Under the background of a moderate domestic macroeconomic decline this year, corporate profitability will continue to decline for a certain period of time. Except for energy and non-ferrous metals, the prices of other upstream industrial products dropped significantly, so the cost pressures of downstream industries gradually eased, and profitability continued to rise. It is estimated that the profit growth of transportation equipment manufacturing industry will be 1.45 times, the power industry will increase by 38.5%, and the electronic communication industry will increase by 33.5%.
Corporate profits will not decline deeply
The current concerns about the macro economy are mainly due to the overcapacity problem in some industries caused by the “overheated†investment in the previous period. The analysis of the changes in the output gap shows that the excess production capacity is not serious as a whole, and it is only periodical and structural. The key is that total demand still maintains a rapid and steady growth momentum.
Another concern for the macro economy is the slowdown in the growth rate of corporate profits and the decrease in profit margins. It is clear that most of the fluctuations in profit growth come from fluctuations in interest expenses, and a small part comes from the stickiness of wages. In the next few years, the maintenance of low real interest rates will not result in a deep decline in corporate profitability. The observed slowdown in profit growth is only a normal adjustment of wealth distribution.
Through analysis, we can find that the real interest rate is a key policy variable. The lower level of real interest rates has increased the potential growth rate of the Chinese economy, stimulated the total demand and improved the profitability of enterprises, thereby further stimulating investment and increasing the potential level of the economy. In addition, the current economic growth mode is still extensive, and excessive economic growth leads to excessive use of resources, which is detrimental to the medium and long-term economic development. During the “Eleventh Five-Year Plan†period, the focus of economic development will shift from focusing only on the growth rate of GDP to the pursuit of sustainable economic development. The slow decline in the economic equilibrium growth rate, the adjustment of economic structure, and the improvement of the growth quality will be the major trends.
In the near term, the stabilization of interest rates is necessary to ensure total demand. With the possible adjustment of exchange rates, interest rates are less likely to increase. However, after 2007, whether it still continues to maintain its current fixed nominal interest rate should be a problem worthy of study.
Equipment manufacturing industry will develop rapidly
Under the background of better-than-expected macroeconomic conditions, there will be room for improvement in the industries that have overreacted to macroeconomic declines, such as iron and steel, building materials, and machinery.
The significant increase in investment in coal, electricity, oil, transportation and other bottleneck industries has led to the rapid development of related equipment manufacturing industries. The related metallurgy, mining equipment manufacturing, bearings, valve manufacturing, railway transportation equipment manufacturing, and shipbuilding industry continue Maintain high growth and rise in a period of time, especially in the power equipment manufacturing industry related to railway and shipbuilding and other transportation equipment industries and power grid construction. The rapid growth and structural evolution of industry will also drive the development of producer services, including financial, transportation, and IT related departments.
Leading industries such as autos and real estate will resume their upward trend after a period of adjustment, and the growth in the export of complete vehicles and parts is playing an increasingly important role in the growth of the auto industry.
For a period of time, investment will continue to be the main force driving China's economic growth, but the contribution of consumption to economic growth will gradually increase. In particular, many large and medium-sized cities in China have already achieved a level of income comparable to that of developed countries, and the consumption structure has rapidly increased. This is evident in the rapid growth in the consumption of real estate, automobiles, and high-end goods (luxury goods, artwork, etc.). It is worth noting that although the proportion of people who have reached this level of spending power is relatively low, it is already large in absolute terms and it is growing rapidly. With more balanced social development, the advancement of consumption structure in time and space will be smooth. Consumer-related services such as personal credit services, retail, medical care, entertainment and culture will gain a lot of room for development.
The rapid growth and structural evolution of industry will also drive the development of producer services, especially financial, transportation, IT and other related departments.
Corporate profits will not decline deeply
The current concerns about the macro economy are mainly due to the overcapacity problem in some industries caused by the “overheated†investment in the previous period. The analysis of the changes in the output gap shows that the excess production capacity is not serious as a whole, and it is only periodical and structural. The key is that total demand still maintains a rapid and steady growth momentum.
Another concern for the macro economy is the slowdown in the growth rate of corporate profits and the decrease in profit margins. It is clear that most of the fluctuations in profit growth come from fluctuations in interest expenses, and a small part comes from the stickiness of wages. In the next few years, the maintenance of low real interest rates will not result in a deep decline in corporate profitability. The observed slowdown in profit growth is only a normal adjustment of wealth distribution.
Through analysis, we can find that the real interest rate is a key policy variable. The lower level of real interest rates has increased the potential growth rate of the Chinese economy, stimulated the total demand and improved the profitability of enterprises, thereby further stimulating investment and increasing the potential level of the economy. In addition, the current economic growth mode is still extensive, and excessive economic growth leads to excessive use of resources, which is detrimental to the medium and long-term economic development. During the “Eleventh Five-Year Plan†period, the focus of economic development will shift from focusing only on the growth rate of GDP to the pursuit of sustainable economic development. The slow decline in the economic equilibrium growth rate, the adjustment of economic structure, and the improvement of the growth quality will be the major trends.
In the near term, the stabilization of interest rates is necessary to ensure total demand. With the possible adjustment of exchange rates, interest rates are less likely to increase. However, after 2007, whether it still continues to maintain its current fixed nominal interest rate should be a problem worthy of study.
Equipment manufacturing industry will develop rapidly
Under the background of better-than-expected macroeconomic conditions, there will be room for improvement in the industries that have overreacted to macroeconomic declines, such as iron and steel, building materials, and machinery.
The significant increase in investment in coal, electricity, oil, transportation and other bottleneck industries has led to the rapid development of related equipment manufacturing industries. The related metallurgy, mining equipment manufacturing, bearings, valve manufacturing, railway transportation equipment manufacturing, and shipbuilding industry continue Maintain high growth and rise in a period of time, especially in the power equipment manufacturing industry related to railway and shipbuilding and other transportation equipment industries and power grid construction. The rapid growth and structural evolution of industry will also drive the development of producer services, including financial, transportation, and IT related departments.
Leading industries such as autos and real estate will resume their upward trend after a period of adjustment, and the growth in the export of complete vehicles and parts is playing an increasingly important role in the growth of the auto industry.
For a period of time, investment will continue to be the main force driving China's economic growth, but the contribution of consumption to economic growth will gradually increase. In particular, many large and medium-sized cities in China have already achieved a level of income comparable to that of developed countries, and the consumption structure has rapidly increased. This is evident in the rapid growth in the consumption of real estate, automobiles, and high-end goods (luxury goods, artwork, etc.). It is worth noting that although the proportion of people who have reached this level of spending power is relatively low, it is already large in absolute terms and it is growing rapidly. With more balanced social development, the advancement of consumption structure in time and space will be smooth. Consumer-related services such as personal credit services, retail, medical care, entertainment and culture will gain a lot of room for development.
The rapid growth and structural evolution of industry will also drive the development of producer services, especially financial, transportation, IT and other related departments.
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