machinery and equipment industry. It also promotes China's upgrading from crude primary processing to sophisticated medium and high-level processing; military and aerospace. The rejuvenation of industries such as aviation and aviation has also drastically boosted the process of industrial upgrading in China. Driven by energy-saving and emission-reduction policies, booming industries such as wind power, nuclear power and solar energy have seen vigorous development. Apart from the need for technological progress, industrial upgrading requires a large scale of investment in fixed assets to support it, and its investment pulling effect on the upstream and downstream industrial chains is even more far-reaching.
Fourth, the urbanization process supports a high level of investment in fixed assets.
During the process of industrialization, a large amount of land will be expropriated to build factories and related facilities. The continuous expansion of city scale will accelerate the process of urbanization. At the same time, the process of urbanization will attract a large number of rural laborers to work in cities, all of which require a large amount of investment in fixed assets.
After China's machinery industry experienced its glory in 2006, the growth rate in 2007 has shown a downward trend. The reasons are mainly due to the following factors: first, the cyclical characteristics of the machinery industry; second, structural price increases have brought about inflation concerns, and the intermediate industries such as the machinery industry, the price transmission capacity Driven by the impact; In addition, the market began to worry about the export growth of the machinery industry in anticipation of the pace of RMB appreciation.
So, did the machinery industry in 2008 re-interpret high growth in 2006, or did it continue to level off as it did in 2007?
Because the machinery industry itself has a certain ability to digest the increase in the cost of labor, raw materials and other factors of production, at the same time because of the demand pulling, which makes shipbuilding, high-end CNC machine tools and other industries have obvious capacity constraints, there is a certain extent of the seller's market structure, This allows the machinery industry to have a certain price transmission capability. Moreover, the proportion of exports from the machinery industry is not very high, which has little impact on the industry. At the same time, the import of some key components also partially offset the impact of the appreciation of the renminbi. Therefore, after entering 2008, many unfavorable factors affecting the machinery industry are expected to dilute, and the market may once again have a long period of prosperity.
A. Huge investment has driven the industry into a long cycle
Machinery industry is highly positively correlated with investment in fixed assets
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 other words, the machinery industry is a typical investment-driven cyclical industry. In 2006, China’s fixed asset investment grew by 24%, driving the machinery industry to reach 5.49 trillion yuan, an increase of 31.4% year-on-year. In the first three quarters of 2007, the growth rate of China's fixed asset investment was as high as 26.4%, and the growth rate of the total output value of the machinery industry was 32.01%.
In 2006, China’s fixed asset investment in urban areas was 9.35 trillion yuan, including 2.204 trillion yuan in equipment and equipment purchase fees, accounting for 21.86%; from January to October 2007, China’s urban fixed asset investment was 8.64 trillion yuan, including equipment and tools. The purchase cost was 1.90 trillion yuan, accounting for 21.96%.
Demographic dividends provide sufficient liquidity
According to authoritative statistics, China has entered the demographic dividend since 1995 and will continue into 2013. By 2013, China will enter the ageing stage of the population structure.
In the demographic dividend stage, the willingness to save is greater than the willingness to consume, resulting in greater savings than investment, excess liquidity in the market, and increased investment impulses. As long as the rate of return on investment is high enough, there will be a large inflow of capital. Therefore, in China's demographic dividend period before 2013, the huge savings scale provided adequate liquidity protection for fixed asset investment.
Industrialization expands investment space
The Chinese economy entered the initial stage of the industrialization process in 1992, and it entered the mature stage of the industrialization process in 1999. Judging from the current development trend, the Chinese economy will enter the ranks of industrialized countries around 2010. After more than two decades of rapid development of reform and opening up, China’s industrialization process has crossed the stage of the internationalization of textiles and garments and the IT industry. It has officially entered the stage of heavy chemical industry that undertakes the transfer of machinery and equipment industries.
The main characteristics of the development stage of heavy chemical industry are the consumption upgrade, industrial upgrading and elimination of backward production capacity, and so on. At the same time, the process of industrialization has stimulated the process of urbanization, which in turn has created a huge space for China's fixed asset investment (see related links).
High return on investment becomes strong driving force
After accepting the international transfer of light industry textiles and IT industry, China is currently undertaking the international industrial transfer of machinery and equipment. Coupled with the domestic economy's rapid growth in domestic demand, the formation of China's fixed assets investment booming production, high investment rate of return pattern. According to statistics, since the reform and opening up in 1978, the rate of return on investment by foreign-funded enterprises in China has been as high as 22%, and the return on equity of domestic industrial enterprises has averaged over 15%.
At present, in the army of fixed assets investment in our country, the most active are foreign capital, private individual capital, local government and state-owned enterprises. Their investment ratio has been as high as more than 60%, and it is in a state of vigorous growth. It has become the main force of China's fixed asset investment. Driven by the high rate of return on investment, as long as the central government does not adopt administrative measures to suppress it, as long as it does not affect the future of local government and state-owned enterprise management, this abnormally high investment enthusiasm for local governments and state-owned enterprises Will not cool down.
Diversification of funding sources dilute the effect of macroeconomic regulation
From the perspective of the source structure of China's fixed assets investment funds, as long as the central government does not take administrative intervention measures, the effects of macro-control on investment in fixed assets will gradually diminish. The macro-control measures adopted by China in the current market-oriented structural adjustment will affect only two parts of the state budget and domestic loans in fixed-asset investment in a short period of time. The proportion of these two funds has dropped from 40.8% in 1981 to 20.7% in January-October of 2007. The proportion of self-raised, issuance of bonds, issuance of stocks, and foreign investment has increased significantly to 79.3%. This means that although China's current 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 economic operation is also healthy.
In addition, the issue of excess capacity has always been the focus of attention. According to statistics, the overcapacity that China currently embodies is only a manifestation, and it is not a substantial overcapacity. Therefore, the structural adjustment emphasized by this macroeconomic regulation is based on maintaining the healthy development of the economy and extending the period of high-speed economic growth as much as possible to achieve a sound and rapid growth.
Investment is still the driving factor of economic growth
According to the composition of GDP, the three major elements of consumption, investment and net exports that stimulated China’s economic growth in 2006 accounted for 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. However, after entering into 2008, this dual-engine growth model of the Chinese economy will gradually change. Due to the lagging effects of the US subprime crisis, the appreciation of the renminbi and the adjustment of export tax rebates, the continued high prices of energy and bulk raw materials, and the global economic slowdown and geopolitical changes, China's net export pull effect will be significantly reduced. .
On the basis that consumption continues to maintain a steady growth, the weakening of the net exports' pulling effect means that we can only rely on the rapid growth of investment to drive the steady and rapid development of our economy. 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 machinery industry is highly correlated with the investment in fixed assets. The large scale of fixed asset investment will inevitably drive the strong growth in demand for machinery products, and the industry will enter a long-term prosperity cycle.
The influence of macro-control can not be ignored
The control of fixed asset investment proposed by macroeconomic regulation and control, and the impact on investment in fixed assets, can still not be ignored. For example, a neutral fiscal policy means that the state’s budget will continue to shrink in the sources of investment funds; tight monetary policy will suppress the growth of domestic loans; the price adjustment of the factors of production brought about by structural adjustment will Gradually reduce the rate of return on investment, and thus affect the investment enthusiasm of all investment entities; China's economic growth will slow down the growth of domestic demand, and then bring about changes in the market environment.
Therefore, people in the industry predict that in 2008 China's GDP growth rate will decline by one percentage point to about 10.5% on the basis of 2007, the corresponding growth rate of fixed asset investment is 24.6%, and the growth of the machinery industry will decline by nearly one percentage point to 30.8%. In general, before 2010, the growth rate of China's fixed asset investment will gradually slow down, but it still maintains a high growth rate of more than 20%. The growth rate of the corresponding machinery industry will also gradually slow down, but the growth rate will remain at a high level of more than 25%.
B. Strengthen policies to expand space for equipment manufacturing
Policy will be a catalyst for the industry boom
During the “Eleventh Five-Year Plan†period, China raised the revitalization of the equipment manufacturing industry to an unprecedented height. From the "Eleventh Five-Year Plan" to the "National Long-term Program for the Development of Science and Technology" and the "Several Opinions of the State Council on Accelerating the Rejuvenation of the Equipment Manufacturing Industry," the state's support for the equipment manufacturing industry is closely linked. Strengthening policy support has not only lessened the impact of macro-control, but more importantly it has expanded the industry's growth space and created the industry's prosperity.
The core of strengthening policy support is independent innovation. For enterprises with independent innovation in the industry, the state gives capital investment, tax incentives, and market support to get rid of the suppression of foreign brands for a long time and achieve endogenous growth.
The state directly invests in scientific research funds and encourages enterprises to invest their own research funds through policies to enhance their R&D capabilities so that they can produce competitive products through independent innovation to replace imports and expand into the international market. At the same time, enterprises with independent innovation ability are directly granted tax concessions such as income tax and value-added tax to improve their profitability and increase their cash flow, so that enterprises can have sufficient funds to invest in R&D.
In addition, laws and regulations that encourage the use of domestically-made first equipment, purchase domestic equipment, implement taxation concessions, limit the level of localization, etc., and adopt domestic and administrative means to vigorously support home-made equipment and expand the market space for China's equipment manufacturing industry.
At present, the independent innovation of China's equipment manufacturing industry is mainly integrated independent innovation and introduction, digestion, absorption and innovation, and there are few original independent innovations. For equipment manufacturing industry, strengthening policy support means having a market, having development funds, and having tax incentives, which will be directly reflected in enhancing the profitability of the company.
Import substitution + export expansion = industry growth space
Currently, 2/3 of China’s equipment investment is dependent on imports, including 100% of optical fiber manufacturing equipment, 85% of integrated circuit chip manufacturing equipment, 80% of petrochemical equipment, and 70 of car industry equipment, CNC machine tools, textile machinery and offset printing equipment. % comes from imported products. In 2006, the import value of machinery and transport equipment in China was 357.021 billion U.S. dollars. From January to October this year, the import volume was 335.118 billion U.S. dollars.
During the "Eleventh Five-Year Plan" period, China's equipment manufacturing industry rejuvenated its goal of reducing import dependency to less than 30%. The degree of import dependence has dropped 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" period. This is a huge alternative to China's equipment manufacturing industry during the "Eleventh Five-Year" period.
At present, China’s manufacturing industry has an international market share of 8.25%, of which the equipment manufacturing industry accounts for less than 30% of the manufacturing industry. The international market shares of the European Union, the United States, and Japan are 4..9%, 10.2%, and 8.2%, respectively. The proportion of the equipment manufacturing industry in the manufacturing industry is 41.9% in the United States, 43.6% in Japan, 46.4% in Germany, and the equipment manufacturing industry internationally. Market share is approximately 2.48% in China, 4.27% in the United States, and 4.26% in Germany. In other words, compared with developed countries, the international market share of China's equipment manufacturing industry still has two points of room for expansion.
Independent Innovation is the Core of Equipment Manufacturing Development
With strengthening policy support, China's equipment manufacturing industry has market support, capital investment, and tax incentives, and the profitability of enterprises in the industry will increase significantly. In this way, companies will have the funds to invest in R&D. The enhancement of R&D capabilities will enable companies to replace their imports with independent innovation to produce competitive products. The company's growth space is opened up, profitability is further improved, and companies have more funds to invest in R&D and independent innovation.
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, companies can expand the international market, establish international brands, and form an international competitive advantage, further expanding their growth space.
International advantage is the competitiveness of equipment manufacturing industry
During the "Eleventh Five-Year Plan" period, various sub-sectors in China's equipment manufacturing industry will be significantly different. Only sub-sectors that are labor-intensive, relatively technology-intensive, and capital-intensive at the same time can achieve alternative import and export expansion, and then open up space for growth and enter a period of high economic prosperity. This is China’s equipment during the “11th Five-Year Plan†period. Manufacturing's international advantages.
China is a large country with a population of 1.3 billion. It is a unique labor resource advantage, and it has created an international advantage in labor costs in China. Looking at the shipbuilding industry, the labor cost in China is 1/7.3 in Japan and 1/8.4 in Korea. Therefore, as far as the status quo of China's equipment manufacturing industry is still unable to compete with the international advanced level, only relying on the advantages of labor resources can participate in international competition. In addition, in addition to the labor costs, the price advantages of resources, energy, and environmental factors are also prominent.
Since the reform and opening up, China's private enterprises have thrived like mushrooms. They relied on cost advantages to launch price competition and quickly occupied the domestic market and even the international market. However, price competition will eventually lead to a meager profit for the entire industry. Only those industries with higher barriers to technical intervention can enable companies to enjoy excessive profits for a long time.
Compared with neighboring developing countries, China’s advantage lies in the fact that after more than 20 years of development since the reform and opening up, per capita GDP has reached 1,800 U.S. and the equipment manufacturing industry has begun to take shape. It already has the capital-intensive industries like the shipbuilding industry. Transfer capacity. Therefore, only relying on the advantages of the scale of funds can constitute barriers to intervention by developing countries in the periphery.
C. Historic Development Opportunities Create High Business Climate
China's equipment manufacturing industry has begun to have strength
At present, the world's manufacturing scale is ranked by the United States, Japan, Germany, and China. China's manufacturing industry has begun to take shape and strength, which provides a realistic possibility for China's development and transfer of equipment manufacturing.
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 of China's economic development. In the 1950s and 1960s, China independently developed a batch of equipment such as a 10,000-ton hydraulic press, a 125,000-kilowatt double-water internal-cooled generator set, and established a relatively complete manufacturing system.
In 1983, the State Council’s major equipment leadership group was established. The first batch of 12 complete sets of equipment for the development of 300,000 and 600,000 kilowatt generator sets, Baosteel complete sets of equipment, 300,000 tons of synthetic ammonia, 300,000 tons of ethylene, Qinshan nuclear power plant, and Three Gorges power station were identified. Since the Ninth Five-Year Plan period, especially since 1998, the former State Development Planning Commission has, in conjunction with the needs of economic construction, successively organized urban rail transit equipment, large ships, 500 kV DC power transmission and transformation equipment, large-scale gas turbines, and 440 tons of polyester equipment for Nissan. The 8000 tons of cement equipment and other equipments have achieved great results. At present, the international competitiveness of Chinese products has been greatly enhanced. One example is the significant increase in the ratio of machinery and transport equipment that reflect the manufacturing level of a country in export products.
Industrialization accelerates industrial upgrading
China’s economy has entered the 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 huge population and the increase in residents’ income have given China a huge market demand. The growth of the economy has created conditions for the escalation of consumer demand. Huge consumer demand will bring about huge production demands, and will bring vast market demand for capital goods such as machinery and equipment and raw materials.
Under the macroeconomic regulatory background, the fixed assets investment in China's manufacturing industry will maintain rapid growth during the “11th Five-Year Plan†period, and the average annual growth rate of industries above designated size will also maintain the level of 14% to 15%. The proportion of GDP will rise to close to 50%, and manufacturing will become the main supporting force for GDP growth.
The acceleration of industrialization has brought about industrial upgrading and industrial revival, which in turn has driven demand growth in the equipment manufacturing industry. This is mainly reflected in the upgrading of light and textile industries to heavy chemical industries; the primary processing of rough frames has been upgraded to sophisticated medium and high level processing; The revival of industries such as aerospace and aviation has drastically boosted the development of China's equipment manufacturing industry.
In addition, emerging industries have opportunities for development, and the construction of a harmonious society and the introduction of green GDP will stimulate the demand for equipment such as energy conservation and environmental protection.
International Industry Transfer Provides Opportunities
Economic globalization has brought about a new round of international industrial transfer. Not only is processing and manufacturing shifting, but R&D (R&D) is also shifting. It is an opportunity for China to develop its equipment manufacturing industry. The adjustment of the economic structure of the developed countries has led to a new round of international industrial transfer, which has provided major opportunities for the development of China’s comparative advantage industries.
With the rapid development of high-tech in the world today, it is unlikely that a country will occupy a dominant position in all high-tech industries. This provides an important opportunity for China’s economic leapfrogging development. On the one hand, we can vigorously develop new and high-tech industries and strive to make breakthroughs in key areas and areas with comparative advantages. On the other hand, use high technology to transform traditional industries, improve industrial quality and industrial structure, and increase industrial technological content and Value, to the high-end development of the industrial value chain.
Economic globalization has accelerated the process of international industrial transfer and some of the world's equipment manufacturing capacity is shifting to developing countries. Especially in recent years, the global economy has entered a new round of growth, creating a huge market for equipment manufacturing.
Related Links: Four Factors Drive Fixed Asset Investment
First, consumption upgrades have driven the rapid growth of investment in fixed assets in the relevant industrial chains.
The "Eleventh Five-Year Plan" proposes that the gross domestic product will increase at an average annual rate of 7.5%, and that the per capita GDP will more than double in 2000. China's per capita GDP will start to move from US$1,000 to US$2,000. This will surely bring about consumption. The overall upgrade, while the consumption upgrade drives the rapid growth of fixed asset investment in the relevant industrial chain.
Second, the elimination of backward production capacity has opened up huge space for investment in fixed assets.
The “Eleventh Five-Year Plan†proposes that the energy consumption per unit of GDP will be reduced by about 20%, the water consumption per unit of industrial added value will be reduced by 30%, the effective utilization factor for agricultural irrigation water will be raised to 0.5, and the comprehensive utilization rate of industrial solid waste will be increased to 60%. Energy conservation and emission reduction have become the top priority of the current government. However, at present, China's energy-saving, environmental-friendly, resource-conserving, and environment-friendly production capacity that truly meets the requirements of an innovative country does not exceed 40% in all industries. In fact, it still has a considerable part of its backward production capacity.
To achieve the goal of energy conservation and emission reduction, the first is to eliminate backward production capacity, such as small thermal power, small steel, small cement. By realizing the new production capacity by investing in fixed assets of advanced production capacity, it is the market that will defeat backward production capacity. At present, China still has more than 60% of its backward production capacity that needs to be eliminated. Therefore, there is huge room for investment in fixed assets here.
Third, industrial upgrading boosted the rapid growth of investment in fixed assets.
After China enters the stage of industrialization, industrial upgrading is mainly reflected in the following aspects: Under the background of macro-control of structural adjustment, new production capacity must meet the requirements of energy-saving and emission reduction, which accelerates the process of industrial upgrading; China is relying on The cost advantage of production factors and the transfer of international industries are currently in the stage of heavy chemical industry transfer from the IT industry to the machinery and equipment industry. It also promotes China's upgrading from crude primary processing to sophisticated medium and high-level processing; military and aerospace. The rejuvenation of industries such as aviation and aviation has also drastically boosted the process of industrial upgrading in China. Driven by energy-saving and emission-reduction policies, booming industries such as wind power, nuclear power and solar energy have seen vigorous development. Apart from the need for technological progress, industrial upgrading requires a large scale of investment in fixed assets to support it, and its investment pulling effect on the upstream and downstream industrial chains is even more far-reaching.
Fourth, the urbanization process supports a high level of investment in fixed assets.
During the process of industrialization, a large amount of land will be expropriated to build factories and related facilities. The continuous expansion of city scale will accelerate the process of urbanization. At the same time, the process of urbanization will attract a large number of rural laborers to work in cities, all of which require a large amount of investment in fixed assets.