At the beginning of 2020, the new coronavirus pneumonia epidemic raid Chinese economy has become the black swan. A time when the Chinese Lunar New Year holidays, the result has become a battle the whole country to fight against the epidemic. For just experienced a difficult 2019, the Chinese economy, not completely from the effects of structural adjustment and downward pressure and friction in Sino-US trade back to life Control Engineering Copyright , it was this outbreak once again upset the rhythm, frequency add more uncertainty. Epidemic is not over, the duration of the epidemic is still difficult to predict. Under the epidemic, China’s manufacturing industry in turn, what effect?
observed first article of this series as we mainly discuss the impact of the epidemic during the Spring Festival of Chinese manufacturing industry, from manufacturing, supply chain, demand end to measure the impact of changes in the manufacturing sector. In a subsequent report, we will update the forecasts for China’s manufacturing industry in 2020, and to analyze short-term and long-term trends for some key industries. Compared to the outbreak of SARS in Beijing in 2003, although this epidemic bigger challenge for China’s economy, but the impact on the manufacturing industry but relatively limited. At present, China’s economy is facing structural adjustment and cyclical downward pressure, and the risk of trade friction with the United States still exists, if China can implement the first phase of commitment to good trade agreements will continue to be concerned about. Compared to 2003, a higher proportion of tertiary industry now China (2019 primary, secondary and tertiary industries accounted for 7.1%, respectively, 39% and 53.9%), plus the Spring Festival shopping season has always been, so this round of outbreak for the greatest contribution to the economic growth of the tertiary industry influence is the most direct and serious. Retail, catering and tourism traffic in the first half of this year will face a shrinking business and cash flow pressure, the Chinese New Year shopping season can not make up at the end of the epidemic. In contrast, Chinese New Year has always been a lot of manufacturing industry, “off-season”, so this round of the epidemic for the manufacturing sector and not much impact. Epidemic will cause short-term decline in manufacturing output, but limited long-term impact on the industry. The main influence is present in the first half, the date of return to work is the biggest variable factor, is the largest supply chain risk points, the biggest blow to the entity’s industry is shrinking profits. We explained from the following aspects we think the impact of “limited” reasons: manufacturing end – “downtime and delayed return to work” resulting in production losses and the risk of outages. Compared to SARS in 2003, this deadly epidemic contagious but weaker, in order to prevent further spread of the epidemic, strengthen epidemic prevention and control, the State Council in 2020 originally extended to the Chinese New Year holiday in January 24-1 January 30 to February 2 in some areas be extended to two months late. Nationwide mobility restrictions and active and passive isolation to resume production presents very serious challenges. Fortunately, the Lunar New Year holidays due to the large number of migrant workers return home reunion has always been the traditional manufacturing industry off-season, so if the normal return to work on February 10, just a short rework delayed, the risk of a quarter corporate performance is still controllable. Now the test is: · endemic areas of business is clearly not successfully started in February 10, facing more uncertainty. · Before large numbers of people returning back to work, increase the flow density staff mobility and public places, we are once again raise the risk of spread of the epidemic. • If patients diagnosed factory or business again, will face downtime disinfection and quarantine measures to protect employees two weeks, corporate managers face such a risk must be extremely cautious in the final decision on the return to work time. Therefore, even if most of the companies began to return to work 2/10 days, the rate of duty can only be increased gradually, the full return to work difficult. For some of the higher degree of automation of trade or business (such as semiconductor, panel manufacturing), even in the past two weeks, its production activities are also basically normal, and there is no interference by the epidemic. But those large number of employment, not high degree of automation industries (such as electronics manufacturing) will face great challenges. After re-strikes, labor-intensive manufacturing will face higher epidemic uncertainty. In addition, the exception of Hubei, Zhejiang and Guangdong, the number of diagnosed coastal areas is also high, and the government is very strict control measures. In many cities completely cut off transportation while once again postponed the date of return to work, manufacturing clusters in the two provinces of Hubei relatively larger. Labor-intensive, while the proportion of manufacturing exports is quite high. While it can not judge the impact will be fermented to what extent, but the potential risks that could inflict even greater damage and pose a greater impact of the global supply chain. Supply chain – the material would be interrupted or blocked supply of raw materials and product inventory directly affect the impact of the supply chain is reflected in two aspects, one is the supply-side Control Engineering Copyright , such as raw materials and components shortage. The main area is currently under the control ofIn the core components of transportation and staff return to work delay risks. Due to transportation limitations, poor entire supply of raw materials segment, not only domestic transport of raw materials affected, from customs clearance of imported goods and foreign imports are also significant slowdown. This will result in tight supply, and then lead to rising raw material prices. For example, the current steel product inventory is very high, because the logistics of breaks, and steel mills shipped from the warehouse link blocked, while raw materials also appeared tense situation. Because although there before the holiday stocking raw material, the prevailing stocking cycle in fifteen days to twenty days. Then shut down after more than ten days, the raw material can not be replenished, it would appear this tense situation. The second is the demand side, the downstream demand weakened, so that the upstream midstream manufacturing enterprise risk inventory backlog. The high inventories could lead companies to cut passivity. The short term, with the gradual recovery and return to work of logistics personnel, the pressure will gradually ease. Currently, short-term regional risk more concentrated in the automotive, electronics and some other industries, in addition to some chemical sub-sectors may also have pressure. Overall, the industry’s supply chain pressures are still in manageable. But in any case, it affects both the supply chain will make the profits of manufacturing companies being squeezed at both ends. Demand side – affect the demand side of the consumer demand for consumer goods is greater than the demand for personal investment commodities, the Spring Festival was originally a season. Since then the full isolation , during the Spring Festival holiday spending to be completely vacuum, this part of the demand is difficult to get it back from the future recovery in. On the other hand, affected by the epidemic, personal income is expected to decline, consumption will slow down. For example, it now appears, the epidemic is bound to affect the rhythm of the main mobile phone brand 5G release and shelves, which in turn affect the entire mobile phone industry chain. Already dismal auto market even worse, the marketing activities under all types of cord canceled, residents also plan to purchase holiday slowdown. Demand for investment products relatively more stable. In the first quarter because of the Chinese New Year, usually off-season demand. Once the staff back to return to work, coupled with national policy with economic policy, commodity demand can rebound better performance, being only time mismatch. The impact Wuhan / Hubei (endemic areas) for the manufacturing sector in Hubei is the hardest hit by the epidemic (about 70% of the number of people diagnosed), Wuhan is epidemic center of the city, so manufacturing companies in the region since the epidemicHave been hit the most direct and serious. More stringent traffic and people flow management and control measures, and after the Spring Festival return to work time and job situation of uncertainty will magnify the impact on local manufacturing, and spread to the downstream products and related industries. In addition, Hubei and Hunan and Henan bordering the manufacturing sector is labor-exporting province, downtime caused by this epidemic for a long, labor shortages and rising labor costs after the return to work may have many private enterprises causing huge cash flow impact. According to 2018 statistics, Hubei overall size of the manufacturing sector accounts for about 4% of the country, and in Wuhan, Yichang, Shiyan is the province’s manufacturing strength top three cities. From the point of view of scale in manufacturing, much less the Yangtze River Delta and Pearl River Delta region, and therefore have limited impact on the overall Chinese manufacturing industry, the impact will be concentrated in several pillar industries in the region, including automotive, panels, semiconductors (memory) and so on. So far, the most affected and bear the highest risk in the automotive industry. Hubei is one of China’s four major automobile production base, in 2019 the production of automotive 2.24 million units in Hubei Province, accounting for 8.8% of the country. Wuhan is one of China’s four passenger car base, in addition to Dongfeng Motor Group rooted in addition, also brings together Japan, the United States, France, Britain and five own-brand cars, while Webasto, Bosch, Farley half of the world’s top 20 auto parts Austria, ZF and the like to settle down here. After the closed city of Wuhan, many car companies have launched emergency measures, including the evacuation of employees and their families, quarantine, travel and other exchanges canceled Wuhan. Automotive industry production chain in parts of Wuhan / Hubei temporarily stopped, will further delay the resumption of work time, some domestic automobile and global automotive supply chain will be affected in the short term, some market products and car prices will appear for parts off phenomenon [ 123] CONTROL ENGINEERING China Copyright , which can lead to delayed new product development, testing and certification, production and product listing. In addition to an important base for automotive, Wuhan is also following several industries: · photoelectron information industry. Wuhan production scale fiber optic cable accounted for first in the world, accounting for two-thirds of the domestic market and international market 1/4; optoelectronic devices accounted for about 60% of domestic market share. On the one hand relatively high optical fiber and cable production level of automation will help accelerate the company’s return to work the complex production process; on the other hand for the optical module products, although 2020 is a bumper year 5G network construction, butDue to large-scale network construction has not yet entered the construction phase, a limited impact on the epidemic 5G network construction, business resumption postponed the resumption of production caused by the impact might be to switch to a single part of the order. · Panel. In Wuhan, including BOE, TCL (Huaxing power) and Shenzhen Tianma panel, including the layout of the companies have invested tens of billions. With more automation equipment, these companies can basically ensure the normal production and operation, including Wuhan plant, including around the plant to ensure production lines run from the impact of the epidemic. But the LCD module plant requires a certain labor, the other due to logistics and customs, but also involves the issue of the shortage of material and increased costs. It might be downstream of the consumer electronics industry some impact. · Storage semiconductors, including three fab: Yangtze storage, Wuhan Xinxin, Wuhan Hong core. Where the pipeline before the program after two closed city by a special declaration of membership, making the chip normal shipping, operating normally. The Wuhan Hong VeriSilicon planned admission of the first device in the second quarter, probably because of the epidemic slightly delayed progress. However, due to the high degree of automation, these companies are basically to ensure normal production and operation, the impact is small. Trade impact of the new crown pneumonia after public health emergencies (PHEIC) was identified by WHO (WHO) is of international concern, some overseas countries in terms of flow of Chinese workers make strict restrictions, many overseas Chinese airline to suspend flights flights, but so far not been involved in restricting trade in goods level. If the epidemic was effectively controlled in February, the epidemic identify high probability will be concentrated in Hubei Province, will be relatively limited impact on trade. If the epidemic continues, the Guangdong and Zhejiang province trade are likely to become infected areas, while expanding the scope of the epidemic will have a direct impact on domestic exports because of trade restrictions. In the case where there are many uncertain factors still do not have much predictive reference value, we can only give optimistic, pessimistic and three neutral judges for the long-term trend of China’s manufacturing output in accordance with the length of the duration of the epidemic. The main difference is concentrated in the short-term (2020-2021), and consistent long-term direction. Chinese manufacturing remains the better long-term driving force of the epidemic will not be disturbed. · Optimistic: the end of February is substantially complete return to work – the overall impact of machinery and equipment manufacturing for a quarter less than 0.5%, the impact on industrial added value is less than 1%; · Neutral: 4 substantially complete return to work early, small parts of the epidemic is still in stalemate , part labor intensiveEnterprise still certain embodiments set control – Effect of a machinery equipment and second quarters of 0.5% to 1%, the impact on industrial added value is less than 1% -2%; – pessimistic: epidemic continues to spread, a considerable part of April manufacturing companies can not return to work – impact on the machinery and equipment manufacturing is greater than 1%, the impact on industrial added value of greater than 2%;
in addition, we predicted based on digital neutral, also roughly summarizes the main manufacturing industry the extent of the impact of the epidemic (see figure below). According to transportation control measures, the current control of the most serious of four provinces to strictly control the degree of pine were Hubei, Zhejiang, Henan, Guangdong. From the perspective of industrial added value
CONTROL ENGINEERING China Copyright , automobile manufacturing, chemical manufacturing, railway, shipbuilding, metal products in Hubei Province accounted for a higher value added weights. Guangdong Province computer, communications and other electronic equipment manufacturing, electrical machinery and equipment manufacturing, automobile manufacturing high proportion. Zhejiang electrical machinery and equipment manufacturing, high chemical manufacturing, textiles, general equipment, computers, communications and other electronic equipment manufacturing accounted for. The Henan Province is a major labor export province, a large proportion of the province’s primary industry. This Spring Festival holiday for China as a whole, it is a special pause button pressed for 2 weeks. The impact of China’s economy and manufacturing, not in this short two weeks after the adoption of digital reflected; also depends entirely on the follow-up to control the effect of the epidemic. Within the next few weeks, with the gradual expansion of the normal order of life, we can observe different states in different sectors of the recovery area, it can also have the prospect of China 2020 manufacturing a clearer and more detailed forecast. We will be analyzed for the automotive, logistics, engineering machinery, electronics, including the related key industries, and to explore the impact on the industry caused and possible coping strategies.