Auto & Transportation

Affected by high temperatures, heavy rains and local epidemics, industrial growth is accelerating to decline.

According to the data released by the National Bureau of Statistics on August 16, the national industrial added value above designated size in July increased by 6.4% year-on-year, which was 1.9 percentage points lower than that in June. The month fell by 0.9 percentage points, and it has fallen for three consecutive months and the rate of decline has increased.

The interviewed experts believe that, in the short term, floods in Henan and other places, as well as outbreaks in economically active areas such as East China, Central China, and Southwest China, have impacted industrial production from both ends of supply and demand. In the medium and long term, domestic and international demand faces more uncertainties. The upstream price hikes squeeze the profits of downstream industries, and some enterprises' production will fall into the wait and see.

Affected by policies such as environmental protection and control of crude steel output, production in high-energy-consuming industries is further decelerating. In July, the growth rate of the added value of the mining industry fell to 0.6% year-on-year, and the ferrous metal smelting and rolling processing industry experienced negative growth for the first time this year. Pig iron, crude steel, steel, raw coal, and coke have all experienced negative growth. It is necessary to pay close attention to the further contraction of upstream supply or provide support for raw material prices to squeeze the profits of the middle and downstream industries.

Affected by factors such as the shortage of cores, the price increase of raw materials, the hindered supply chain, and the slowdown in demand, the decline in the automobile manufacturing industry in July further expanded to 8.5%, and the decline in automobile production also expanded to 15.8%. In contrast, new energy The growth rate of automobile production is as high as 162.7%, which is 27.4% faster than last month. This is a true portrayal of China's economic structural adjustment.

Floods and epidemics impact output, and industry declines faster

From January to July, China's industrial production increased by 14.4% year-on-year, and compared with the same period in 2019, the two-year average growth rate was 6.7%. The two-year average growth rate of the industry in a single month in July was 5.6%, which has fallen for three consecutive months and the rate of decline has expanded.

Wu Chaoming, chief economist at Caixin Securities, told the 21st Century Business Herald that the decline in industrial growth in July was the result of the superposition of medium and long-term trend factors and short-term factors: in the long run, this continued the previous economic recovery but the momentum slowed down. The trend. In the short term, the floods in some provinces and cities in July have affected industrial production activities; the epidemic has spread in many places, and is mainly concentrated in eastern, central, and southwestern regions where my country's economic activity is relatively high, and it has also affected industrial output.

"The domestic epidemic is spreading in many places, and the impact on industrial production is that on the one hand, epidemic prevention and control measures have been strengthened, the upstream, middle and downstream supply chains have been impacted, supply shortages have become prominent, and transportation and other costs will also increase. On the other hand, the epidemic is in The demand side will also curb investment growth. However, as the accuracy of China's epidemic prevention and control has been significantly improved, and the ability of enterprises to adapt to epidemic prevention and control has also been significantly enhanced, it is not appropriate to overestimate the long-term impact of the epidemic on industrial production."

Everbright Bank analyst Zhou Maohua said in an interview with a reporter from 21st Century Business Herald that the decline in industrial growth in July was mainly due to the decline in manufacturing output and the rising base. The value added of the manufacturing industry in July increased by 6.2% year-on-year, down from the previous month. 2.5%. On the one hand, this is because the upstream commodity prices continue to be high, which squeezes the profits of some downstream industries, and some companies are on the sidelines in the short term. On the other hand, due to factors such as "core shortage", the automobile manufacturing industry has declined significantly. And constitute a drag on some upstream and downstream industries.

In addition, Zhou Maohua also mentioned that the decline in industrial output in July was more than expected and was hit by "short-term sudden" factors. Extreme weather and sporadic cases had an impact on the production and operation of the company through logistics and transportation.

At the press conference of the State Council Information Office on August 16, Fu Linghui, spokesperson for the National Bureau of Statistics, pointed out that there were four regional heavy rainfalls across the country in July, of which the extreme rainstorm in Henan had a more obvious impact. In July, Henan The value added of the industrial enterprises above designated size increased by 4.6% year-on-year, a decrease of 1 percentage point from the previous month. In general, the impact of the flood on the economy is controllable.

He pointed out that in July, facing the situation of high temperature, heavy rain, and the spread of epidemics in some areas, the year-on-year growth rate of the main indicators of the national economy fell. At the same time, last year's economy was affected by the epidemic and showed a trend of low and high. This year, affected by the base, the annual economic growth rate has shown a trend of high and low, but industrial and other indicators have remained at a reasonable level.

Black line shrinks, crude steel output drops by 8.4%

It is worth noting that among the three major categories, the mining industry and some energy-intensive industries are further decelerating.

In July, the year-on-year growth rate of the added value of the mining industry fell to 0.6%. The output value of the ferrous metal smelting and rolling processing industry fell by 2.6% that month, and this year saw a negative growth for the first time this year. The output of pig iron, crude steel, and steel was 7,285, 8679, and 111 million tons, respectively, down 8.9%, 8.4%, and 6.6% year-on-year. The output of raw coal and coke were 31,417 and 38.79 million tons, down 3.3% and 2.9% year-on-year.

Wang Jun, chief economist of Centaline Bank, said that ferrous metals and coal are greatly affected by domestic policies and domestic supply and demand. In the past few months, China has intensively introduced energy consumption "dual control" and pressure drop "two highs" projects. A number of measures, the intensity and frequency of policy interventions are very large, which has caused a significant decline in the output of related categories in the past two months.

Zhou Maohua pointed out that the country is strictly controlling the output of crude steel and other products to prevent overcapacity in related industries and continue to promote the transformation of high energy consumption industries based on the goal of carbon neutrality. For example, China has clearly established a “red line” for the year-on-year decline in crude steel output during the year. Therefore, the output of steel and other categories in July entered a negative growth range.

What needs great attention is that the further contraction of upstream supply may provide support for the maintenance of high prices of raw materials, and then continue to squeeze the profit space of the middle and downstream industries.

The Bank of China research report shows that the domestic ferrous metal mining and processing, chemical fiber manufacturing, non-ferrous metal smelting, and ferrous metal smelting industries have the highest profit growth rate. The average growth rate for the two years from 2020 to 2021 is as high as January to June. 257.57%, 183.24%, 163.2%, 99.46%.

However, due to the weak bargaining power of mid- and downstream industrial enterprises, the prices of end consumer goods cannot rise simultaneously with the prices of raw materials, and enterprises are forced to bear the pressure of rising costs. The industries with lagging profit growth rates are fur products and footwear, textile and clothing, furniture manufacturing and other industries. The average growth rates for the two-year period from 2020 to 2021 are -19.98%, -17.31% and -10.34, respectively. %.

Fu Linghui pointed out that the current price increase of the extractive industry and the raw material industry was significantly higher than that of the processing industry. In July, the price of production materials in the PPI rose by 12% year-on-year, an increase from the previous month. However, the price of subsistence materials increased by only 0.3% year-on-year. Due to tight supply of bulk commodities, rising shipping prices and abundant currency liquidity in major developed economies, bulk commodity prices will continue to run at a high level.

"In the next stage, we will continue to increase the efforts to ensure supply and price stabilization, increase support for downstream industries and small, medium and micro enterprises, and maintain overall price stability." Fu Linghui said.

The car’s decline has expanded, and new energy has bucked the trend and increased by 1.6 times

Affected by the slowdown in the production of traditional fuel vehicles, the decline in automobile production and output value expanded again in July.

The decline in the automobile manufacturing industry in July further expanded from 4.3% in the previous month to 8.5%. The month’s auto production was 1.853 million, a decline of 15.8%, an increase of 2.7 percentage points from the previous month.

Zhang Hangyan, a researcher at the Institute of Industrial Economics of the Chinese Academy of Social Sciences, said in an interview with the 21st Century Business Herald that the output of traditional cars has shrunk, on the one hand, because under the “dual carbon” constraints, traditional cars are facing more restrictions such as traffic restrictions; on the other hand, last year After the outbreak, due to the need for social isolation, the demand for automobiles has been fully released. Unlike consumables, automobiles are durable consumer goods. After the short-term demand is met, the rapid growth of the automobile industry lacks sustained demand support.

Zhou Maohua believes that the decline in automobile output is the result of a combination of factors such as shortage of cores, rising prices of raw materials, blocked supply chains in the industrial chain, and slowing domestic and foreign demand. "Due to the increasingly prominent problem of automotive chip shortages, some automakers have been forced to stop production, inhibiting the release of auto production capacity. In addition, the auto industry is highly dependent on the global industrial chain, and the decline in domestic auto production may be related to the continuous increase in industrial raw material prices and poor global parts logistics. The factor is related."

However, the production of new energy vehicles is still very strong, which is in sharp contrast with the decline in traditional vehicle production, reflecting that China's auto industry is accelerating its transformation and upgrading. The output of sedans and SUVs in July was 706,000 and 654 thousand, down 14.5% and 12.9% year-on-year, and the rate of decline expanded by 1.4 and 1.8 percentage points respectively. The output of new energy vehicles reached 289,000, a growth rate of 162.7%. It accelerated by 27.4 percentage points last month, and the growth momentum is very strong.

"The reason for the rapid growth of new energy vehicles is firstly the result of industrial policies and consumption stimulus policies at the national and provincial and municipal levels; secondly, each link of the new energy vehicle market has become more mature, and consumer acceptance and recognition have increased; The third is that with the improvement of technology, the market share of domestic brands is gradually increasing." Wu Chaoming said.

The current industrial recovery is uneven, and the industry is divided significantly. The growth rate of most traditional industries has slowed down or even been negative, while new industries have maintained a relatively high growth rate.

In July, the added value of the high-tech manufacturing industry increased by 15.6% year-on-year, which was 9.2 percentage points faster than that of all regulated industries, and the two-year average growth rate was 12.7%. Among them, the pharmaceutical manufacturing industry increased by 25.3% year-on-year; the aerospace vehicle manufacturing industry and the information chemical manufacturing industry increased by 27.2% and 21.7%, respectively, an increase of 9.8 and 5.3 percentage points from the previous month; the electronic and communication equipment manufacturing, computer and office The equipment manufacturing industry grew by more than 10%. Industrial robots, smart watches, and service robots increased by 42.3%, 32.0%, and 18.4% respectively year-on-year.

According to the breakdown data released by Yangtze River Source, Deputy Department of Industry, National Bureau of Statistics, in July, China's electronics, metal products, electrical machinery and other industries increased by 13.0%, 12.7%, and 10.3% year-on-year, respectively. Integrated circuits, electronic components, optoelectronic devices, Printed circuit boards continued to grow rapidly, with year-on-year growth rates of 20%-50%; solar cells increased by 30.3%, and charging piles increased by 97.3%; the supply of metal containers for shipping was in short supply, and output increased by more than twice.

“In general, the industrial economy continued to recover. However, due to the impact of unfavorable factors such as the epidemic situation and flood conditions, the growth rate of industrial production declined in July. At the same time, the cost of private enterprises and small and micro enterprises has risen and profits have been squeezed. The foundation for stable recovery is still not strong, and uncertainties are increasing."

Jiang Yuan pointed out that in the next step, we will continue to do a good job in coordinating epidemic prevention and control and economic and social development, take effective measures to deal with the excessively rapid increase in raw material prices and its associated effects, strengthen the collaborative innovation of the upstream and downstream of the industrial chain, smooth the economic and social cycle, and focus on resolution Small and micro enterprises and downstream enterprises have difficulties in operating, consolidating the foundation for the stable recovery of the industrial economy.