Current economic operation and trend prediction of the machinery industry

Mechanical industry is a pillar industry of the national economy. In 2019, the main economic indicators of the mechanical industry operated within a reasonable range, playing a supporting role in the steady growth of the macroeconomic economy. In early 2020, facing the novel coronavirus pneumonia epidemic, the mechanical industry resolutely implemented the deployment of the CPC Central Committee and the State Council, and the whole industry actively participated in the fight against the epidemic and orderly promoted the resumption of work and production.
I. Review of the Economic Operation of the Mechanical Industry in 2019
In 2019, facing the complicated situation where domestic and foreign risks and challenges increased significantly, the mechanical industry earnestly implemented the decisions and deployments of the CPC Central Committee and the State Council, overcame difficulties, and pressed ahead. At the beginning of the year, the main economic indicators fell sharply, rebounded briefly in March, and then continued to fall; after entering the third quarter, many measures to stabilize growth gradually took effect, and the benefits of tax cuts and fee reductions became apparent, and the economic operation of the mechanical industry improved. The annual operating income increased slightly, production and sales gradually stabilized, and exports remained basically stable. However, overall, the structural contradictions hindering the development of the industry have not been significantly alleviated, the situation of declining efficiency and sluggish investment has not yet been reversed, and the pressure to achieve stable operation of the mechanical industry still exists.
(1) Fluctuation and stabilization of value-added growth rate
In 2019, the added value of the mechanical industry fluctuated greatly, with a year-on-year increase of only 2% in the first two months, and a rapid increase to 6.3% in the first three months; however, from April to July, it continued to slow down to 3.9%; after August, the trend of stabilization gradually emerged. The year-on-year growth rate of the added value of the mechanical industry increased to 5.1%, which is still lower than the national industrial average (5.7%) and lower than the growth rate of 6.3% in the previous year.
(2) Product production gradually rising
Since June 2018, the production of mechanical industry products has gradually weakened. Among the key monitored products, the number of products with increased output has continued to decrease, reaching a low point in August and September 2019, with the number of products with increased output accounting for only 35.8% of the 120 key products. Since then, it has stabilized and increased month by month. In the whole year, 50 of the main products showed a year-on-year increase in output, accounting for 41.7%; 70 products showed a year-on-year decrease in output, accounting for 58.3%.
The increase and decrease in the output of major products show the following characteristics: First, the production of lifting equipment, petrochemical equipment, some general equipment and basic parts remained stable growth; second, the growth rate of engineering machinery, instrumentation, and environmental protection products generally fell after rapid growth, but the overall prosperity is still good; third, the production of power generation equipment, power transmission and transformation equipment, machine tools, and agricultural machinery remained sluggish; fourth, automobile production and sales decreased significantly, but the decline narrowed in the second half of the year.
(3) Economic benefit indicators decline
In 2019, the mechanical industry achieved a total operating income of 21.76 trillion yuan, a year-on-year increase of 2.46%, with continued low-speed growth throughout the year, 1.39 percentage points lower than the national industry; the total profit reached 1.32 trillion yuan, a year-on-year decrease of 4.53%, with continued negative growth throughout the year, 1.24 percentage points lower than the national industry.
In 2019, the operating income profit margin of the mechanical industry was 6.08%, down 0.44 percentage points year-on-year, 0.22 percentage points higher than the national industry; the operating income per 100 yuan of assets was 88.78 yuan, down 2.79 yuan year-on-year, 0.01 yuan lower than the national industry.
(4) Obvious differentiation in industry operation
In 2019, the automobile industry continued its downward trend of the previous year, with a year-on-year decrease of 1.66% in operating income and a year-on-year decrease of 15.3% in total profit, which was the main reason for the decline in the main economic indicators of the mechanical industry. Excluding the automobile industry, the non-automobile industry in the mechanical industry increased by 5.18% in operating income and 4.11% in total profit year-on-year, both higher than the national industrial and mechanical industry averages during the same period; among them, the operating income of engineering machinery, robotics and intelligent manufacturing industries achieved double-digit growth, and the profit growth rate of cultural office equipment, heavy mining equipment, and food packaging equipment industries exceeded 20%.
(5) Overall sluggish import and export
According to customs statistics, in 2019, the mechanical industry achieved a total import and export value of US$773.5 billion, a year-on-year decrease of 2.08%. Among them, imports totaled US$315.1 billion, down 6.5% year-on-year, with all 14 sub-sectors experiencing negative growth in import value; exports totaled US$458.4 billion, up 1.22% year-on-year, with exports decreasing in 14 sub-sectors including internal combustion engines, office equipment, electrical equipment, mechanical basic parts, and automobiles, and exports increasing in the other nine sub-sectors. The mechanical industry achieved a trade surplus of US$143.3 billion for the whole year.
II. Current Economic Operation of the Mechanical Industry
At the beginning of 2020, the novel coronavirus pneumonia epidemic spread rapidly across the country. The sudden epidemic has had a significant impact on various aspects of the national economy, social order, and people's livelihood. It has also had a great impact on the stable operation of the mechanical industry, causing the main economic indicators to fall sharply. Since mid-February, under the policy guidance of the CPC Central Committee and the State Council in coordinating epidemic prevention and control and the restoration of economic and social order, the mechanical industry has accelerated the pace of resuming work and production, and the production and operation of enterprises have begun to gradually recover.
(1) Impact of the novel coronavirus pneumonia epidemic on industry operation
Affected by the epidemic, market demand and production slowed down sharply, consumption was sluggish, investment was weak, and exports declined. As a pillar industry of the national economy, the mechanical industry also faces enormous challenges in its production and operation. According to a special survey of enterprises conducted by the China Mechanical Industry Federation in early February, the impact of the epidemic on industrial enterprises is mainly reflected in the following aspects: First, the national Spring Festival holiday was extended, and most provinces and regions postponed the resumption of work and production, resulting in a general delay in the resumption of work and production of mechanical enterprises, with more than 90% of enterprises experiencing a significant reduction in actual production time due to the postponement of work resumption. Second, traffic restrictions led to difficulties in logistics and transportation, on the one hand, manifesting in the difficulties in transportation of raw materials, parts, and outsourced parts, making production difficult to guarantee; on the other hand, it is difficult to deliver already sold products, and equipment commissioning and installation personnel cannot reach the work site. Third, due to the inconsistent deadlines for resumption of work and production, the difficulty of matching production and supply between upstream and downstream enterprises has increased significantly, disrupting the industrial ecosystem. Fourth, due to production stagnation, it has led to difficulties in order delivery and contract execution, slowing down enterprise capital recovery and increasing breach of contract costs; at the same time, fixed expenditures such as credit interest and housing and site rent are still continuing, leading to tight enterprise capital chains. Fifth, most areas require a 14-day quarantine for people returning from other places, and some communities and village committees even forcibly quarantine people returning from other places, making it difficult for grassroots employees to return to their posts. Sixth, after the outbreak, some overseas orders were postponed or cancelled.
(2) Comprehensive downward trend of major economic indicators in the mechanical industry
Affected by the epidemic, the production and operation of mechanical enterprises have generally suffered a greater impact, resulting in an unprecedented decline in the major economic indicators of the mechanical industry recently.
1. Significant decline in industrial added value
Data from the National Bureau of Statistics show that the year-on-year growth rate of the added value of the mechanical industry in the first two months fell by 28.3%, falling more than 30 percentage points from the same period last year, 14.8 and 12.6 percentage points lower than the national industry and manufacturing industry during the same period, respectively.
Among the major national economic categories involved in the mechanical industry, the year-on-year growth rate of added value in general equipment manufacturing decreased by 28.2%, specialized equipment manufacturing decreased by 24.4%, automobile manufacturing decreased by 31.8%, electrical machinery and equipment manufacturing decreased by 24.7%, and instrumentation manufacturing decreased by 27.4%, all hitting record lows.
2. Significant Decline in Major Product Production
Among the 120 major products under key monitoring by the machinery industry, only the output of hydropower generating units and wind turbine generating units increased year-on-year in January-February. The output of the other 118 products decreased across the board, with 83.3% experiencing a drop of over 20%. Among the major products, automobile production fell by 45.8% year-on-year, metal-cutting machine tools by 44.96%, excavators by 35.68%, and generating sets by 30.75%.
3. Sharp Decline in Fixed Asset Investment
In the major national economic sectors involving the machinery industry, investment in general equipment manufacturing fell by 40.1% year-on-year, specialized equipment manufacturing by 36.2%, automobile manufacturing by 41%, and electrical machinery and equipment manufacturing by 33.7%. These declines are significantly greater than the decrease in industrial investment (-27.5%) and manufacturing investment (-31.5%).
4. Year-on-Year Decline in Both Machinery Industry Imports and Exports
Customs statistics show that in January-February, China's imports of electromechanical products totaled US$119.603 billion, down 7.6% year-on-year; this includes a 35.3% decrease in machine tools, a 6.1% decrease in automobiles (including chassis), and a 12.8% decrease in auto parts. Exports of electromechanical products amounted to US$172.057 billion, a year-on-year decrease of 16.2%; this includes a 7.8% decrease in general mechanical equipment, a 1.3% decrease in automobiles (including chassis), and a 13.3% decrease in auto parts.
(3) The Entire Industry Actively Participates in Epidemic Prevention and Control
Faced with the sudden impact of the epidemic, the China Machinery Industry Federation gave full play to the role of the industry organization as a bridge and link, actively deploying and carrying out prevention and control work. First, it issued initiatives to build confidence. It successively issued the "Notice on Strengthening the Prevention and Control of the Current Novel Coronavirus Epidemic" to its member units and issued the "Initiative to Build Confidence, Overcome Difficulties, and Win the People's War of Epidemic Prevention and Control" to the industry and the "Notice on Jointly Doing a Good Job in Epidemic Prevention and Control and Orderly Resumption of Work and Production Services" to various professional associations and local industry associations. Second, it conducted investigations and collected information. Through various channels, it extensively understood the situation of industries and enterprises affected by the epidemic, as well as the problems and difficulties in the resumption of work and production. It successively organized special surveys on the impact of the epidemic on key enterprises; established a daily and weekly report system for the resumption of work and production with 18 professional associations, covering more than 8200 enterprises; and jointly conducted special surveys on more than 700 small and medium-sized enterprises with 13 local associations (organizations), including the Shandong Institute of Information Technology. Leaders of the Federation conducted investigations on the Agricultural Machinery Association, Automobile Association, and Engineering Association; advocated the establishment of a service and cooperation alliance of 16 associations directly managed by the State-owned Assets Supervision and Administration Commission (SASAC), issued an initiative letter, held a leadership group meeting, and carried out exchange and service docking activities. Third, it supported government decision-making. It submitted reports to government departments on the dynamics of epidemic prevention and control, the impact of the epidemic on machinery enterprises, and relevant suggestions, participated in government symposiums, and submitted more than 20 analytical reports, including special reports and dynamic reflections. It published more than 40 work bulletins and situation reports; forwarded notices, distributed bulletins, etc., over 5,000 times; and actively issued the voice of the machinery industry to the whole society, organizing more than 3,600 news reports. It organized a video press conference on industry economic information, with more than 60 media outlets participating. The situation regarding the resumption of work and production in the machinery industry was released through media such as CCTV.
A large number of enterprises in the machinery industry, making use of their own advantages, actively participated in the fight against the epidemic in various forms. Automobile industry enterprises accelerated the pace, made full use of their production capacity, and urgently resumed production of negative pressure ambulances; organized travel service teams to cooperate with epidemic prevention and control vehicle dispatching and provided free travel services; engineering machinery industry enterprises participated in the construction of "Xiaotangshan"-style hospitals across the country; and general equipment manufacturing enterprises donated air conditioners, ventilation and purification units, valves, and sewage treatment pumps and other ventilation and disinfection materials to Huoshenshan and Leishenshan hospitals. In addition, machinery industry enterprises gave full play to their strong R&D and manufacturing capabilities, quickly shifting their production to epidemic prevention materials and equipment, and have successively produced medical masks, disinfectants and other products, and provided mass supplies of fully automatic mask production lines and other equipment.
(4) Orderly Advancement of the Resumption of Work and Production
Since the State Council and relevant ministries and commissions and local governments successively issued and implemented various policy measures to promote the orderly resumption of work and production of enterprises, the situation of the resumption of work and production in the machinery industry has rapidly improved.
Rapid Increase in the Resumption Rate of Backbone Enterprises. Data from the daily reports on the resumption of work and production established by the China Machinery Industry Federation and 18 sub-industry associations show that the resumption rate of enterprises in the machinery industry has increased rapidly. From less than 30% on February 13 to nearly 80% in early March, it has now exceeded 90%. Among them, 12 industries, including automobiles, general machinery, electrical appliances, heavy machinery, petroleum and petrochemical equipment, printing machinery, food packaging machinery, machine tools, general parts, refrigeration and air conditioning, instrumentation, and plastic machinery, have reached over 90%.
Resumption Rate of Small and Medium-Sized Enterprises is About 50%. In order to understand the situation of the resumption of work and production of small and medium-sized enterprises, which account for about 90% of the total amount of the machinery industry, the China Machinery Industry Federation, in conjunction with local associations (organizations), conducted a special survey on small and medium-sized enterprises. The results show that the current employee resumption rate of small and medium-sized enterprises is 51%, and the enterprise production capacity utilization rate is 49%. These two indicators are significantly lower than the resumption rate indicators of large enterprises in the daily report system of the machinery industry in the same period. This shows that small and medium-sized enterprises in the machinery industry are more severely affected by the epidemic, and the difficulty of resuming work and production is also greater.
To help industry enterprises carry out scientific and precise epidemic prevention and control and orderly resumption of work and production, the China Machinery Industry Federation recently proposed eight aspects and sixteen measures to serve the resumption of work and production of enterprises. At the same time, with the support and promotion of SASAC, CMIF and 16 other associations directly managed by SASAC voluntarily formed a cooperation alliance to serve the resumption of work and production of enterprises, so as to better serve the fight against the epidemic and help enterprises restore normal production and operation order.
(5) Current Problems in Industry Operation
Although the resumption of work and production in the machinery industry has been comprehensively promoted and has achieved phased results, problems and difficulties still exist. However, with the improvement of the epidemic situation and the implementation of policies, they have been alleviated to varying degrees. The resumption rate of member enterprises and key contact enterprises monitored by the daily report has exceeded 90%, but the employee resumption rate is significantly lower than this level, and the enterprise production resumption rate is even lower; the resumption rate of small and medium-sized enterprises surveyed is only around 50%. Currently, enterprises are mainly facing the following problems and difficulties in the process of resuming work and production and restoring the order of production and operation:
First, the industrial chain is not well connected, and the supply of parts and components is insufficient. The first batch of enterprises to resume work and production successfully are mostly large-scale main (complete) machine manufacturing enterprises, while their basic component suppliers are mostly small and medium-sized enterprises. The pace of resumption of work and production by suppliers is slower than that of host enterprises, making the shortage of upstream parts and components a problem frequently mentioned by enterprises resuming work and production, and some enterprises have already been affected in production due to insufficient parts supply.
Second, contract fulfillment and continuation are difficult, and enterprise orders have generally declined. Affected by epidemic prevention and control and delayed resumption of work, the phenomenon of products not being delivered on time, sales stagnation, and loss of market orders is widespread. Surveys show that nearly 90% of the surveyed enterprises in the machinery industry have seen a decline in orders. Among them, nearly 30% of enterprises have seen a drop of more than 50% in their backlog of orders, 20% have seen a drop of 20%-50%, and about another 30% have said that the extent of the drop in orders is difficult to estimate. The decline in orders and the shrinking demand make it lack the motivation and support for enterprises to fully resume production, and the goals of stabilizing economic operation and employment will face greater challenges.
Thirdly, logistics and transportation remain unsmooth, and transportation inefficiencies are prolonged. Following the outbreak, logistics and transportation, especially inter-provincial logistics, were essentially suspended, significantly impacting production activities. Recently, with the increase in the number of enterprises resuming work and production, the demand for logistics and transportation has also grown rapidly. Insufficient logistics and transportation services supporting the machinery industry have created a shortfall in the transportation of materials, parts, and products. Some enterprises report that current logistics efficiency is about double the time compared to the same period last year.
Fourthly, foreign trade exports are affected. Since the outbreak of the COVID-19 epidemic, some countries (regions) have successively adopted restrictive measures on the export of goods and personnel movement from China, involving 146 countries as of now, resulting in the cancellation or postponement of some foreign trade orders. In addition, some countries and regions have adopted excessive epidemic prevention measures, restricting Chinese enterprises from participating in international exhibitions, conducting business negotiations, and carrying out international cooperation and exchange activities, which has also directly affected the export of machinery products.
Fifthly, enterprises are under multiple pressures, and their capital chains are tight. Affected by the epidemic, the market and production have been stagnant for a long time, leading to order losses, reduced capital recovery, and tight liquidity. However, enterprises still need to pay employee wages and other expenses, bearing a heavy burden of labor costs. At the same time, the difficulty in delivering orders and executing contracts due to production stagnation has put enterprises under pressure from rising breach of contract costs. In addition, fixed cost expenditures also put significant financial pressure on enterprises.
Sixthly, labor shortages still exist. Although restrictions on personnel movement have been relaxed recently, and some provinces and cities have adopted measures such as chartered flights and buses to specifically pick up migrant workers to promote the resumption of work and production, the total number is still far from enough. As more and more enterprises resume work and production, the labor shortage remains a problem plaguing enterprises.
III. Prediction of the Trend of Economic Operation in the Machinery Industry
Currently, the epidemic prevention and control situation in China continues to improve, and positive results have been achieved, with favorable factors accumulating continuously; however, the overall domestic and international epidemic situation remains severe and complex, and various unfavorable factors bring uncertainty to industry development.
(1) Favorable Factors
Since the outbreak, under the deployment of the Central Committee of the Communist Party of China and the State Council, relevant ministries and local governments have introduced numerous policies to support epidemic prevention and control, promote the resumption of work and production, support enterprises in difficulty, and guarantee employment for workers. These policies support and help enterprises cope with the impact of the epidemic by reducing tax burdens, increasing financial support, easing social security pressure, lowering energy prices, and simplifying approval procedures, playing a positive role in stabilizing the social and economic order.
Recently, policies and measures to stabilize investment, consumption, and foreign trade have been promulgated in a concentrated manner, and relevant projects are gradually being implemented, further restoring market confidence.
Stable Investment: Relevant national departments have accelerated the approval of projects and the allocation of central budgetary funds. As of March 3, the National Development and Reform Commission has approved infrastructure projects totaling 228.6 billion yuan, an increase of 93 billion yuan year-on-year; as of March 20, the Ministry of Finance has allocated central infrastructure investment transfer payments to local governments, with a year-on-year increase of 12.6 percentage points in progress; it has allocated more than 250 billion yuan in vehicle purchase tax funds, more than 7 billion yuan in port construction fees, and more than 24 billion yuan in civil aviation development funds in advance, all of which will be used to support the construction of infrastructure such as highways, ports, waterways, and airports. Expanding the scale of local special bonds. Authorized by the Standing Committee of the National People's Congress and approved by the State Council, the Ministry of Finance has allocated 1.848 trillion yuan in newly added local government bonds for 2020 in advance, of which 1.29 trillion yuan are special bonds, all of which will be used for infrastructure construction; as of March 20, 1.0233 trillion yuan in newly added local special bonds have been issued, and nine provinces and regions including Beijing, Tianjin, and Liaoning have completed the issuance of newly added local special bonds. This is beneficial to the engineering machinery and heavy machinery industries.
Guangdong, Hunan, and Shanxi provinces recently announced plans for the construction of 44 thermal power projects (including new, ongoing, and preparatory projects); Yunnan added 8 million kilowatts of wind power and 3 million kilowatts of photovoltaic layout and construction; Huaneng's 1.6 million kilowatt wind power base project was approved; and the State Grid's Shanxi Yuanqu pumped storage power station project started construction. This is beneficial to the power generation equipment industry.
The State Grid plans to arrange more than 400 billion yuan in grid investment in 2020, which can drive more than 800 billion yuan in social investment; the compiled "2020 Plan for Preliminary Work of Ultra-High Voltage and Cross-Provincial 500 kV and Above AC/DC Projects" clearly states that the overall investment scale of ultra-high voltage construction projects this year is nearly 500 billion yuan. This is beneficial to the power transmission and transformation industry.
The Ministry of Science and Technology issued the "Notice on Several Measures for Scientific and Technological Innovation to Support the Resumption of Work and Production and Steady Economic Operation," proposing to increase the implementation and support of major scientific and technological projects such as artificial intelligence and industrial internet. This is beneficial to the intelligent manufacturing equipment industry.
Stable Consumption: On February 16, General Secretary Xi Jinping proposed at the Standing Committee meeting of the Political Bureau of the Central Committee that "we should actively stabilize the traditional mass consumption of automobiles and other products, encourage automobile-restricted regions to appropriately increase the allocation of automobile license plates, and drive the consumption of automobiles and related products." Subsequently, the "Implementation Opinions on Promoting the Expansion and Improvement of Consumption and Accelerating the Formation of a Strong Domestic Market" jointly issued by 23 departments including the National Development and Reform Commission and the Ministry of Industry and Information Technology, the "Guiding Opinions on Orderly Promoting the Resumption of Work and Production of Industrial and Communication Enterprises" issued by the Ministry of Industry and Information Technology, and the "Notice on Supporting the Resumption of Business Operations of Business and Trade Circulation Enterprises" jointly issued by the Ministry of Commerce, the National Development and Reform Commission, and the National Health Commission, etc., propose to stabilize and expand automobile consumption through measures such as encouraging automobile-restricted regions to appropriately increase the quota of automobile license plates, promoting the scrapping and updating of motor vehicles, providing subsidies for new vehicle purchases and trade-ins, and removing restrictions on pickup trucks entering cities. This is beneficial to the automotive manufacturing industry. Guangzhou has clearly stated that it will increase the quota for small passenger vehicles this year.
The Ministry of Agriculture and Rural Affairs, the Ministry of Finance, and the Ministry of Commerce jointly issued the "Implementation Guiding Opinions on Subsidies for the Scrapping and Updating of Agricultural Machinery," addressing the problem of overdue agricultural machinery by introducing scrapping and updating subsidy policies, guiding local governments to accelerate the progress of scrapping and updating old agricultural machinery, and promoting the recovery of the agricultural machinery market. This is beneficial to the agricultural machinery industry.
Stable Foreign Trade: The State Council's executive meeting issued measures to stabilize foreign trade and foreign investment, including timely and full tax rebates for all export products except "two highs and one resource" that have not been fully refunded; the Ministry of Finance and the State Taxation Administration issued the "Announcement on Increasing the Export Tax Rebate Rate for Some Products" on March 17, involving automotive fasteners, castings, and other products in the machinery industry; the Ministry of Commerce issued the "Notice on Doing a Good Job in Stabilizing Foreign Trade, Foreign Investment, and Promoting Consumption in Response to the COVID-19 Epidemic," proposing 20 specific measures to stabilize foreign trade, foreign investment, and promote consumption; the Ministry of Commerce and the Ministry of Finance jointly issued the "Notice on Making Good Use of Domestic and Foreign Trade Special Funds to Support Stabilizing Foreign Trade, Foreign Investment, and Promoting Consumption," proposing to fully leverage the effectiveness of central government domestic and foreign trade funds to fully support the stabilization of the basic foreign trade and investment market. Overall, the implementation of recent relevant policies and measures and specific projects has a positive significance for stabilizing and ensuring the market demand for machinery products and accelerating the restoration of the normal production order of the industry. These policies and measures are all beneficial to foreign trade enterprises in the machinery industry.
Overall, the implementation of recent relevant policies and measures and specific projects has a positive significance for stabilizing and ensuring the market demand for machinery products and accelerating the restoration of the normal production order of the industry.
(2) Unfavorable Factors
1. The impact of the epidemic is significant, and recovery will still take time
From the perspective of industrial economic operation, the year-on-year decline of the added value of industries above designated size in the first two months of this year was 13.5%, the lowest since statistics were kept. Among them, the manufacturing industry declined by 15.7%. Except for the petroleum and natural gas extraction industry and the tobacco manufacturing industry, among 41 major industrial categories, 39 experienced a decline, with 30 industries experiencing a double-digit decline. From the perspective of the three major demands, investment, consumption, and exports all declined comprehensively. In the first two months, national fixed asset investment declined by 24.5% year-on-year, among which industrial investment declined by 27.5%, and manufacturing investment declined sharply by 31.5%; total retail sales of consumer goods declined by 20.5% year-on-year; and foreign exports in US dollar terms declined by 17.2% year-on-year.
Since entering March, industrial enterprises have resumed work and production in an orderly manner, the enterprise operating rate has steadily improved, and production and operation activities have been restored in an orderly manner. According to the monitoring and scheduling data of the Ministry of Industry and Information Technology, except for Hubei Province, the average operating rate of large-scale industrial enterprises nationwide has reached 98.5%, and the employee return-to-work rate has reached 87.3%. However, it will still take some time for a complete return to normal order.
2. The global spread of the new coronavirus epidemic affects international trade
Affected by the epidemic, at the beginning of March, the International Monetary Fund (IMF) announced that the global economic growth rate in 2020 was expected to fall from 3.3% announced in January to 2.9%. Since then, the spread of the epidemic has continued to expand. On March 12, the World Health Organization officially announced that the outbreak of the new coronavirus pneumonia epidemic has constituted a global "pandemic." At least 53 countries, including Italy, Spain, and the United States, have declared states of emergency. Affected by this, the global financial market has begun to fluctuate violently, major international stock indexes have fallen sharply, and many stock markets have experienced "circuit breakers." Panic sentiment and consumption recession will further drag down the slowdown of world economic growth and the weakness of the international trade market.
In this context, the markets for products such as auto parts, low-voltage electrical appliances, civilian machinery, and office equipment, which account for a large volume of exports in the machinery industry, will face severe international market conditions. From the perspective of trading partners, 15 countries, including Italy, France, Germany, the United States, and the United Kingdom, where the epidemic has recently escalated rapidly, are all important export destinations for the machinery industry. In 2019, the total export amount to these countries accounted for one-third of the total exports of the machinery industry. In addition, the epidemic has also brought more uncertainty to trade between China and the United States, and the hard-won positive achievements of the first phase of the China-US trade agreement have been negatively impacted. In summary, the foreign trade of the machinery industry will face enormous pressure.
(3) Prediction of Future Trends
In the short term, since the epidemic has not yet been lifted, it will take some time to fully return to the normal state of production and operation, so the overall operation of the industry in the near future is still in the stage of gradual recovery. In addition to the losses caused by the previous shutdown of work and production, it is expected that the major economic indicators of the machinery industry in the first quarter will fall by about 20%. If the epidemic is effectively controlled in the first quarter, in the second quarter, against the backdrop of the general rise in the resumption of work and production across society, and as problems with industrial chain supporting gradually improve, the production and operation order of machinery enterprises will accelerate recovery, and the market will also see a certain degree of rebound. It is expected that the production and operation of the machinery industry in the second quarter will show a trend of stabilization and improvement.
In the medium term, in order to alleviate the difficulties caused by the epidemic to the production and operation of enterprises, relevant government departments at the national and local levels have jointly introduced a number of support and rescue policies, covering market guarantees, financial and tax support, financial support, and employee return to work, among other aspects, playing a positive role in boosting market and corporate confidence. In the first half of the year, the production and operation of the machinery industry will gradually stabilize, and the growth rate in the second half of the year will be significantly higher than that in the first half of the year.
In the long term, the fundamentals of China's economy are stable, and the restorative construction and investment carried out after the epidemic can release potential markets for the machinery industry and bring new opportunities for structural adjustment and transformation and upgrading of the machinery industry.
Comprehensive Analysis: It is expected that the economic operation of the machinery industry in 2020 will show a trend of low in the beginning and high later, gradually recovering. If the epidemic can end early, the growth rate of industrial added value can still reach about 5%, and indicators such as operating income and total profit will maintain a slight increase.
2020 is the closing year of building a moderately prosperous society in all respects and the 13th Five-Year Plan. Faced with the current difficulties and challenges, let us be firm in our confidence, inspire our spirits, and take the initiative, participating in the effective fight against the epidemic and the orderly resumption of production with practical actions, to make due contributions to achieving steady and healthy development of the industry and ensuring that the annual targets are completed as scheduled.
Finally, in order to strive to achieve the main economic indicators of the machinery industry planned at the beginning of the year, I would like to make three points:
First, work together to promote the sustained and healthy development of the economic operation of the machinery industry. The China Machinery Industry Federation, various professional associations, and various local associations must work together to respond to and promote the sustained and healthy development of the economic operation of the machinery industry. Various professional associations and local associations should closely monitor the main expected targets such as the year-on-year growth rate of industrial added value of above-scale enterprises in their industries and regions, accelerate the implementation of full resumption of production and reaching full capacity, and quickly study the paths and measures for catching up and making up for losses in the last three quarters of the year, helping enterprises to maximize their potential, expand the market, and strive to find new growth points, ensuring that the operation of the industry does not deviate from the reasonable range.
Second, actively reflect the difficulties and problems existing in the operation of the industry. The main task at present is to accelerate the resumption of production and reaching full capacity in the industry and restore normal production order while continuing to do a good job in epidemic prevention and control, compensating for the losses caused by the epidemic. Various industry associations and local associations should further improve industry monitoring and analysis, and through enterprise surveys and meetings, accurately ascertain the current production and operation status of key enterprises, understand the difficulties and problems existing in resuming work and production, personnel returning to work, industrial chain supply chain capital chain, etc., and promptly reflect the situation and problems to us or to relevant government departments, jointly promoting the solution of these problems.
Third, play a more prominent role in guiding and promoting the healthy development of the industry. Insist on providing good services to enterprises and play a more prominent role in guiding and promoting the healthy development of the industry. In recent period, various regions and departments have intensively introduced a series of policies and measures to support enterprises, including resuming work and production, tax cuts and fee reductions, targeted cuts in the reserve requirement ratio, stabilizing foreign trade and investment, and promoting consumption. Various professional associations and local associations should first thoroughly understand the spirit of these document support policies for enterprises and guide and help enterprises make good use of various preferential policies.