In 2016, in the face of the complicated and severe economic environment, the CPC Central Committee and the State Council followed the general principle of seeking progress in stability, adhered to the new idea of development, put emphasis on the core task of boosting the supply-side structural reform, focused on the improvement in the quality and efficiency of development, and strived to promote the five major tasks, namely, "depleting stocks, cutting production overcapacity, deleveraging, reducing costs and bolstering weak spots." As a result, the industrial economy slowed down and stabilized, featuring steady operation of industrial production, significant improvement in enterprise performance, continuous optimization of the industrial structure, and accelerated transition of drivers.
1. Steady operation of industrial production
In 2016, the added value of industries above designated size nationwide increased by 6% on a year-on-year basis, down 0.1 percentage point over the previous year. Quarterly speaking, the first quarter saw growth of 5.8%, and the second, third and fourth quarters all saw growth of 6.1%. Industrial production growth remained at about 6% with slight fluctuations, showing an obviously stable trend.
Prices of industrial products continued to rebound significantly. From January to August in 2016, the year-on-year decline in the producer price index (PPI) narrowed month by month and changed from negative growth to positive growth, bringing to an end the trend of decline for 54 months in a row. The PPI rose faster in the fourth quarter, with the year-on-year growth of 1.2% in October, 3.3% in November and 5.5% in December. The PPI fell by 1.4% annually, down greatly by 3.8 percentage points over the previous year.
More products achieved growth of product output. In 2016, among the 589 kinds of major industrial products, 61.3% of them realized output growth in the first quarter, 64% in the first half, and 66.9% in the whole year. Surface active agent, coated sheet (belt) and titanium sponge in the traditional industries, as well as solar cells, optoelectronic devices and industrial robots in the emerging industries maintained rapid growth of product output.
Export growth changed from decline to increase. In 2016, the value of export delivery for industries above designated size increased by 0.4% on a year-on-year basis, while that in the previous year fell by 1.8%. Quarterly speaking, it fell by 3% in the first quarter on a year-on-year basis, and increased by 0.8% 1.3% and 1.9% in the second, third and fourth quarters, respectively, showing a quarterly rising trend.
Labor demand stabilized and rose. According to the survey of industrial enterprises in terms of their production, operation and prosperity, labor demand by more than 90,000 enterprises surveyed remained stable in the first half of the year and rose significantly in the second half. The number of enterprises whose labor demand increased over the previous quarter accounted for 10.4%, 10.3%, 11.6% and 13.2% in the total number of enterprises surveyed in the four quarters, respectively.
Prosperity of small and micro enterprises picked up. In 2016, the business climate index (BCI) of small and micro industrial enterprises still fell in the depression range, but exhibited a trend of low pick-up quarter by quarter, and the BCI in the fourth quarter rose to the highest point in nearly two years. Quarterly speaking, the BCIs of small and micro enterprises were 87.2, 90.6, 92.0 and 93.3 in the first, second, third and fourth quarters, respectively.
2. Significant improvement in enterprise performance
From January to November in 2016, industrial enterprises above designated size nationwide achieved total profits of RMB 6.03341 trillion, a year-on-year increase of 9.4%, up 0.8 percentage point over the period from January to October. But the total profits of industrial enterprises above designated size decreased by 2.3% in 2015 over the previous year, so the enterprise performance improved significantly over the previous year. Specifically, the profits of industrial enterprises above designated size grew by 14.5% in November on a year-on-year basis, representing the second highest growth rate since July 2014. On the whole, the improvement in enterprise performance was mainly attributed to the accelerated growth of industrial production and sales as well as the rise in the PPI. The rise in the prices of raw coal, steel, refined oil and other commodities fueled the rapid growth in profits of coal, steel and oil processing enterprises, and played a significant role in promoting the growth of profits of all industrial enterprises above designated size. Cost reduction also increased the profit margins of enterprises. From January to November in 2016, the profit margin of main business income of industrial enterprises above designated size nationwide reached 5.85%, a year-on-year increase of 0.26 percentage point (comparable caliber).
3. Continuous optimization of the industrial structure
The added value of the mining industry exhibited a change from increase to decline. In 2016, the added value of the mining industry decreased by 1% over the previous year, representing a change from increase (by 2.7%) in the previous year to decline. Quarterly speaking, it grew by 2.1% in the first quarter and declined by 1.6%, 1.4% and 2.5% in the second, third and fourth quarters, respectively, showing a rapid decline trend on the whole. The added value of the coal mining industry fell by 1.5%, but it grew by 1.9% in the previous year.
Growth of six high energy-consuming industries fell. In 2016, the added value of the six high energy-consuming industries increased by 5.2% over the previous year, down 1.1 percentage points over the previous year. Quarterly speaking, it grew by 6.3%, 6.1%, 5.1% and 3.6% in the first, second, third and fourth quarters, respectively, showing an obvious quarterly decline trend. The added value of the steel industry fell by 1.7%, but it grew by 5.4% in the previous year.
Growth of the equipment manufacturing industry and high-tech industry accelerated. In 2016, the value added of the equipment manufacturing and high-tech industries increased by 9.5% and 10.8% respectively over the previous year, 3.5 and 4.8 percentage points higher than that of all industries above designated size, and up 2.7 and 0.6 percentage points over the previous year.
In 2016, the five key tasks of the supply-side structural reform achieve partial results in the industrial field. Steel and coal industries accomplished the annual goal of cutting production overcapacity. At the end of November, steel, coal, cement, plate glass and other industry stocks continued to decline year on year, continuing the trend of depleting stocks starting early this year. At the end of November, the asset-liability ratio of industrial enterprises was 56.1%, down 0.6 percentage point on a year-on-year basis, representing certain results achieved in deleveraging. From January to November, the cost per RMB 100 of main business income was RMB 85.76, down RMB 0.14 (comparable caliber) on a year-on-year basis, showing the initial effect of reducing costs.
4. Accelerated transition of drivers
New growth points played a positive role in promoting industrial production. In 2016, more than 10,000 new industrial enterprises above designated size launched production, accounting for 2.8% of all industrial enterprises above designated size, and contributing as high as 20% to the industrial growth.
Strategic emerging industries were growing at an accelerated pace. In 2016, the added value of strategic emerging industries increased by 10.5% over the previous year, 4.5 percentage points higher than that of all industries above designated size.
Electronics and automobile have become the most important leading industries that drive China's industrial economic development. In 2016, the added value (calculated as per current price) of electronics and automobile industries respectively accounted for 7.5% and 6.9% in that of all industries, and the two industries contributed as high as 27.9% to the industrial growth. Production of smart phones, smart TVs, integrated circuits, optoelectronic devices, SUVs and new energy automobiles that are in line with the development direction of consumption upgrade maintained high growth.
Growth of steel and coal industries slowed down significantly. With the in-depth progress of the supply-side structural reform that is focused on the key tasks of "depleting stocks, cutting production overcapacity, deleveraging, reducing costs and bolstering weak spots," steel and coal prices rebounded and industry benefits improved, but the overall pattern of overcapacity did not change. Both industries played a negative role in pulling the industrial economy in 2016.
In short, the high-tech industries and the strategic emerging industries are now characterized by continuous and rapid growth of new drivers, accelerated transition of old drivers to new drivers, deepening process of industrial structure adjustment and transformation and upgrading, and significant stabilization of the industrial economy. However, we must also see that insufficient demand, overcapacity and other inherent contradictions in industrial economy are still being resolved, and that a lot of difficulties still challenge the traditional industries. Thus, it is still arduous and complex to promote the key tasks of "depleting stocks, cutting production overcapacity, deleveraging, reducing costs and bolstering weak spots." In the next stage, we must conscientiously implement the decisions made at the Central Economic Work Conference, unswervingly move forward on the supply-side structural reform, and further consolidate the stable performance of industrial economy while securing high quality progress.
(Author: Director of the Department of Industry, National Bureau of Statistics)