NewsRelease at EMO 2017
NewsRelease at EMO 2017
Dear ladies and gentlemen,
Good morning!
First, on behalf of CMTBA, I would like to express my heartfelt thanksto all of you for attending this news release! I will share with you the latestinformation on China economy, market and the change of machine tool industry. Iwill also introduce the preparatory progress on the tenth China CNC MachineTool Fair (abbreviated as CCMT2018) in Shanghai in April next year, hoping ourwell-prepared information would be helpful to you.
Since the fourth quarter of 2016, the market and performance of Chinamachine tool industry have been showing a restorative growth. This change isclosely related to China economy and market environment. The followinginformation is based on the macro data, import & export data and statistics& survey from China National Bureau of Statistics (CNBS); we used macro& micro economic analyses on the trend and connection between recent Chinaeconomy and machine tool market to study and judge the whole year’s tendency.
1. China’s Economy and MarketEnvironment
1.1. Economic Operation and Investment
According to macroeconomic data from CNBS in the first half of 2017,the GDP was about RMB 38.1 trillion, a year on year growth of 6.9% with thegrowth rate rising by 0.2%. It is expected the GDP growth in the second half of2017 would drop back, but the annual growth rate would be at 6.5-6.9% remainingin the medium and high rate range.
In Jan-July 2017, the industrial added value grew 6.8% year-on-year,representing a pick- up of 0.8%. In industry-classified sectors, the top 3sectors with a y-o-y accumulated industrial added value speeding up are:computer and communication electronics (13.6%), automobile (13%) and specialequipment (12.1%); The last 3 sectors are: ferrous metal (0.7%), nonferrous metal (2%) and chemical rawmaterials (4%) respectively.
In Jan-July 2017, the achieved investment in fixed assets was aboutRMB33.7 trillion, showing a year on year growth of 8.3% with the growth raterising 0.2% compared with the same time last year. Among them, the secondaryindustry grew by 3.4% on yearly basis. The manufacturing sector grew by a y-o-y4.8%.The achieved investment in purchasing equipment and tools grew a y-o-y7.1%, representing -0.1%, 1.8% and 5.3% respectively compared with that of2016. The recent restorative growth of China machine tool & toolconsumption market is closely related to the growth of investment in fixed assets.From the investment point of view, the trend of growth in machine tool &tool consumption would continue in this year.
On the other hand, the dynamics of the total investment of newprojects planned in fixed assets and the amount of the investment in place forcurrent year have been easing up. The planned growth rate of the totalinvestment for new projects was lower in the period of 2014-2015, between -2%to 15%. In 2016, the growth rate rapidly increased and remained at high-level,between 20% and 42%. In Jan- June 2017 the growth rate was negative, but thedecline narrowed since June and then it rebounded to 1.9% in July. Theinvestment in fixed assets in place dropped from about 13% in 2014 to about 7%in the period of 2015-2016. It was basically in the negative growth range inthe first half of 2017. From June to July, it gradually rebounded and rose1.5%year on year. These changes indirectly reflected the investment in the secondhalf of 2017 would slow down and stabilize. The market consumption would beturned to the stage of steady operation from rapid picking up.
In the investment in fixed assets in subdivision of Chinamanufacturing in Jan-July, 2017, the investment scales in front row are: nonmetallic mineral (RMB899.1 billion , a y-o-y increase of 1%), chemical rawmaterials (RMB773.4 billion, a y-o-y decrease 1.6%), electrical machinery(RMB749.1 billion, a y-o-y increase of 9.3%), Automobile (RMB716.2 billion, ay-o-y increase of 8.8%), general equipment (RMB715.1 billion, a y-o-y increase of1%), computer and electronic communications (RMB686.8 billion, a y-o-y increaseof 27.2%). Seeing from subdivided formation of investment in manufacturing, thetraditional sectors account for a large proportion, and the growth of emergingsectors is fast. Thus, the development of emerging sectors and the lift ofupgrading the traditional sectors are the primary direction for China'sindustrial structure upgrading in the future.
In addition，along with the strategyof “one belt one road” advocated by China to get a positive response from theinternational community to become the new consensus in international economicand trade relations, the smooth operation of AIIB and the upgrade versionof global economic integration，all of them will play an expectant stable function for future marketsupply-demand in China, adding some positive factors to the world economicrecovery.
1.2. Cost and Price
Through combing the ex-work price index of industrial product ofsubdivision sectors, 2 kinds of price index could be formed as upstream &downstream relating to machine tool & tool industry. The upstream one willimpact the production cost of the said industry, while the downstream one willimpact the sale price of the said industry. From the second half of 2014 to theend of 2015, the upstream one fell to 92.5% from 99.6% and the downstream onefell to 96.1% from 99.5%, leading to cost advantage of manufacturing for theindustry, but the market demand was fatigued in the same period.
Since 2016, with the influence of drive from rapid rebound in fixedassets investment and the prices of raw materials and energy in recovery inproduction and manufacturing, the upstream price index rose all the way up from92.5% in January 2016 to 110.8% in February 2017. The downstream price indexslowly picked up over the same period, causing the industry to face thesituation of “cost rapidly grows and sales competition intensifies". AfterFebruary 2017, with the joint influence of those factors of chang of moneytaryliquidity, moderate growth in investment and balance of supply & demand,the price index of both upstream and downstream retreated and gradually drewcloser towards each other. This trend will be conducive to a smooth operationfor the industry.
1.3. Liquidity and Debt Levels
In recent years, China's monetary policy has been moderate and steady.The changing trend of M2 showed an obvious growth in 2015, but since February2016, M2 growth has been in a falling channel. In Jan-July 2017, money supplyof M2 was about RMB163.1 trillion, showing an increase of 9.4% year-on-yearwith the growth rate fell 0.2 % again over the previous month.
The change of trend of money supply has been linked to a recent pushto reduce leverage in the financial sector. For a period of time, the problem ofhigher leverage in corporate sectors and the rapid rise of leverage infinancial sectors have caused the Chinese government to pay more attention tothe prevention and control of financial risks. It put forward the specificrequirements towards deleveraging “to reduce the leverage in corporate sectorsas the top priority under the premise of controlling the total leverageratio." The rise of leverage in financial industry is closely related tothe over-development of off balance sheet activities, trader’s transaction,asset management business and non-credit financing business. Recent efforts topush to reduce leverage will undoubtedly curb the phenomenon of capital idlingin these parts of the financial system, leading to a decline in the growth rateof M2, playing a positive role in promoting the flow of financial capital tothe real economy.
It also can be seen from the monthly change in Shanghai interbankoffered rate (SHIBOR), in the first half of this year the comparatively tightliquidity has improved, which would be conducive to economic stability ofeconomic operation in the second half of 2017. Since December 2016, the trendof SHIBOR has been increasing month by month. Among them, the average monthlyoffered rate for a year has increased from 3.284% in December 2016 to 4.417% inJune 2017, an increase of 113.3 basis points. Till August, SHIBOR had graduallydropped.
Another area of concern is the leverage level in corporate sectors.The reflection of asset-liability ratio of the user industries associated withthe machine tool industry (such as automobile, railway transportation,electrical machinery, electronic communication, special equipment, generalequipment, metal products, etc.) has been appeared to decrease in totalitysince June 2014.
1.4. Exchange Rate and Trade Balance
Since the beginning of July 2015, the exchange rate of RMB againstU.S. dollar has been in a depreciation channel. The monthly average of thecentral parity rose from RMB 611.7 Yuan against $100 to the highest of RMB691.8 Yuan against $100 in December 2016. It remains stable at a higher levelnow. The devaluation of RMB is a double-edged sword to the Chinese machine toolindustry. On one hand, it helps the industry to participate in internationalcooperation in production capacity and to exploit the international market. Onthe other hand, it increases the cost of importing high performance rawmaterials and the core components. Due to the lower dependence on theinternationality (metalworking machine tool 12.7% and tools 51% in 2016), Chinamachine tool & tool industry, at present, bears a higher dependence onimporting core components. So the recent decline of the RMB exchange rate hascertain adverse effects on the development of the industry.
Looking into the situation of trade balance in China machine tool& tool industry, overall, there is a bigger trade deficit. It hampered theimports of machine tool & tool for domestic market due to the decliningdemand of the market in recent years. At the same time, foreign brands increasethe scale of building factories in China and local enterprises attachimportance to developing the international market and expanding exports. As aresult, the degree of trade deficit in China machine tool & tool industryfalls a bit. In the first half of 2017, the trade deficit of metalworkingmachine tool was $2.32 billion, showing a 9.7% year on year drop.
1.5. Macroeconomic Prosperity
For the near future and certain future period, the trend of themachine tool & tool consumption market can be analyzed from themacroeconomic prosperity. From the changes in the Purchasing Managers Index(PMI) in Manufacturing in the first half of 2017, the PMI from China NationalBureau of Statistics (NBS) and Caixin.com showed some differentiations. The PMIfrom NBS fluctuated above the break-even line, while the PMI from Caixin.compresented monthly declines. Since June, the PMI from both NBS and Caixin.comhave been above the break-even line. In July 2017, The PMI from NBS andCaixin.com were 51.4% and 51.1% respectively.
1.6. The Operation of Major Domestic ListedCompanies in Typical User Sectors
By the analyses of 247 major listed companies in 8 typical user sectors highly relevant tomachine tool & tool consumption market (full vehicle , automotive parts,aerospace and national defense, energy equipment, shipbuilding and oceanographyengineering, railway and rail transit, engineering machinery, iron &steel), the trend information of the relating subvision sectors has obtained.
In the cash flow of the listed companies in typical user sectors, thecash flow in business activities was negative. In the first quarter of 2017, cash flow fell 187.4% year-on-year;there’s a pullback in investment. In the first quarter of 2017, net investmentnet payment dropped 39.9% year-on-year. Due to net cash for the purchase offixed assets decreased a y-o-y 5.3%. The financing environment has beensignificantly improved. In the first quarter of 2017, net financing grew ay-o-y 53.1%. Taking into account that the operational cash flow has beengreatly influenced by the product delivery cycle, it’s estimated the data wouldbe gradually improved after 6 months. Seeing from net cash in investment andfinancing, the investment growth trend in user sectors this year can beconfirmed.
2. China Machine Tool & Tool Consumption Market and IndustryOperation
2.1. Machine Tool & Tool Consumption Market
In the first half of 2017, the consumption of China metalworkingmachine tool was about $13.6 billion, showing a year on year increase of 3.8%.Of which, the import one was about 3.8 billion, dropping 3.4% over the sameperiod of last year.
In the first half of 2017, the consumption situation of subdivisionareas of metalworking machine tool: the consumption of metal cutting machinetool was about $9 billion, presenting a year on year decline of 2.2%. Of which,the import one was about $3.1 billion, fell 4% year on year. The consumption ofmetal forming machine tool was about $4.6 billion, increasing 17.9% over thesame period of last year. Of which, the import one was about $700 million,decreasing 0.6% year on year.
In the first half of 2017, China's tool consumption was around $2.4billion, showing a year on year increase of 26.3%. Of which, the import one wasabout $800 million, growing 14.3% over the same period of last year.
Affected by the substantial growth of investment from the user sectorsand comprehensive influence of substantial growth of investment in the usersectors and the expected pick-up in market operation, China's machine tool &tool consumption market showed a restorative growth in the first half of 2017.Of which, the recovery of metal forming machine tool & tool is significant.The main reason is that both domestic production and imports data showed ay-o-y significant increase; the consumption of metal cutting machine tool declined slightly, which wascaused by the domestic production downturn and obvious imports decrease. As theconsumption situation of metal forming machine tool and tool are stronglyrelated to the medium-short term of economic and industrial operations, whilethe metal cutting machine tool is strongly related to the medium-long termexpectation of economic and industrial operation. Therefore, China’s machinetool & tool consumption market shows a trend of restorative growth in theshort-medium term.
Above is from the angle of achieved supply side to show theconsumption market of China machine tool & tool. Now the following will befrom the expectation of demand side to analyze the medium-short term consumptiontrend of China machine tool & tool. Based on the data of annual output of91 major industrial products released byNBS and consumption relation withmachine tool products, we modeled the “China machine tool & tool demandindex”. The index reflects the variation and trend prediction of consumerdemand in each year and base period. Overall, the demand index has a strongcorrelation with the changed historical trend of achieved China machine toolconsumption, and the trend is basically the same. The specific circumstancesare as follows:
(1) Metal cutting machinetool: the demand index began to show a recovery growth in 2016, and the trendof pick-up in 2017 was slower than that of 2016;
(2) Metal forming machinetool: the demand index began to show a restorative growth in 2016, and thetrend of recovery in 2017 was more obvious than that in 2016;
(3) Cutting tools: the demandindex began to pick up in 2016, and still showed a trend of recovery in 2017;
(4) Abrasives & grindingtool: The demand index increasedsignificantly in 2016, and the growth trend narrowed in 2017.
It is need to point out that the index reflects the potential marketdemand. It is, to some degree, inconsistent with actual consumption. It’smainly affected by those factors of macroeconomic environment, policy changes,investment in place and investment expectation. If the environmental factordoes not mutate or fluctuate obviously, the correlation between the actualconsumption and the demand index would be stronger.
2.2. Machine Tool & Tool Industry Operation
In the first half of 2017, China metalworking machine tool output wasabout $11.3 billion, a y-o-y increase of 7.4%. Of which, the export one was$1.5 billion, a y-o-y increase of 8.5.
In the main subdivision sectors of metalworking machine tool in thefirst half of 2017, the output of metal cutting machine tool was about $6.9billion, unchanged from the same period of last year. Of which, the export onewas about $1 billion, a y-o-y increase of 8.9%. The output of metal forming machinetool was about $4.4 billion, a y-o-y increase of 21.5%. Of which, the export one was about $500million, a y-o-y increase of 7.8%.
In the first half of 2017, the output of China tool was about $2.9billion, a y-o-y increase of 20.8%. Of which, the export one amounted to about$1.3 billion, a y-o-y increase of 8.3%.
2.3. The Degree of Prosperity of Machine Tool& Tool Industry
In the first half of 2017, the degree of prosperity index and relatedanalysis results were obtained through a questionnaire of 136 key enterprisesin China machine tool & tool industry and major foreign enterprises inchina. The sales revenue of the surveyed enterprises was about $12.8 billion in2016, and it is quite representative in the industry distribution and structure.
------------------------DistributionStructure--------------------
According to the distribution of ownership, 46 state-owned andcollective holding enterprises accounted for 44% of the total sales; 54 privateholding enterprises accounted for 20% of the total sales; 20 foreign and HongKong and Macao holding enterprises accounted for 18% of the total sales; theother 16 enterprises accounted for 18% of the total sales.
According to the distribution of products, 64 metal cutting machinetool enterprises accounted for 63% of the total sales; 19 metal forming machinetool enterprises accounted for 18% of the total sales; 27 tool and abrasivesenterprises accounted for 12% of the total sales; 26 functional parts and NCdevice enterprises accounted for 7% of the total sales.
According to the regional distribution, 88 enterprises in easternregion accounted for 77% of the total sales; 29 enterprises in the middleregion accounted for 11% of the total sales; 19 enterprises in western regionaccounted for 12% of the total sales.
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In the first half of 2017, the prosperity index of China machine tool& tool industry was 62.5%, above the entrepreneur confidence threshold, arise of 8.6 % compared to the end of 2016, and it continues to maintain thetrend of expansion.
(1) Seeing from the nature ofenterprises’ ownership, Foreign Owned Enterprises (including Hong Kong, Macaoand Taiwan) continued to maintain the highest - 73.3%,rising 17% compared tothe end of 2016; private holding enterprises was 62.2% rising 7.8% compared tothe end of 2016; the state-owned (including collective one) holding enterprises(including collective one) was 60.5% rising 6.2% compared to the end of 2016;other enterprises was 43.2%, declining 8.2 % compared to the end of 2016,showing the state of contraction.
(2) Seeing from the productsubdivision sector, sectors of tools, measurers and abrasives & grindingtool quickly rose to 65.3% rising 21.4% compared to the end of 2016; sectors ofCNC device and functional components were 64.6% declining 3.8 % compared to theend of 2016; sector of metal forming machine tool was 62.7%, rising 0.9 %compared with the end of 2016; sector of metal cutting machine tool was 61.1%rising 9.8 % compared to the end of 2016.
(3) Seeing from the factor ofprosperity index, the orders and operating index of enterprises in Chinamachine tool & tool industry were 75% and 63.3% respectively, rising 14.4 %and 8.2 % compared to the end of 2016, continuing to show expansion trend; thecost and environmental index were 46.4% and 47.3% respectively, continuing toshow contraction trend, change fluctuating by 3.4 % and -0.7% compared to theend of 2016; the expectation index was 66.8%, rising 10.3 % compared to the endof 2016.
2.4. Annual Forecast
To sum up, the prediction of the machine tool consumption market andindustrial operation this year is higher than the forecast at the end of lastyear. At the same time, taking into account the uncertainty of the economicenvironment and the changing market demand in the second half of 2017, theconsumption of machine tool & tool would be expected a slight year-on-yeargrowth or a flat state in 2017. The industry operation and exports wouldstabilize and rebound with the decline in imports narrowed.
3. China CNC Machine Tool Fair
The brand fair-China CNC Machine Tool Fair (CCMT)-was established inthe year of 2000 by CMTBA in Shanghai. It has been successfully held ninesessions. During 17 years, the venue of the fair had changed. In order to adaptto the new market changes in China and the new demands from exhibitors, ChinaCNC machine tool fair went back to Shanghai again since 2014. Relying on thecomplementary condition of good hardware and software of the Shanghai NewInternational Expo Center, CMBTA promises to forge an international andprofessional machine tool exhibition facing the most dynamic economy region tobuild a first-class display, exchange and marketing platform for classicdomestic and foreign exhibitors. Now, I’d like to briefly review thedevelopment of CCMT and introduce the preparatory progress of CCMT2018.
3.1. The Previous CCMTs
Starting from CCMT2000, China CNC machine tool fair has been based onthe exchange and display of the latest technology, products and the changingtrend of market demand in China CNC machine tool field. As a result, more andmore domestic and international exhibitors, professional audiences, users andgovernment officials are attracted by CCMT, willing to participate in andsupport the event. By this means, the exhibition area, number and structure ofexhibitors as well as audience of CCMT have been increased session by session.From the data below, we can obviously see its development and grow.
? The exhibition area rosefrom 15 thousand and 800 square meters of CCMT2000 to 120 thousand squaremeters of CCMT2016, with an average growth rate of 28.8%.
? The number of exhibitorsrose from 244 in CCMT2000 to 1148 in CCMT2016, with an average growth rate of21.4%. Among them, overseas exhibitors increased from 0 to 371, accounting for32.3% at CCMT2016.
? The audience rose from 43thousand person-times in CCMT2000 to 146 thousand person-times in CCMT2016,with an average growth rate of 16.5%.
The success of CCMT2016 has raised the fair to a higher level. Inaddition to the basic situation described above, CCMT2016 had higher levelexhibits with abundant varieties. Besides involving the CNC metalworkingmachine tool, high performance CNC device, high performance tools system,cutting tools and abrasives & grinding tool, core functional parts andaccessories of CNC machine tool, industrial measuring instruments and othertraditional machine tool & tool products, there were also industrialrobots, automation, intelligent manufacturing system, additive materialmanufacturing, engineering software and other products, all of them have beenrapidly rising and growing recently. It can be said that, CCMT2016 not onlyfully demonstrated the latest market demand, but also actively responded to thelatest market demand, providing both supply and demand sides a rareopportunity.
3.2. Preparations for CCMT2018
The Tenth China CNC Machine Tool Fair (CCMT2018) will be held on Apr.9-13, 2018 at Shanghai New International Expo center. At present, thepreparatory work is in an orderly manner. CCMT2018 will continue to use W1-W5and N1-N5, totally 10 halls out of 17 halls of the Shanghai New InternationalExpo Center. Its exhibition area will be 120 thousand square meters. Theexhibition will bring together the latest demands from consumption market ofChina machine tool & tool industry, the world's latest manufacturingtechnologies and products. During the exhibition, CMTBA will continue toincrease the efforts to organize exhibition & service, to provide moreconvenient & quality services, to arrange rich & targeted exhibitionactivities and to invite more professional visitors with purchasing power andcooperation intention to visit and exchange views. Along with the stableoperation of China economy and more financial capital return to the realeconomy, China machine tool & tool consumption market will present a moreactive state, which will provide a good market environment for hostingCCMT2018. I believe that through our unremitting efforts and strong supportfrom our partners, CCMT2018 will become a more successful, international,professional and world famous exhibition.
Thank you again for listening and hope to keep in touch with you tostrengthen communication and I sincerely invite all of you to join CCMT2018.Look forward to meeting you in Shanghai! Thank you!
CMTBA
September, 2017
