China’s industry grew significantly in the first quarter, but profits of industrial companies fell by 14% during the same period. Behind this is the process of conversion of old and new kinetic energy. The new kinetic energy has not yet formed an advantage. The traditional kinetic energy is limited by the weakening of investment and demand, and the profit margin is limited.
According to data released by the National Bureau of Statistics on the 17th, in the first quarter, the added value of industries above designated size nationwide increased by 6.5% year-on-year. %, with industrial growth rebounding to 8.5% in March. Jiang Chao, a macro analyst at Haitong Securities, said that industry rebounded sharply in the first quarter, including a sharp rebound in industrial production in March, which “hit a multi-year high.”
In addition to new highs, there are many bright spots in industrial production. For example, in terms of industrial structure, the added value of industrial high-tech industries increased by 7.8% year-on-year, 1.3 percentage points faster than that of industries above designated size. New products grew rapidly, with the output of mobile communication base stations increasing by 153.7% and the output of urban rail vehicles increasing by 54.1%.
The manufacturing purchasing managers index (PMI), which reflects the prosperity of the manufacturing industry, returned to the expansion range. In March, the manufacturing purchasing managers index was 50.5%, returning to the expansion range after being below the critical point for three consecutive months.
According to data from the National Bureau of Statistics, from January to February, the total profit of industrial enterprises above designated size nationwide was 708 billion yuan. RMB, down 14.0% year-on-year. After excluding the Spring Festival factors, it was the same as the same period last year and slightly decreased. Preliminary statistics show that the profits of industrial enterprises improved in March.
Han Jianfei, director of the Industrial Development Research Office of the Institute of Industrial Economics, China Electronic Information Industry Development Research Institute, believes that from the perspective of traditional industries Look, upstream industries such as steel and raw materials experienced rapid profit growth due to price increases in 2018. However, due to rapid increase in production capacity, profits subsequently declined. Downstream companies are facing a shrinking market, and at the same time, it is difficult to increase prices due to a surplus of products. Small and medium-sized enterprises in the midstream are squeezed from both ends, resulting in lower profits.
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Chen Yao’s research in Fujian and other places found that the average profit margin of traditional OEM companies is around 3%, and many The company is struggling to maintain its business but lacks the will and ability to transform. He believes that to promote the transformation and upgrading of traditional production processes, we need to vigorously develop the producer service industry.
The Central Economic Work Conference held in December 2018 proposed “increasing technological transformation and equipment updating in the manufacturing industry. Accelerate the pace of 5G commercialization and strengthen the construction of new infrastructure such as artificial intelligence, industrial Internet, and the Internet of Things.” In the long term, this will lay the foundation for “high-quality” industrial development, which the market calls “new infrastructure.”
Han Jianfei said that developed countries attach great importance to seizing the commanding heights of manufacturing. Germany proposed “Industry 4.0” and the United States put it Defined as the Industrial Internet, they are similar to China’s “Integration of Informatization and Industrialization”. They both improve manufacturing production efficiency through human-machine interaction, machine-machine interaction, and upstream and downstream interactions in the industrial chain. This is the core of future industrial competition. And this places high demands on infrastructure.
In response to the “new infrastructure” proposed by policy makers, various regions in China are stepping up their efforts to deploy emerging industries. Taking 5G as an example, Beijing, Sichuan, Chongqing, Guangzhou, Jiangxi and other places have introduced 5G development plans or special projects to actively promote the implementation of 5G. Cities such as Jinan, Qingdao, Nanjing, Wuhan, and Hefei are actively striving to become 5G trunk nodes to gain development opportunities.
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