China’s Machine Tool & ToolConsumer Market and Industrial Outlook
【China’s Machine Tool & ToolConsumer Market and Industrial Outlook】
Press release
Editor's Note: This is the press release of the conference held by CMTBA(ChinaMachine Tool & Tool Builders’ Association) on Nov. 3rd, duringJIMTOF 2018 Exhibition. President Mao Yufeng made the press release.
Dear guests, ladies and gentlemen, good morning!
Welcome to the press conference. Onbehalf of CMTBA, let me express my sincere grati-tude to you! Three aspectswill be mainly introduced here: They are China’s machine tool & tool marketsituation, China’s machine tool & tool industrial operation andpreparations of CIMT2019 & CCMT2020.
Inrecent years, China machine tool & tool consumer market has been showing arestorative growth trend, influenced by the rebound of Chinese economy and thepull of new momentum. Thanks to this influence, China’s machine tool & toolindustrial operation and the import of related commodities are sharing the sameobvious trend. In general, the industry and its con-sumer market have graduallytransformed from the operating characteristic of “overall de-mand slide andstructure rapidly upgrade” before 2015 to “overall demand stabilize andstructure rapidly upgrade”. The said characteristic will continue for aperiod of time. Now, I will comprehensively analyze the current situation anddevelopment expectation based on the collative macroeconomic date of China,market information and industrial performance.
1.Machine Tool & Tool Consumer Market Situation of China
1.1Recent Chinese macro-economy conditions
Seeingfrom the y-o-y increase of quarterly GDP, the one of 2017 showed a process of“high at the beginning, low at the end in each quarter”. It was related to theimplementation of the policy thought on financial risk control, deleveragingand economic structural adjustment. In-fluenced by the drop of investmentgrowth in the second half of 2017, the GDP growth in the first half of 2018showed a slight downturn, with the second quarter relatively obvious, down 0.2%than the 6.9% in 2017 by y-o-y comparison. On July 23, Chinese government putfor-ward specific policies for economic work in the second half of the year.The government de-termined to better play the role of fiscal and financialpolicies to support the expansion of do-mestic demand to adjust structure topromote the economic development of entities, to decide and push effectivemeasures around addressing weak links, strengthening staying power andimproving people’s livelihood. These measures include further activatingalready active finan-cial policy, implementing simultaneous loose-tight prudentmonetary policy, expanding the financing and guarantee scale for small andmicro enterprises, uncompromisingly eliminating zombie companies, inspiringsocial vitality, facilitating steady growth of effective investment, etc... Itis expected China’s GDP growth in the second half will pick up and maintain thesteady trend with the pull of effective investment growth.
Fromthe perspective of segmentation of GDP in the first half of the year, thetertiary indus-try remained at top and tended to expand, while the secondaryindustry closely followed with relatively obvious trend of expansion; forspecific industries, industry and manufacturing con-tributed the most to GDP,with the next one being service industry. The contribution degree of realestate industry decreased somewhat. Information and software industry was swiftand vi-olent, but its proportion was lower. In summary, in order to achievestable economic growth in the second half of the year, investment in industryand manufacturing would be increased and consumption demand of machine tool& tool would continue to grow.
Seeingfrom the growth of investment in fixed assets, it showed a trend of y-o-yconsistent drop after March 2017, among which the decline in equipment and toolprocurement was fiercer, from y-o-y 10.5% increase in February 2017 down toy-o-y 2.3% increase in Feb. 2018, plummeting by 8.2 percentage points. Underits influence, the demand of machine tool & tool consumer market wasfalling in the first half of 2018. After March 2018, the growth rates ofinvestment in the secondary industry, manufacturing, equipment procurement,etc., assumed varying degrees of rebounds, despite the fallback of the growthrate of investment in fixed assets of the whole society. The increase rate ofequipment and tooling procurement further downed in July-August. It’s estimatedthe investment in sectors relevant to machine tool & tool consumption wouldincrease consistently, due to the influence of lagging impact of investment.
Dataof industrial added value showed a month-by-month decline in the first half of2018 af-ter a significant increase in the fourth quarter of 2017. This echoedto the change of the above investment data. PMI index of China manufacturingindustry published by National Bureau of Statistics and caixin.com exposed astructural problem of decline in growth. From the third quarter of 2017 to thefirst quarter of 2018, the expansion of PMI index by National Bureau ofStatistics dropped significantly, while PMI index by caixin.com fluctuatedwithin the weak expansion range, which correlates with the decline in growth ininvestment. From the first quarter to the second quarter of 2018, PMI index byNational Bureau of Statistics showed an apparent rise, but PMI index bycaixin.com remained at critical state of the weak expansion range. PMI index bycaixin.com mainly reflects the operational tread of China SMEs, so the abovedisparate indexes reflect the earlier investment in real economy was notenough. There-fore, policies and measures to stabilize economic growth and workarrangements were made by Chinese government.
Inthe data of money supply, the increase of M0 that correlates with householdconsumption and real economy was basically stable; the increase of M2 and M1fell continuously and the excessive growth of social debt has been effectivelycontrolled under the policy of financial risk control and deleveraging.Moreover, influenced by the moderately prudent and loose-tight monetary policydetermined by the State Council, the growth rates of M0, and M2 have beenstable since the 1st quarter of 2018, but the increase of M1 narrowed downapparently in July-August causing capital relatively tension at short-term. Amodest rise in the growth of money supply is conducive to stimulatingconsumption and stabilize investment.
Accordingto the data from National Bureau of Statistics on above-scale industrialenterprise, enterprise asset liability ratio dropped from 56.2% at thebeginning of 2017 to 55.5% at the end of the same year. Over the same period,enterprise profit margin of main businesses ex-perienced first drop and thenrise, while the deleveraging task of industry enterprises was steadilyadvancing. In the first half of 2018, the asset liability ratio of above-scaleindustry en-terprise picked up, profit margin of main businesses alsoincreased, and enterprise investment and operation appeared to be the trend ofexpansion.
Insummary, in the second half of 2018, China’s macroeconomic performance wouldshow a stable trend, which would spur an increase of demand for the consumermarket of China ma-chine tool & tool.
1.2The Latest Change in Machine Tool & Tool Market
Thefollowing is an analysis from the angle of the change trend of consumer marketof China machine tool & tool in the second half of 2018. The fundamentaldriver of consumption de-mand for machine tool & tool is the expansion ofmanufacturing industry. Change in output of related industrial products and theprogress of manufacturing technology have an indirect impact on the consumptiondemand in metal working machine tool, cutting tool and abrasive & grindingtool. The index of consumption demand of China machine tool & tool isformed according to the data of the year 2000 as standard via pertinentanalysis and modeling on the data of main industrial products output issued byBureau of State Statistics. The first index in the index system has four fieldindexes covering metal cutting machine tool; metal forming machine tool,cutting tool and abrasive. The second index can be subdivided as machiningcenter, turner, grinder, heavy-duty machine tool, presser, puncher, shearer andbending ma-chine, etc... Below is the upgrade data calculation in June 2018,which has reflected the fol-lowing recent demand change.
Thedemand quantity of metal cutting machine tool is influenced by structureupgrade and de-capacity and the demand index in recent years has been falling.2018 will be a low point in recent consumer demand quantity. With the advent ofthe renewal period of machine tools in service and new kinetic energy, thedemand index will show a steady upward trend after 2019. In addition, due tothe obvious demand structural upgrading, the average price of metal cuttingmachine tool has soared sharply in the last decade. The quick rise of price offuture machine tool would hedge the impact on expenditure caused by thedecrease of demand quantity. The expenditure of metal cutting machine toolwould show a steady growth trend in China.
Metalforming machine tools differentiate from metal cutting ones with comparativelymore visible increase. This benefited from the close tie between user marketand consumption of metal forming machine tools. The constantly improvingcontribution rate of consumption to Chinese economy is indirectly helping thegrowth in consumption of metal forming machine tools. What similar to metalcutting machine tools is the quick growing expenditure on metal forming machinetool becoming more remarkable with the lift of value of machine tool.
Thereis a stable overall demand in cutting tools since 2018. This correlates withthe steady demand in metal cutting machine tools. At the same time, the upgradein performance and the smooth increase in processing capacity are offset eachother. It is expected demand in cutting tools in the future would show a trendof “overall demand stabilizes, structure upgrades”. The market competition willbecome fiercer.
Withdomestic manufacturing improvement and increase in demand in precisionprocessing, especially with the rise in demand in grinding machine tools, theconsumption in abrasives will show a gradual step-up in 2018. Due to theupgrade in consumption and demand struc-ture, the supply structure of abrasiveswill follow the suit.
Onthe other hand, investment trend from user fields is the most direct referenceon judging the trend change and hotspot direction of the future domesticconsumption of machine tool & tool. For your reference, the following isthe latest trend change in investment from user fields in-cluding automotive,aerospace & aviation, national defense, shipping and ocean engineering,energy equipment, rail and transit, engineering machinery, steel, automotiveparts, machine tool & tool, etc., based on the analysis on the quarterlydata in the first half of 2018 of listed companies (282 companies) in China’sshanghai and Shenzhen stock markets. In the first half of 2018, the top threeof expenditure on fixed and intangible assets were energy equipment (52.6billion yuan, 27%), automobiles (40.6 billion yuan, 21%), railways and railtransit (29.9 billion yuan, 15%). From the perspective of investment activity,automotive, steel, rail and rail transit, ship building and oceanographicengineering are in the most active areas; automotive parts, constructionmachinery, machine tools, aerospace and national defense industries are in theneutral zone; energy equipment investment contracted.
2.China Machine Tool & Tool Industry Operation
2.1Overall Operation of machine tool & tool industry
Accordingto the calculation of relevant data by the National Bureau of Statistics, theoutput of metal working machine tool is USD 13.5 billion in the first half of2018 in China, increas-ing 11.5% over last year. Among them, metal cuttingmachine tool is around USD 7.5 billion, a y-o-y up 13.6%, while metal formingmachine tool is USD 6 billion, a y-o-y growing of 8.9%. Based on the abovedata, China’s machine tool & tool consumer market showed an obviousincrease in the first half of 2018.
2.2New Features in Industry Development
China’smachine tool & tool industry is experiencing unprecedented battle intransformation. Under the impact of various factors from both home and abroad,China’s machine tool & tool industry is showing new features.
Total quantitytowards stability, structure upgrade.In the future, China machine tool & tool industry will be transformed fromthe mode of scale oriented to development mode of quality and profit oriented.Under the premise of maintaining industry generally stable, resources will leantowards the cluster of enterprises with higher operation efficiency, betteroperation qual-ity, more advanced product technology and greater potential fordevelopment. Marketization mechanism becomes the primary mean to the allocationof the above resources.
Innovative driverbecomes the engine of transformation and upgrade of the industry. Factordriven model will gradually recede to a secondary position. Innovative drivingmechanism will become the primary driver for the development of the industry.“Science and technology are the primary productive force” will be given a newconnotation and play a new historic role.
Deepen the reform andopening up, shape new competition and cooperation relationship.Under the new circumstance, deepening domestic reform and opening up policyhave positive significance to the development of machine tool & toolindustry. Deepening reform in the as-pects of state owned enterprise, the constructionof innovative system, investment, financing, taxation and allocationregulation, etc. will prompt collaborative development of domestic en-terpriseswith different ownership, and lay a solid foundation for industrialdevelopment. Poli-cies of opening up, such as optimization of structure ofintroducing foreign capital, promotion of fair competition, protection of IPR,consolidation of international cooperation, equalization of market access topromote trade and investment equity will form positive interaction be-tweendomestic and overseas enterprises.
3.Expectations for the Future
Inconsideration of the comprehensive influence of industrial operation, importand export trade, change in RMB exchange rate, etc., a growth would be expectedon China’s machine tool & tool consumer market in 2018. Among them, outputof machine tool & tool remains the state of slight increase. Industrialinternal structural upgrade will become more significant, and import of machinetool & tool would share the trend.
4.CIMT2019 & CCMT2020
Now,let you have the general information on the preparatory work of CIMT2019 andCCMT2020 hosted by CMTBA. Under the impact of constant upgrade in consumptionand demand on China machine tool & tool market, the two sister exhibitionsof machine tool & tool industry are growing more influential. The two showshave become renowned branded ones in China’s and even in the world’s machinetool & tool industry, judging on the facet of exhibition performance,scale, degree of professionalism, internationalism, and attraction. Thesixteenth China International Machine Tool Show (CIMT2019) will be held onApril 15-20, 2019 at China International Expo Center (New Venue) Beijing. It isexpected the total area of the exhibition will reach 140 thousand squaremeters, among which overseas exhibition area will be 70 thousand square meters.The theme of the exhibition is set as “Win the Smart Future Together”.The theme conforms to the development concept and trend of Chinese market,industry and international peers, fit the current situation, and respond to thehotspot in industrial development. CMTBA will continue to uphold the concept ofholding exhibition as a platform for economic and trade exchange in the fieldof machine tool & tool at home and abroad, to provide optimized service forevery exhibitor and visitor. I believe with the support of industrial and otherpeers, CIMT2019 is bound to become a feast for machine tool industry.
CMTBAwill hold the eleventh China CNC Machine Tool Fair (CCMT2020) at Shanghai NewInternational Expo Center from April 7-11, 2020. The exhibition will be hostedby CMTBA and is a sister exhibition of CIMT. With the expansion of opening upof China machine tool consumer market, CCMT2020 will be more internationalizedand enjoy rising global impact. We expect CCMT2020 to become another showcasefor Chinese machine tool & tool industry.
Finally,let me show my sincere thanks to every guest and friendin the press conference again. Welcome to visit CIMT2019 and CCMT2020, welcometo invest, work and visit China. As always, CMTBA will help you in doingbusiness in China. Wish everyone smooth work and good health.
FromCMTBA
