Under the energy reform, the correlation between profits and manufacturing investment is weak, and we need to focus on the marginal changes of industrial policies. We believe that the dual carbon vision development goal has triggered the structural transformation at both ends of China’s supply and demand. The correlation between profits and investment of industrial enterprises is not strong, and profits are not suitable to be used as the main index for predicting manufacturing investment. Through empirical analysis, we find that the profit data of Industrial Enterprises above Designated Size since 2021 are weakly correlated with manufacturing investment on the whole. However, from historical experience, the cumulative growth rate of profits of Industrial Enterprises above designated size is about one year ahead of the cumulative growth rate of manufacturing investment. The reason is that the driving force of capital expenditure in manufacturing industry is to expand production capacity, which depends on the high outlook of economic fundamentals in a macro sense.
We emphasize that the follow-up should focus on the poor expectation of manufacturing investment contained in the industrial policy adjustment, including not only cross industry and cross field capital expenditure, but also reconstruction and expansion investment in the industry. Based on this framework, we judge that the overall technological transformation is strong during the 14th Five Year Plan period, and the average annual growth rate will reach more than 10%. Since the second half of 2021, China’s supply side reform has entered a new stage. The reform of production factors with new energy as the core drives the comprehensive reconstruction of manufacturing industry, which will bring incremental investment in machinery, plant and equipment.
First, the fluctuation of profit is the superposition result of endogenous and exogenous. The decline of profit caused by external factors does not directly affect capital expenditure. Taking 2021 as an example, the profits of the middle and lower reaches of the manufacturing industry are eroded by the sharp rise of production costs. The contradiction between lack of core, cabinet, power and labor is difficult to be fundamentally solved, and the profitability of the manufacturing industry continues to weaken. However, according to our calculation, the operating income profit margin of Industrial Enterprises above Designated Size shows a significant negative correlation with manufacturing investment. This is reflected in the weakening of profits, but the manufacturing investment shows strong toughness and sustainability. The core lies in the fact that market players have more choices to switch their main business tracks, forming a physical amount of investment across industrial boundaries and industrial chains.
Second, medium and long-term loans in manufacturing industry are important credit carriers to provide financing facilities for investment. In 2021, the balance of medium and long-term loans in the manufacturing industry increased by 31.8% year-on-year, 20.2 percentage points higher than the growth rate of various loans. In the whole year, new manufacturing loans increased by 1.67 trillion yuan, an increase of 300.5 billion yuan year-on-year. Among them, the growth rate of medium and long-term loans in high-tech manufacturing industry was 32.8%, with an increase of 364.3 billion yuan in the whole year. We believe that from the perspective of the actual investment direction derived from credit, China’s commercial banks have increased medium and long-term credit for advanced manufacturing, strategic emerging industries and industrial chain supply chain, focused on increasing credit for equipment renewal and technological transformation of traditional manufacturing industries, and the risk tolerance has also been improved.
Third, endogenous financing is no longer the main channel of manufacturing investment. China’s direct financing system provides more capital supplement for manufacturing industry. Since the establishment of the science and innovation board, equity financing has made a significant contribution to the capital expenditure of the manufacturing industry. From international experience, direct financing will play an important role in four basic fields: key basic materials, core basic parts (components), advanced basic technology and industrial technology. According to our calculation, in 2021 (calculated according to the online issuance date), the IPO Financing of computer, communication and other electronic equipment manufacturing industry (classified by the industry of CSRC) is 68.874 billion yuan, the additional issuance financing is 126324 billion yuan, the allotment financing is 1.155 billion yuan, and the convertible bond financing is 18.699 billion yuan. Then look at the electrical machinery and equipment manufacturing industry (classified by the industry of the CSRC). In 2021, IPO Financing was 41.482 billion yuan, additional issuance financing was 56.001 billion yuan and convertible bond financing was 17.757 billion yuan.
The work plan of the chain length system requires strengthening the chain to supplement the chain, and the policy guides the investment in technological transformation to become the driving force of the manufacturing industry
Many places in China have focused on the deployment of special actions to strengthen and supplement the manufacturing chain, so as to drive the development and growth of industrial clusters with chain owners. In the face of a series of neck problems, China’s chain leader system work plan implements the mode of “one industrial chain, one municipal leader, one special work class and one set of work plan”, and government leaders serve as the chain leader of the industrial chain to promote the smooth operation of all links of the industrial chain. Considering that most manufacturing market players adopt continuous production mode, once there are problems in raw material supply and middleware transportation, they will be forced to reduce production capacity. The outbreak of covid-19 pneumonia in 2020 further magnified the vulnerability of the global industrial chain, increased transportation costs, and significantly increased the breakpoints and blocking points of the supply chain. Strengthening and supplementing the chain has become the main focus of industrial policy.
We judge that technological transformation investment has the characteristics of less land, short construction period, quick effect and good benefit, which is an important support for expanding effective investment in the process of strengthening the chain and supplementing the chain. In terms of connotation, technological transformation investment is an investment activity for manufacturing enterprises to adopt new technologies, new processes, new equipment and new materials to transform and improve existing facilities, process conditions and production services, eliminate backward production capacity and realize connotative development. The key direction of the new round of technological transformation of the manufacturing industry is high-end, intelligent and green. The latest version of the investment guide for technological transformation and upgrading of industrial enterprises lists the national key technological transformation fields, including 12 industries such as electronic information, machinery, automobile, ship, civil aviation and aerospace, steel, non-ferrous metals, building materials, petrochemical and chemical industry, biomedicine, light industry and textile.
We believe that the main direction of technological transformation is intellectualization and greening, and promote the industry to move towards medium and high-end. As an investment method that relies on incremental investment to guide stock adjustment, technological transformation investment can effectively support capacity expansion, promote the development of new energy and intelligence, and improve the quality and efficiency of manufacturing industry through equipment and machine renewal.
The reconstruction of industrial base driven by new energy and intelligence has become the core factor of manufacturing investment
The reconstruction of industrial foundation will drive the profound changes in the investment behavior of enterprises. The capital expenditure of enterprises will no longer be confined to the profit of the original industry, but will be promoted by the trend of industrial transformation to a greater extent. The profit of the original industry is no longer the core driving factor of enterprise capital expenditure. Our previous report pointed out that the core drivers of current manufacturing investment come from two aspects. First, the supply side of the manufacturing industry makes up for weaknesses, which is mainly reflected in strengthening the chain and supplementing the chain in the manufacturing industry. Taking the chain length system as the starting point, the government participates in the coordination and derives a large amount of manufacturing investment (for details, please refer to the previous report “the chain length system is a new mechanism for strengthening the chain and supplementing the chain”). The second is the reconstruction of industrial foundation in the process of economic structure transformation, which is mainly reflected in the “two transformation” of industry, namely, industrial new energy and industrial intelligence, which respectively correspond to the two major regulatory waves in the world: industrial new energy mainly corresponds to carbon neutralization and industrial intelligence mainly corresponds to antitrust.
Industrial new energy will lead to the comprehensive reconstruction of the industrial system and drive cross industry investment in traditional industries
Industrial new energy industrialization is the process of industrial structure reform following the industrialization of new energy. It refers to the deep integration of new energy and various fields of economy and society, promote the reform of energy production and consumption, drive the new energy of the whole industrial chain, achieve the goal of carbon peak and carbon neutralization, and form a new form of economic and social development based on new energy consumption. This process will lead to the overall reconstruction of the manufacturing industry and even the industrial system.
First, under the wave of carbon neutralization, the cross industry transformation of traditional industries cuts into the new energy track, which belongs to the significant adjustment of industrial direction. Second, the new energy transformation of traditional industries under the original industrial framework belongs to the slight adjustment of industrial direction. Typical cases, such as the traditional building materials industry with high carbon emission, and the gradual development of prefabricated buildings and building materials recycling under the guidance of carbon neutralization (for details, please refer to the previous report “enabling, energy saving, production capacity, three levels of construction engineering industry to help new energy +”.
Third, traditional industries have become a part of the new energy industry chain and began to increase capital expenditure or directly transform new energy, which belongs to the endogenous adjustment of industrial structure. Typical cases include the chemical industry. After the rapid development of the installed capacity of the photovoltaic industry, photovoltaic glass has driven a large number of soda ash demand in the chemical industry. It is conservatively predicted that China’s new photovoltaic installed capacity will drive the annual demand of soda ash by more than one million tons in 2025 (for details, please refer to the previous report “innovation and change” of the chemical industry in the context of new energy “; In addition, some previous chemical enterprises also participated in the transformation of new energy industry.
Industrial intelligence takes industrial digitization as the prerequisite and derives various medium and long-term investment needs
Industrial intelligence refers to the use of digital technology to connect scattered or isolated equipment, products, producers and enterprises in the form of industrial chain and value chain to form linkage development. Industrial digitization is the basis of industrial intellectualization, and full digitization is the premise of intellectualization. On the whole, high-tech manufacturing industry has established a central role in the process of industrial intelligence. From January to February 2022, the investment in high-tech manufacturing industry increased by 42.7% year-on-year, 20.5 percentage points faster than that in 2021. Among them, the investment in electronic and communication equipment manufacturing increased by 50.3%, the investment in medical equipment and instrument manufacturing increased by 41.2%, and the investment in pharmaceutical manufacturing increased by 27.2%.
Intellectualization is a slow variable with high technical barriers and strong industrial relevance. The Ministry of industry and information technology issued the development plan for the deep integration of informatization and industrialization in the 14th five year plan. It is proposed that by 2025, the digital popularization rate of enterprise operation and management will reach 80%, the popularization rate of digital R & D and design tools will reach 85%, and the NC rate of key processes will reach 68%. This means a deeper integration with the manufacturing industry and a higher level of artificial intelligence. We suggest that industrial smart hardware, smart Siasun Robot&Automation Co.Ltd(300024) , smart connected vehicles, smart ships, UAVs, smart wearable devices, smart homes and other fields are expected to form a large amount of capital expenditure.
We emphasize again that although industrial intelligence is a slow variable with high barriers, under its catalysis and spillover effect, the manufacturing investment in 2022 is most likely to be much higher than the market expectation, and the annual growth rate is expected to reach about 11.1%. During the 14th Five Year Plan period, manufacturing investment is no longer a pro cyclical variable, but has become the core support of economic growth under the action of industrial intelligence.
Risk warning: covid-19 epidemic spread beyond expectations; Macro policy withdrawal is inconsistent with the pace of steady growth; The adjustment of epidemic prevention and control policies exceeded expectations; New risks appear in the process of dealing with hidden debt risks by local governments.
