At present, the new crown pneumonia prevention and control epidemic war has entered a critical period of attack. The epidemic prevention and control and economic recovery and development have also been gradually balanced. A series of policies have been issued from the central government to the local government to assist the development of enterprises, especially SMEs. However, the postponement of the resumption time and the uncertainty of the start time still make enterprises and users, including construction machinery, have doubts about the next market development.
The more critical moments, the more calm thinking and rational judgments must be maintained to isolate noise. It is undeniable that the epidemic has delayed the arrival of the traditional "peak season" in the construction machinery industry, but it has never been eliminated. So how do you view the impact of the epidemic on the economy? After the resumption of work, the "peak season" of late construction machinery has passed. What will the industry's next development look like? Are there large variables in the form of international trade? In this regard, we specially invited Mr. Feng Gang, a senior expert in data analysis and industry development research in the construction machinery industry, a senior consultant in the aftermarket, and a founding partner of the Robot House, through the National Bureau of Statistics, Bank of China, PricewaterhouseCoopers, Goldman Sachs Combining statistical data such as investment with industry development analysis, combined with the analysis of the "troika" and the process of urbanization rate driving China's economic development, the above issues are discussed in order to provide a reference for everyone.
On the whole, in the short term, the impact of the new crown pneumonia epidemic on China's economic growth will be very obvious. Since the outbreak, many domestic and foreign institutions have made predictions. Most of them believe that the growth rate of GDP in the first quarter may decline by about 2 percentage points, that is, about 4%. The remaining three quarters will gradually increase according to the end of the epidemic. After picking up, the annual GDP growth will show a "V-shaped" pattern. Based on the main analysis and prediction results of domestic and foreign institutions, the professional analysis team of PricewaterhouseCoopers believes that if the epidemic situation enters the end stage at the end of March or early April, the growth rates in the four quarters of this year may be 4.5%, 5.0%, and 5.8% respectively. And 5.7%, the annual growth rate will be 5.2% ~ 5.3%.
The steady growth of China's economy is inseparable from the support of a number of data indicators. Among them, consumption, investment, and exports are the "troika" and important indicators of economic development that drive China's economic growth. In order of GDP contribution, the "troika" is consumption, investment, and export. Among them, consumption is the first driving force for economic growth in the "three carriages" for six consecutive years.
The epidemic will have different impacts on the "three horse-drawn carriages" driving GDP. By analyzing the specific data of the three, we can see how the economy can achieve smooth operation and the impact on the construction machinery industry.
Speculation 1: "Consumption" will be the carriage most affected by the epidemic
In recent years, consumption has played an increasingly important role in economic development, and high-quality economic development is inseparable from the expansion of domestic demand. This is also the key development direction and strategy of our country. In 2018, the role of consumption as the main driving force for economic growth was further consolidated. The contribution rate of final consumption expenditure to GDP growth was 76.2%, an increase of 18.6% from 2017.
In 2019, the contribution rate of consumption to economic growth was 57.8%, driving GDP growth by 3.5 percentage points. Compared with 2018, although it showed a downward trend, it was still the first driving force for economic growth for 6 consecutive years.
The outbreak occurred before the Spring Festival and had a relatively large impact on consumption. The Spring Festival is a traditional festival in China and one of the most prosperous periods of the year. During the Spring Festival Golden Week in 2019, national retail and catering companies achieved sales of more than 1 trillion yuan. Affected by the epidemic, consumption during the Spring Festival in 2020 will be significantly reduced.
Among them, the catering, hotel, tourism, entertainment, transportation and other industries were the first to bear the brunt of the decline in related enterprise income.
In short, it is highly probable that the contribution of consumption to GDP growth will decline significantly in 2020.
Presumption 2: Investment impact is small, or it will promote new investment in medical infrastructure projects
The contribution rate of investment (total capital formation) to economic growth in 2018 was 32.4%, and the contribution rate of investment in 2019 was 31.2%. In the overall investment in 2018, the growth rate of infrastructure investment as a tertiary industry investment showed a significant decline. Infrastructure investment increased by 3.8% year-on-year, a growth rate of 15.2 percentage points lower than the same period in 2017. Among them, preventing risks and tightening regulations are a major reason for the slowdown. However, in response to the worse-than-expected performance of infrastructure investment in 2018, the growth rate of infrastructure investment in 2019 has gradually stabilized and rebounded under the issuance of special bonds. From January to October, infrastructure investment has grown by 4.2%, a slight acceleration of 2.34 percentage points from the same period in 2018 . However, the phenomenon of “large demand and insufficient financing” for infrastructure construction is still restricting the growth of infrastructure investment.
Ning Jizhen, director of the National Bureau of Statistics, said that although infrastructure investment is weaker than manufacturing investment growth, infrastructure is still an important area to make up for shortcomings. In the future, including supporting infrastructure for poverty alleviation housing, the supply of affordable housing in cities and towns, the revitalization of rural areas, agriculture and water conservancy, and other fields, as well as transportation, will be the focus of infrastructure investment.
In fact, the first month of the year of the infrastructure project is well-received, and the year-round project is expected to reach a new high month-on-month. In 2020, in addition to the planning and implementation of trillion-level infrastructure projects in the Guangdong-Hong Kong-Macao Greater Bay Area, in January 2020, more than 200 infrastructure projects and bids from railways, highways, municipalities, rail transit, etc. and overseas won the bid ( The list is at Appendix 1), with a total bid amount of more than 322.4 billion yuan. Among them, Guangxi, Jiangsu, Chongqing, Hebei and other regions have a relatively high share of bids. Among the construction units, China Railway Construction is in a rush, winning 12 major projects with a total of 69 billion yuan; China Civil Engineering Group won 17.2 billion Colombian tram projects overseas, participating in the construction of 13.1 billion yuan in front of the Chongqing-Qianjiang railway station and 12.6 billion yuan Lanzhang 3rd and 4th line projects, etc .; China Communications Construction Company ’s subsidiary of China Communications Construction, China National Aviation Administration, and China Road and Bridge Company obtained 18.8 billion yuan in Chongqing Wanzhou North New City Project and 11.8 billion Tangshan Ecological Environmental Protection Project.
In January 2020, the China National Railway Group Co., Ltd. working conference revealed that by the end of 2019, the national railway operating mileage has reached more than 139,000 kilometers, including 35,000 kilometers of high-speed rail. At the meeting, the main goal of railway work in 2020 was also determined: to fully complete the railway investment task assigned by the state, to ensure the commissioning of more than 4,000 kilometers of new lines, including 2,000 kilometers of high-speed rail. This is great information for the future development of the construction machinery industry.
Currently, affected by the epidemic, although many companies are unable to start work on time, production orders are forced to be cancelled, and investment will be reduced accordingly. However, overall, the impact of the epidemic on investment is relatively small compared to the impact on consumption. Because China's general manufacturing industry is already in an overcapacity state. Taking the construction machinery manufacturers as an example, manufacturers and agents in 2019 still have a lot of inventory. Due to the short-term suspension of production due to the delayed resumption of work, the impact on the actual production of the enterprise is relatively limited. For infrastructure projects, the start of some projects may be delayed, but these projects will start after the epidemic, and the actual impact will not be significant throughout the year. In fact, in addition to the above-mentioned investments in known infrastructure projects, the epidemic may also drive new investments in some large-scale medical infrastructure projects.
Speculation 3: Delay in the development of import and export trade
In terms of exports, in addition to the uncertainty of the Sino-US trade conflict in the past two years, there has also been pressure from the global economic downturn and the squeeze on China's export share. In 2018, China ’s “net exports” contributed to the growth rate of GDP by -8.9%. Although the contribution rate of exports to the economic growth in 2019 has increased significantly, the contribution rate of net exports of goods and services was 11%.
However, the contribution rate to the overall domestic GDP growth is far from the contribution rate of investment and sales.
Due to the slowdown in consumption and investment caused by the epidemic, and the implementation of the first phase of the Sino-US trade war, it is expected that import and export trade will continue to slow down in 2020. In particular, after the World Health Organization announced on January 31 that the epidemic constitutes a public health emergency of international concern (PHEIC), some countries have adopted short-term measures such as evacuation of overseas Chinese, restrictions on entry, and suspension of flights. Investment (FDI) has been affected to some extent. On the other hand, many people cancel outbound travel plans due to the epidemic during the festival, which will lead to a significant decline in China's service trade imports.
Speculation 4: Further growth and optimization of the urbanization rate will drive the development of the industry
Ha Jiming, China ’s vice chairman and chief investment strategist of Goldman Sachs Investment Management Department, pointed out in the analysis of China ’s urbanization that the process of urbanization is often accompanied by economic growth, and urbanization can indeed drive economic growth. The Goldman Sachs report pointed out that every 1% increase in the urbanization rate will drive China's GDP to grow by 0.8% in one year and 3.5% in five years. This is consistent with a recent academic study on China's urbanization and economic growth: for every 1% increase in China's urbanization rate, GDP will increase by 4.8% in the long run.
At present, China's urbanization rate is very close to 60%, but the scale and quality of China's urbanization is far lower than that of many developed and developing countries, so China has huge room for development. The World Bank predicts that China's urbanization rate will reach 70% by 2025. Generally speaking, when a country's urbanization rate is less than 30%, the urbanization growth is slower; when it is higher than 70%, the urbanization growth rate is also slower; while those with an urbanization rate of 30% to 70% At times, growth is usually faster. Although the growth rate of China ’s urban population has slowed significantly in the past 10 years (from about 4% in 2002 to less than 2.5% in 2018), China ’s urbanization rate still has great potential for improvement.
Looking at the urbanization rates of other countries, according to the World Bank's official website, as of 2018, the global urbanization rate is about 55%, of which the U.S. urbanization rate is 82%; Japan's urbanization rate reaches about 92%; Russia's urbanization The rate is about 75%.
How much urbanization space does China have? The specific conditions of each country are different, and it is difficult to judge the ceiling of urbanization rate by the same standard. If we use the urbanization rate of 92% seen in Japan and the urbanization rate of 82% in the United States as benchmarks, there is at least 20% of room for urbanization in China. According to the foregoing, every 1% increase in the urbanization rate will drive GDP to grow by 0.8% in one year and 3.5% in five years. Then, the driving force for China's sustainable GDP growth in the future will be very optimistic, which will directly drive the development of the construction machinery industry.
In summary, under the background of the epidemic, among the three horse-drawn carriages driving the economy in 2020, the contribution rate of “consumption” to GDP growth will decline significantly; the “export” trade will continue to slow down, and even its contribution rate may further increase "Investment" is relatively less affected by the epidemic, and the government's stimulus to investment is expected to increase. It is expected that the contribution of infrastructure investment to GDP growth will likely increase significantly. In addition, China's urbanization rate has huge room for growth and optimization and optimization, and infrastructure investment as the tertiary industry will also continue to increase, which will directly drive the construction machinery industry to maintain another stage of favorable development. From an overall and long-term perspective, the epidemic will definitely change China profoundly. After the epidemic, as in the SARS epidemic in 2003, many new business opportunities will emerge in the country, and certain industries will also explode.
Finally, at the moment of the epidemic, confidence is more important than gold! Let us keep in mind the words of the General Secretary, establish a nationwide chess game, race at the same time, and fight against the disease, and resolutely curb the spread of the epidemic! I believe that when the spring is blooming, this comprehensive war to prevent and control the epidemic will surely win! Here, I would also like to pay tribute to the industry colleagues who fought on the front line of the epidemic and persisted in the post in this epidemic situation!
