Wang Xiaoguang: Slower economic growth may affect the automotive and parts industry

Core tips:

This year is the first year of the Twelfth Five-Year Plan, with a good start. GDP growth in the first quarter was 9.7%, showing a rapid growth trend. However, can this growth rate be sustained throughout the 12th Five-Year Period? As China's economy continues to grow at a high rate for 30 consecutive years, will there be adjustments in the future, and how large will the adjustment be? During the 12th Five-Year Plan period, in the face of various changes that may occur in the Chinese economy and adjustments that will be made, how will China's auto industry respond and where will auto parts companies go? On April 21st, the famous economist Wang Xiaoguang published on the 3rd Global Parts Summit organized by Gasgolux.com.cn and published the report on the trend and environment of the 12th Five-Year Macro-economy and its possible impact on the future auto industry. The keynote speech on “The Impact of the Twelve Five Economic Policy Environment on the Automotive Industry”.

Automobile industry is an important factor in maintaining China's economic stability

During the 12th Five-Year Plan period, the economic growth rate will show a trend of rising from high to low, and the current economic growth rate will remain at around 10%. However, it is unlikely that such high-speed growth will continue in the future, and the growth rate will slow down significantly.

The economic growth rate has slowed down, consumer demand has dropped significantly, and export demand has also been declining in the future. It is only that this downward trend is not yet obvious, so the domestic economy has maintained a relatively high growth rate. In addition, due to price considerations, the country has taken corresponding measures to maintain growth, so the current high growth will continue for one or two years. However, in the future, China's economy will surely be adjusted, and its growth rate will drop from 10% to around 8%.

However, the auto industry has a certain degree of independence and has its own independent cycle of movement. Generally, it is a cycle of three and a half years. Therefore, the quality of China’s macroeconomy cannot directly determine the development of the auto industry.

At the end of 2001, China joined the World Trade Organization. In 2002 and 2003, China's automobile industry suffered blowouts for two consecutive years. However, at the time of China's macroeconomic growth in 2004, the automobile industry made one adjustment and sales volume declined. It began to rise again in 2005, continued to rise in 2006 and 2007, and adjusted again in 2008, among which the adjustment was most violent during the financial crisis. In 2009 and 2010, high growth was maintained and adjustments were again faced this year. The auto industry has always followed its own rules and has no inevitable relationship with the quality of the macro economy. On the contrary, the auto industry is an indispensable factor in maintaining China's economic stability. With the rapid growth of the auto industry, it will accelerate the advent of the Chinese consumer era.

In addition, in the future our country's growth space will be smaller than in the past, but in the adjustment of economic structure, such as the merger and reorganization of the industry, this space is expanding, which will bring new opportunities for the automotive industry.

The readjustment of the economic structure will prompt the pace of adjustment of the automobile industry structure, and promote the automobile industry to become bigger and stronger through mergers and acquisitions among enterprises.

Parts companies to seize the second golden decade of the automotive industry

China's economy has sustained high growth for 30 years, and it is likely that it will undergo a relatively deep adjustment afterwards.

In the past, China’s development model has achieved a series of successes, and it has now reached the level of middle-income countries. However, this long-term development model is facing challenges. The 12th Five-Year Plan will accelerate the transformation of development methods as a plan. The emphasis is on the adjustment of real estate, foreign trade, and demand structure.

All along, a large part of the high growth in China's investment is based on the real estate bubble economy. This will inevitably bring about many hidden troubles. The auto industry is also following suit, under the guise of being an industry, striving for the support of the land and policies, and investing the money in the speculation of real estate to earn huge profits.

What is more, in the past, the dependence of foreign companies on foreign investment and foreign trade was too high. However, this financial crisis has sounded the alarm and the external environment is not stable. Enterprises should also look beyond China and continue to expand domestic demand and improve the competitiveness of the industry.

During the 12th Five-Year Plan period, the country’s first step in formulating economic restructuring plans was to adjust the demand structure, further expand the variety of consumption, and release consumer potential. Among them, optimizing the automobile consumption structure is particularly critical. The second is to adjust the industrial structure. In 2010, China’s auto production reached 18 million, making it the undisputed world’s largest auto market. In the next step, China will advance to the goal of a powerful automobile country and strive to cultivate one or two or three world-class automobile enterprises in two to three years.

At the same time, domestic companies are also facing the challenges of the international environment. Frequent outbreaks of global problems - food, security, energy crisis, ecological crisis, etc. will affect the company's exports. With the rapid rise in international oil prices, the cost pressure on domestic companies will be further increased.

In addition, China must guard against the middle-income trap that emerged in Latin American and Southeast Asian countries. The auto industry plays an especially important role. During the 12th Five-Year Period, it is not only necessary to achieve an increase in car sales. What is more important is to create an international competitive advantage for the Chinese auto industry.

In the face of challenges and possible adjustments, domestic companies must seize opportunities for development. After China's accession to the WTO, it has ushered in a golden decade for the development of the auto industry. Now after a period of adjustment, it is estimated that it will enter the second golden period. In the future, Chinese autos will continue to grow for more than a decade, and the final saturation volume may reach 600 million.

Carification is an inevitable trend of future development. With the advent of the automotive era, it will fundamentally change our consumption patterns. The car will also develop in the direction of compaction, that is, to produce a small, energy-efficient car.

For the development of Chinese parts companies I would like to give a few suggestions:

First, China’s parts and components companies have not yet formed a world-class competitive advantage. The key is that they have not formed a strong vehicle company. Only by first establishing a global vehicle company with a global brand status can a strong industrial chain system be established. Thereby a more effective integration of the supply chain will be implemented to further promote the rapid development of spare parts companies;

Secondly, for the parts and components companies themselves, they should make full use of such a development opportunity as the rapid growth of China's auto market, large-scale and industrialization, and develop rapidly under the active support of national policies;

Third, increase investment in R&D, and work with domestic research institutions and scholars to formulate an effective industrial development strategy.

Brief introduction: Wang Xiaoguang, a well-known economist, former director of the Development Strategy and Planning Research Office of the National Institute of Development and Reform, and a professor of the current National School of Administration. The professional research field is the macroeconomic situation analysis and economic development strategy research, including real estate, automobiles, regional economy, and urban development.