Machinery sector may see a tough H2

A worker at an electromechanical equipment workshop in Huaibei, Anhui province. The output of China's machinery industry increased 12.17 percent year-on-year in the first half of the year, much slower than at the same time last year. [Photo/China Daily]

This year will be the toughest for China's machinery industry since 2009, an industry leader said on Monday.

"The growth of the industry in the first half was much slower than we expected, and the second half won't be much easy either," said Cai Weici, vice-president of the China Machinery Industry Federation.

He made the remarks after the release of first-half figures for the industry, which accounts for nearly one-fifth of China's exports and imports.

The industry's output stood at 8.7 trillion yuan ($1.4 billion) from January to June, increasing 12.17 percent year-on-year, according to the China Machinery Industry Federation.

The growth rate was significantly lower than the 27.08 percent registered in the first half of last year.

Cai estimated that the industry's growth rate for the whole year will be 14 percent, down from last year's 25 percent.

He added that machinery exports are expected to rise 15 percent year-on-year, but the industry's profits are only expected to grow by 5 percent.

"Structural adjustment from low end to high end is the key to help companies get through this difficult time," Cai said.

"It is urgent that companies restructure as the government will not carry out massive stimulus policies such as in 2009."

The average price of machinery products fell in the first six months, with prices in 61 out of 142 product categories falling compared with a year ago.

Meanwhile, orders received by major companies in the industry declined 0.95 percent year-on-year, compared with 20 percent growth last year.

However, Cai said inquiries increased recently after the central government introduced a series of policies to boost economic growth.

Private companies performed better than their State-owned counterparts in the first half.

Private companies realized a total output value of 4.79 trillion yuan in the first half, an increase of 17.47 percent. The growth rate was 5.3 percentage points higher than the industry's average.

"Compared with State-owned enterprises, private ones are more sensitive to the market and they change their strategies faster," Cai said.

Private companies in the industry made a profit of 2.07 trillion yuan, up 16.73 percent year-on-year during the first five months, accounting for 49 percent of the industry total.

Exports of machinery products recovered recently, Cai said.

According to the federation, exports stood at $141.5 billion from March to May, an increase of 15.78 percent year-on-year. Exports in May reached $32.77 billion, a record high for any single month.

While Cai said Chinese companies still need to make greater efforts in terms of upgrading, he added some progress had been made.

China's automobile exports increased 40 percent during the first five months, much higher than the industry average.

Cai said this reflected China's progress in terms of high value-added products. Automobiles are categorized as machinery products.

dujuan@chinadaily.com.cn