China's machine tool industry is not the future

The new “four modernizations” will be a new driving force for China’s domestic demand. It is understood that according to the plan, only urbanization will drive GDP by at least two percentage points.

At the same time, investment in fixed assets will also grow steadily. Last year, the country has approved 25 urban rail projects with nearly a trillion yuan in investment, and nuclear power projects have also been limited. This year marks the beginning of the implementation of the 12th Five-Year Plan, and a number of investment projects in the iron and steel base project are expected to achieve rapid growth. The westward shift of industries will also drive investment in fixed assets.

The fundamentals are generally positive, which determines the probability of a deep decline in the machine tool industry. The bad news is that demand for the equipment manufacturing industry, which is closely related to the machine tool industry, is still not strong enough and the overall operation is still not under pressure from the downside. From the orders of key enterprises in the machinery industry, cumulative orders have shown a negative growth in the most recent year. The orders for construction machinery, ships, commercial vehicles, and power generation equipment declined most significantly. At the same time, exports also fell sharply.

Affected by this, investment in equipment manufacturing industry has weakened. On the one hand, as mentioned earlier, corporate profits have declined, and investment capacity has naturally declined. On the other hand, the economic growth rate of real entities has slowed down, and social capital investment has changed.

In the course of the operation of the company, the tightening of cash flow has become a common phenomenon. Acceptance drafts have even been popularized with barter, and the normal operation of the company has been seriously affected. As most machine tool products have a certain production cycle, they will maintain a certain production inertia, resulting in a sharp increase in the inventory of semi-finished products and finished products. Therefore, even if the market improves in 2013, companies will be at the destocking node first, and the response will also show low or negative growth in economic indicators.

From an international point of view, the economic downturn in the EU and Japan and the slowdown in the growth of emerging economies have continued to increase the global economic and financial risks. Trade protectionism has risen. The International Monetary Fund has issued a global economic recession in 2013. Risk warning. In contrast, at home, China's labor costs have risen rapidly, and labor-intensive industries have shifted to neighboring countries. Therefore, the competitive advantage of machine tool product exports is weakened.

The China Machine Tool Industry Association predicts that the total industrial output of the machine tool industry in 2013 will still maintain a growth rate of around 10%.