Economy Operation Trend in the Sector of Machinery Industry in the First Half of 2014

The sector of machinery industry has been earnestly implementing the decision-making by the Party Central Committee and State Council and striving to promote the industrial structure adjustment since this year, although the economy is in a complicated trend with huge pressure on downward economy. The growth of primary economic indicators in the sector of machinery industry is higher than that of national average industrial level since the beginning of this year, the export situation is pleasant and the R&D and innovation achieve new fruits as well. The industrial structure adjustment and upgrading show the active change and a stable-and-progress operation situation.

The economy operation in the whole sector will maintain a stable trend in the whole year. While the increasing speed in the second half of this year would probably be moved down due to the impact of base in the first half of this year, yet the overall trend is becoming stable. It is estimated the increasing speed of annual production and sales will be at around 12%, and profit at 15%. The increasing speed of foreign trade will be higher than that of last year. The entire industry shall be confident and strive to promote the structure adjustment, transformation and upgrading in the sector of machinery and improve the growth quality of the industry.

I. Primary operation features in the sector of machinery industry in the first half of year

(1) The increase of industrial added value is higher than that of other industries in the country

According to the statistics from National Bureau of Statistics, the increasing speed of machinery industrial added-value is higher than other industries in the country since this year. The cumulative increasing speed of machinery industrial added-value was 11.2% from January to June, 2.4 percentages higher than that of industrial added-value in the country, and 2 percentages higher than that in the sector of machinery industry at the same period of last year. The operation strength in the sector of automobile is better than that in the sector of non-automobile, yet the operation strength in the sector of non-automobile is better than the national average level.

As the machinery industry features the light consumption on energy and resources and higher technique and service added-value and provides the fundamental equipment for the development of national economy, the development of machinery industry is faster than that of national average industrial level. It meets the requirements on national industrial structure adjustment and upgrading.

(2) The industrial profit growth is faster than the income, and the profit rate is becoming increasing

The machinery industrial profit maintains an increasing trend in the second half of last year and the growth is rapid this year. The increasing speed of profit is always faster than that of income. The total cumulative profit reaches 715.3 billion Yuan from January to June, increased by 19.58% compared to the same period of last year; the primary business income reaches 10.4 trillion Yuan, increased by 11.52% compared to the same period of last year; The increasing speed of profit is 8.06 percentages higher than the primary business income at the same period, 7 percentages higher than that in the same period of last year.

The profit rate of primary business incomes in machinery industry maintains an increasing trend since the beginning of this year, driven by the rapid growth on profit. The profit rate was 6.86% from January to June, increased by 0.46 percentage compared to last year.

(3) Foreign trade is better than that of last year

The import/export trades situation in machinery industry are better than those of last year in the first half of this year, increased by 8.87% compared to the same period. The import trade reached $155.9 billion, increased by 10.96% compared to the same period; the export trade reached $191.7 billion, increased by 7.22% compared to the same period and increased by almost 6 percentages compared to the same period of last year; the trade surplus reached $35.8 billion.

The general trade export is good. The cumulative export reached $112.2 billion last year, increased by 8.94% compared to last year. The increasing speed is 1.72 percentages higher than the average export increasing speed in machinery industry, 4.98 percentages higher than the export increasing speed of processing trade.

While the foreign trade in machinery industry was good in the first half of year, domestic enterprises shall fully cope with the change to international market in future as the increasingly fierce competition in international market.

(4) Downturn of product price and vigilant on inventory

The market competition in machinery products market is becoming increasingly fierce due to the impact of insufficient demand. The general price maintains the downturn in the first half of this year. The cumulative price index has been lower than 100% for 30 months by June. However, the constant decreasing trend of price index at the previous stage has been improved since this year.The price index was 98.7% in January and 98.9%in June cumulatively. But, generally speaking, the growth is weak. The price of 79 types of products out of 142 key monitored products was reduced compared to the same period, accounting for 55.63%.

In addition, the inventory increasing speed of machinery industry, in particular for finished-products, is in a high level and increasing every month. The finished-products inventory increased by 11.72% in January and February, compared to the same period. The figure was increased to 15.06% from January to June, so necessary attention and precaution shall be taken.

II. Prediction on the trend of machinery industry in the whole year

The machinery industry entered a relatively stable growth stage at an intermediate speed since 2013 after it went through the fluctuation in the previous years. Although the operation of macro-economy fluctuated and there were disadvantageous factors like difficulty in payment collection, increasing financing costs and instable orders in the first half of this year, the machinery industry shows a good stable-and-progress operation situation, and increasing enterprises focus on researching and developing competitive high-end products and extension services. The internal power which promotes the structure adjustment, transformation and upgrading is strengthening. The macro-economy situation is becoming better in China, so the development environment in machinery industry will probably be improved in the second half of year; the world economy is improving, and the export market is expected to maintain a stable growth; consequently, we believe the trend in machinery industry will be stable in the second half of year. The increasing speed of primary businesses is expected to reach 12% this year, increasing speed of profit at 15% and export at 8%.

Export Growth Exceeded 15% in September,Foreign Trade is Becoming Better by Seasons

According to the data issued by the General Administration of Customs, the total import/export value was increased moderately in the first three quarters this year, and the export amount was increased by 15.1% in September. The foreign trade is becoming better by seasons.

According to the statistics of the customs, the total import/export value reached 19.4 trillion Yuan in the first three quarters this year, increased by 1.8% compared to the same period of last year. The total import/export value reached 2.44 trillion Yuan in September, increased by 11.2% compared to the same period of last year. The import/export value was increased by 15.1% and 6.9%, respectively. The trade surplus was 190.1 billion Yuan, expanded by 1.1 times. Mr. Zheng Yuesheng, press spokesman of General Administration of Customs and director of National Bureau of Statistics noted the import/export situation is becoming better by seasons in China.

Mr. Zheng Yuesheng remarked the import/export value was 5.9 trillion Yuan in Q1, decreased by 3.8%, 6.5 trillion Yuan, increased by 1.8%, and 7 trillion Yuan in Q3, increased by 7.2%. It is predicted it will increase in Q4 in virtue of the good trend, in particular in regard of export. The pressure on export will be reduced further in the future 3 months.

However, he also noted the negative factors which impact the foreign trade development still exist. For example, the international competitiveness of exported products is reduced, the traditional labor-intensive manufacturing industry is shifting to Southeast Asia, advanced countries are accelerating the influx of manufacturing industry due to the warming economy, and the constant reduction of bulk commodity reduced the import value in China. He also remarked the foreign trade development has entered a new normality in China at present

Mr. Zheng Yuesheng said it would be very tough to realize the target, i.e. 7.5% increase of foreign trade in the whole year, considering the data in the first three quarters. The foreign trade development has entered a new normality in China and is at a shifting stage of increasing speed and transformation stage of structure. Apart from focusing on the speed of foreign trade development, we should further focus on the quality and benefits of foreign trade development at the next stage.

Is the Importance of Internet Finance in China Exaggerated?

In recent years, the rise of Internet finance in China roots in the shortage of financial services due to license restrictions and the arbitrage opportunities arising from financial regulation.

Globally, there is no vigorous Internet finance industry rising. Therefore, the Internet finance is also considered as "China's Internet Finance".

The year of 2013 was known as the first year of China's Internet finance, which has attracted great attentions, and even been incorporated into this year’s government work report for the first time.

Today, at the TV debate of Reshaping Finance and Trade in Asia, the experts debated the topic of Internet finance.

Lin Yifu, Professor and Honorary Dean of the National School of Development at Peking University and Vice Chairman of All-China Federation of Industry & Commerce, said that undoubtedly, to some extent, the Internet finance will be helpful to China's GDP growth, but it is absolutely not a panacea for GDP growth.

Lin believed that China must persevere in investing in technological innovation and industrial upgrading, which require financial services. We all know that to date, the Internet finance is mainly to support consumption, and mainly to support small and medium enterprises, rather than to support technological innovation or large industrial upgrading. We need a variety of financial arrangements to serve various industries. Of course, Internet finance is a new technology, we really hope it can help a lot of people, but we can never think that the Internet finance can solve all problems in China.

Chen Zhiwu, Professor of Financial Economics at Yale School of Management, said that he agreed with Professor Lin's point of view, i.e. the importance of Internet finance in China is greatly exaggerated.

Chen Zhiwu believed that the Internet finance is good for more inclusive growth, especially for the promotion of deregulation, for example, Alipay and other Internet financial products have made explosive growth. Besides, the cost of excessive regulation is revealed to the society.

Due to the inadequate supply of traditional financial services, the needs of many people for financial services can not be satisfied, which provides opportunities for the rapid development of China's Internet finance.

At present, China's market economy structure is distorted, one of the main reasons is that the interest rate liberalization has not been realized. Deposit interest rate liberalization will help to optimize the allocation of financial resources and will also allow depositors to get more interest.

Currently, the majority of Chinese household savings are limited to bank deposits, but the cap on deposit interest rate causes the masses to subsidize the banks or the state-owned enterprises and local financing platforms with higher bargaining power, which means the loss of the legitimate interests of depositors.

Zhou Xiaochuan, Governor of The People's Bank of China, pointed out that the important prices at financial market should be mainly determined by the market, market-determined price will help to optimize resource allocation and will also contribute to the development of financial market. However, interest rate liberalization is affected by many factors, which will be a gradual process. With the development of Chinese economy and financial market, interest rate liberalization will continue progressing step by step.

With the rise of Internet finance, Chinese interest rate liberalization reform is accelerated, the pricing power for deposit interest rate should be returned to financial institutions, financial autonomy of commercial banks should also be fully guaranteed, which will not only help to optimize resource allocation and adjust economic structure, but also help depositors get interest income.