China's industrial economic operation report: industrial growth rate fell to 5.7% in the second half of the year

On August 17, the China Social Science Press and the Institute of Industrial Economics of the Chinese Academy of Social Sciences jointly hosted the “China Industrial Economic Operation Summer Report (2016)” (hereinafter referred to as “Report”) release and seminar.
According to the "Report", China's industrial economy has shown a steady development trend in the first half of 2016, and it is more likely that the industrial economy will maintain a slower growth rate in the second half of the year.
According to the "Report", under the background that the international situation is not optimistic, the industrial economic situation in China in the second half of 2016 is still complicated and severe. Many contradictions and risks will be further manifested in the operation, and the downward pressure is still relatively large. Under this circumstance, it is more necessary to grasp the balance between steady growth and structural adjustment in macroeconomic regulation and control.
Statistics show that the growth rate of industrial enterprises above designated size in July was 6%, which was 0.2 percentage points lower than that in June. Jiang Yuan, deputy director of the National Bureau of Statistics, said at the seminar that although the growth rate of the above-scale industrial enterprises has been slightly lower than that of last year, the signs of stabilization are relatively obvious, and it may be staged to stabilize.
However, Jiang Yuan also stressed that although the industrial growth rate has stabilized, the industrial recovery momentum is still weak, and the staged bottoming trend has not changed, and it is difficult to see a very obvious U-shaped or V-shaped trend.

Signs of industrial stabilization are obvious
According to the information from the above-mentioned seminar on August 17, multi-sector experts believe that the industry has shown signs of stabilization.
For example, in the first half of the year, industrial electricity consumption increased by only 0.5%, and it rose to 1.6% from January to July. It is very obvious that the growth momentum will be stopped. Especially in July, industrial electricity consumption increased by 6.9%.
The figures of the National Bureau of Statistics also show that the growth rate of industrial enterprises above designated size in January-July is the same as that in the first half of the year, at 6%. Although the growth rate of industrial enterprises above designated size was 0.2 percentage points lower than that in June, the factory producer price (PPI) of industrial producers in July was -1.7%, which was much better than June-2.6%, reflecting the decline in industrial deflation.
According to Jiang Yuan, 567 major industrial products account for about 50% of the total industrial production, and the growth rate in July is about 60%. “This shows that the steady growth of supporting industrial production has increased.”
An expert from the Ministry of Industry and Information Technology believes that in the first half of 2016, the industry was slow and stable, with limited recovery. However, the supply-side structural reform task is still very heavy and far-reaching, so it is still struggling to stabilize the growth and adjust the structure.
Huang Qunhui, director of the Institute of Industry of the Chinese Academy of Social Sciences, shares the same view. Despite positive signs, he still has to worry about the high production of crude steel, which may affect the production capacity. In addition, many industrial productions have some hidden concerns, such as the national total from 2009 to 2015. The production of new energy vehicles has accounted for one-third of the world, and the sales volume is so large.

Industrial economic growth slowed down in the second half of the year
However, although the industry may stabilize, the V-shaped reversal, which is accelerating in the second half of the year and next year, is unlikely to occur.
According to the Report, it is more likely that the industrial economy will maintain a slower growth rate in the second half of 2016. The model forecast shows that the industrial economic growth rate will drop to 5.7% at the end of 2016, and the industrial economic growth rate will fall to 5.0% in June 2017.
Huang Qunhui believes that considering the recovery of the world economic cycle is not as expected, the domestic economic downturn is difficult to reverse in the short term, and the macro policy has not changed significantly in the short term. From the second half of 2016 to the second half of 2017, the industrial economy will continue to grow at a slower rate. 5.5% to 6%.
Zhang Hangyan, Ph.D., of the Industrial Operation Research Office of the Chinese Academy of Social Sciences, believes that from the survey situation, the industrial development is slightly worse than the statistical data, so the industry still has a large downward pressure. The next step is to continue to push the reform of the supply side structure, accelerate the pace of steady growth, and maintain the relative stability of macroeconomic policies.
The 21st Century Business Herald was informed that the recent rebound in steel and coal prices is related to the de-capacity work.
The data shows that in 2016, the crude steel production capacity was reduced to 45 million tons and the coal was 250 million tons. By the end of July, 47% and 38% of the year were completed. This makes the price of crude steel and coal from this year to July rise by 40% and 20% respectively compared with the end of December last year.
According to the planning of the National Development and Reform Commission, in the next five years, the country will reduce the crude steel production capacity by 150 million, and withdraw from the reduction of coal production capacity by 1 billion tons. Jiang Yuan believes that because a large amount of steel investment still exists, it is difficult to achieve one ton of new capacity in five years.
"At the same time, not only steel and coal have to go to production capacity, but also cement, glass and electrolytic aluminum to go to production capacity. A large number of zombie enterprises need to withdraw. This work is not completed in three to five years, but it has been going through several years." Jiang Yuan said. Therefore, the expected growth rate of industrial production in the future cannot be too high, especially the trend of V-shaped recovery.

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