According to the report of CE Equipment Manufacturing Industry Prosperity Index, the 2012 prosperity index of the industry dropped another 0.2 points from that of the first quarter. The four warning guidelines, namely the Production Composite Index, Products Sales Revenue, Total Export Value, and Total Profit Value, stayed in the blue-light region for two periods in a row, indicating that, with the deterioration of insufficient demands in domestic market and foreign market, the growth of industrial production and sales continues the downward trend, enterprises' decreasing profit capability has not been significantly reversed, and the equipment manufacturing industry is till at the bottom of its periodic fluctuation.
In terms of industry, in the first half of the year the production increment of enterprises above statistical scale of the general-purpose equipment manufacturing industry grew by 8 percent (which was 8.8 percent in the first quarter), that of the auto industry grew by 10.2 percent (8 percent in the first quarter), and that of electrical machinery and equipment manufacturing grew by 9.8 percent (10.8 in first quarter), all of them being lower than the average 10.5 percent growth of national industry. In terms of structure, industries' beginning to stabilize amidst slow development is mainly due to the contribution of the upwards growth of the auto industry.
In terms of product, noticeable products in the first half of the year include automobile, farming machinery, industrial control instrument and electricity transport and distribution equipments. Sales of automobiles have been increasing monthly for the last three months. The central government's financial subsidy on the purchase of farming machinery has boosted production and sales of large tractors, corn reapers, and farm product pre-processing machines, with growth rates of production and sales both above 33 percent. More importance has been attached to automation technology in the process of improving the smartness of the equipment manufacturing industry. Larger investment and more extensive construction that are needed in order for the State Grid to achieve the target of becoming a world-class power grid would drive the growth of electricity transport and distribution equipments.
In terms of market volume, market demands in some industries are insufficient, significantly accentuating the problems of over capacity. From January to April, growth of the main operation revenue of the machinery industry kept slowing down, with growth of merely 9.7 percent year on year; the internal combustion engine and engineering machinery industry even suffered negative growth. Nonetheless, export of China's electromechanical products has been good in the first half of the year, increasing by 10.5 percent, 1.3 percentage points higher than overall export growth in the same period.
In terms of company profit, while main operation revenue has increased by 9.7 percent, total profit value increased by only 0.8 percent, continuing the slow growth and showing signs of further slip. The internal combustion engine and engineering machinery industry, despite that its total profit value has fallen most significantly, its profit rate maintained the highest 8 to 9 percent. The profit rate of the auto industry reached 7.8 percent, greatly improving the average rate of the industry.
In terms of future trend, total investment value, a leading industrial indicator, stayed in the light-blue light region. In the first half of the year, growth of fixed assets investment in the general-purpose equipment manufacturing industry reached 38 percent, that of specialized equipments exceeded 50 percent, and that in automobile reached 36 percent. Investment increments in the downstream industries of railway, watercraft, and aerospace and other transportation equipment manufacturing industries were significantly lower than that of the principal industry. If the weight of industrial upgrade and technology innovation are not taken into account, the machinery industry is still able the expand production capacity at a profit rate of 5.5 percent. The future is rather uncertain.
On the whole, demand inadequacy in the equipment manufacturing industry is a rather conspicuous problem at present, and foreign trade under the influence of the international economic situation and regional conflicts is full of uncertainties. Recently, growth of investment in downstream industries continued to go downwards, unable to significantly drive up demands for machinery in the domestic market in the next half of the year, and the fall of the price of main raw materials is unable to fuel the going up of products' ex-work price.
Therefore, in recent period, the equipment manufacturing industry has been staying at the bottom region of its periodic fluctuation. The difficulties of the slowdown of growth, slipping of profit, and resources consolidation during industrial reform and upgrading are touchstones that weed out the weak. Excellent companies would remain flexible and handle the problems skillfully, whereas more companies would hope for the government to promulgate policies that help increase investment and reinvigorate the market.
