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China industrial production

Summary

23 Oct 2013.

As of Sep, year-over-year growth in industrial production was reported at 10.2%. If the figure is accurate, it shows growth that is quite low for recent history in China, but still impossibly high for a sustainable trend. There are doubts about its accuracy, when compared with PMI and electricity use.

Graph

23 Oct 2013. Data through Sep 2013.

Highlights

Background

  • This is a value added measure.
  • Historical data are given only for the year-over-year change. The press releases also sometimes give month-to-month change. News sources that graph or mention a level are deducing it themselves.
  • Based on the sectoral data presented, the index covers mining, manufacturing and utilities, but not construction.

Sources

See also

Clippings below were used in the construction of this page

Chinese manufacturers moving up the food chain

8 Mar 2007. FT p11.

“Now China's manufacturing miracle is entering a second phase, as producers start to drive aggressively up-market. Exports of aircraft parts, ships, microchips and cars all grew by about 70% last year, more than four times faster than traditional exports such as shoes and clothing.”

China industrial production - deduced level

11 Nov 2009. Econompicdata.

http://econompicdata.blogspot.com/2009/11/china-is-ripping-bears-are-smoking-dope.html

“China is Ripping… Bears are Smoking Dope”

A good overview on excess capacity

22 Dec 2009. Project Syndicate.

http://www.project-syndicate.org/commentary/deweaver2/English

“China’s Excess-Capacity Nightmare. Mark DeWeaver”

“Back in 1958, the year of China’s ill-fated “Great Leap Forward,” Chairman Mao had big plans for the steel industry. While production had been just over five million tons in 1957, he expected the country to catch up with or even surpass the United States by 1962, producing 80-100 million tons per year, and to reach 700 million tons per year by the mid-1970’s, making China the undisputed world leader. All this was to be accomplished using small “backyard steel furnaces” operated by ordinary people with no particular technical expertise.

Today, Mao’s dream of catching up with the rest of the world has been realized, albeit a bit behind schedule, not only in steel making, where annual capacity has reached 660 million tons, but in many other sectors as well. In 2008, China ranked first in steel (about half of world production), cement (also about half), aluminum (about 40%), and glass (31%), to take just a few examples. The country topped the US in auto production in 2009, and remains second only to South Korea in shipbuilding, with 36% of global capacity.

For Beijing’s central planners, however, the size of China’s industrial base has become a cause for alarm rather than celebration. In a document approved by the State Council on September 26, the National Development and Reform Commission (NDRC) warned of serious excess capacity in a wide variety of sectors. (The State Council, which includes the premier, vice premiers, and heads of ministries and commissions, is China’s highest executive authority.)

Based on the NDRC’s figures, 2008 capacity utilization rates were just 76% for steel, 75% for cement, 73% for aluminum, 88% for flat glass, 40% for methanol, and 20% for poly-crystalline silicon (a key raw material for solar cells). The current project pipeline also implies less than 50% utilization for wind-power equipment manufacturers in 2010.

Excess capacity has been a priority for the State Council since 2005, when it issued industry-by-industry restrictions on new projects and targets for shutting down inefficient production. Since that time, however, the situation has in many cases only gotten worse. The problem is that much of the so-called “blind” and “redundant” investment that Beijing would like to eliminate has the strong support of local governments, whose primary concern is with generating GDP growth in their jurisdictions, regardless of whether the means of achieving it make any economic sense.

Consider cement production, where, according to the China Cement Association, 38% of capacity consists of “shaft” kilns. These have been obsolete in most of the rest of the world for over a century, and accounted for less than 3% of production even in 1957, when most of China’s cement plants were imports from Eastern Europe. Nowadays, however, shaft kilns are a favorite of local governments because they can be built cheaply and quickly and generate growth and employment. Achieving economies of scale and lessening environmental impacts simply are not priorities.

A similar situation exists in the steel industry, where the central government has made repeated unsuccessful attempts to close small furnaces. In 2006, for example, the NDRC produced a list of plants that were required to cease operations by the end of the following year. As the deadline approached in December 2007, a correspondent from Mysteel , a leading local source of information on the sector, visited a number of these mills to see first-hand how they were progressing with the government-mandated dismantling of their equipment.

What he found was a great example of how any such program is likely to work in practice. One site was still operating 24 hours a day; in others production had been temporarily halted until the deadline passed. In only a very few cases had any machinery actually been removed.

Local officials and managers had a variety of reasons for not complying with the NDRC’s order. Some expected to expand their plants so that they would no longer be counted as inefficient – a stratagem explicitly prohibited by the regulations. Where facilities were privately owned, it was felt, perhaps not unreasonably, that removing assets would violate China’s property-rights law. One formerly state-run enterprise was being operated under a 2001 lease specifying that no workers could be laid off for the next ten years. And there were also jurisdictions that had canceled the licenses of the operators in question, so that, as one regulator put it, they simply “didn’t exist.”

China ’s excess-capacity problem reveals a serious defect in its “socialist market economy.” In many industries, neither market forces nor central planning are strong enough to bring about the “creative destruction” of inefficient producers. As a result, the dream of catching up with the developed countries has to a surprising extent been realized much as Mao imagined – by lower-level cadres using small-scale technology.

If simply leading the world in output is the goal, the Chairman’s vision has been resoundingly vindicated. But if product quality, environmental protection, and economic efficiency are important as well, this state of affairs is little short of nightmarish.”

Background from a National Bureau of Statistics monthly report

9 Sep 2011. China National Bureau of Statistics.

http://www.stats.gov.cn/english/newsandcomingevents/t20110909_402753263.htm

“Industrial Production Operation in August 2011”

“Annotations:

1. Explanation of Indicator.

Growth rate of value added of the industrial enterprises: also known as industrial growth rate, which is used to reflect a certain period of increase or decrease in volume of industrial production indicators of the degree of change. With this indicator can determine the short-term trend of the industrial economy of operation, the extent of the economic boom, also the important reference and basis for formulation and adjustment of economic policies, and implementation of macroeconomic adjustment and control.

Sales ratio: refers to sale value and industrial output value, which reflecting the situation between production and sales of industrial products.

Export delivery value: refers to the foreign trade department of industrial enterprises or self-run (commission) exports (including sold in Hong Kong, Macao and Taiwan), with the price of foreign exchange settlement of product value, and foreign samples, materials processing, component assembly and compensation trade product value. In calculating the export delivery value, the transaction price of foreign exchange should be converted into RMB.

Daily product output: the total production of the total value added of the industrial enterprises above designated size in the current month divided by number of days in the month.

The year-on-year growth rate of product output: as industrial enterprises above designated size range will be some changes each year, according to the regulations of NBS, the data in the same period of previous year were required when enterprises submit monthly data. Hence, the year-on-year growth rate of product output was calculated by the current total value added of the industrial enterprises above designated size divided by the data submitted at the same time period.

2. Statistical Coverage.

From 2011 on, the standard starting point of industrial enterprises above designated size was adjusted to 20 million yuan of annual revenue from primary business, the former one was 5 million yuan.

3. Data Collection.

The reports of industrial enterprises above designated size is conducted with complete survey on a monthly basis (Not report for January). ”