How can the agricultural machinery industry reach a higher level under the new normal

General Secretary Xi pointed out that China's economic operation has entered the “new normal”. What does the “new normal” mean? I think its meaning should be threefold: First, the new normal. China's economic development has reached a gear-shifting period. Over the past few decades, China's economy developed at high speed, with a growth rate approaching double digits, and it has now entered a period of medium-to-high-speed development. The gear-shifting period provides space for China's next round of reform and adjustment. Second, new opportunities. After many years of development, the time has come for adjusting the economic structure and industrial structure. In the past, economic development mainly relied on resource consumption, the labor dividend, and so on. Now the economic structure is shifting from mainly expanding incremental capacity to deep adjustment in which adjusting existing stock and creating advantageous incremental capacity coexist, and industries are transforming toward high-end, sustainable economic models. Such changes have brought us new opportunities. Third, new development. In the past our development relied on investment-driven growth; now new development must rely on innovation-driven growth.

Based on these three understandings, let me talk about the development of China's agricultural machinery industry.

The “new normal” of the agricultural machinery industry

The first is slowing growth. The ten years before 2012 were the “golden decade” of China's agricultural machinery industry, with average annual growth in sales revenue of about 20%. Starting in 2013 it declined, with growth of 16.31%. In 2014 it continued to decline, and by the end of October the growth rate was only 9%. Industrial added value also showed a declining trend. At present, the added value growth rate of the agricultural machinery industry is 8.5%, lower than the 10.3% growth value of the entire machinery industry and 4.3 percentage points lower than the same period last year for agricultural machinery. In 2013 the growth value of the agricultural machinery industry was higher than that of the entire machinery industry, and starting in 2014 it has been lower than the growth rate of the entire machinery industry.

The second is a sharp decline in the industry's profit margin. In previous years, the profit margin of the agricultural machinery industry grew very quickly, in some years even growing by about 20-30%; last year it fell to 9.6%, and this year the growth value of total profit is already negative, reaching about -4.99%. At the beginning of this century, the sales profit margin of the agricultural machinery industry was about 2%. After more than ten years of development, by 2012 it had reached 6.9%, close to the national machinery industry average profit margin of 7%. At present, the industry's profit margin is only 5.5%, down 1.4 percentage points from 2013. This is very unfavorable to the industry's sustainable development.

The third is a sharp decline in the output of major products. The output of key large and medium tractor enterprises fell by 16.92% in January-October 2014, and sales fell by 15.18%. Harvesting machinery was slightly better, with output of key enterprises falling by nearly 3.18% and sales rising slightly. Sales of wheat machines and rice machines fell sharply, and the growth in harvesting machinery sales was mainly driven by corn machines. Data show that wheat machines fell by 10.8%, rice machines fell by 24.6%, while corn machine sales grew by 33.5%. Other products, including agricultural implements, livestock products, and agricultural and sideline product machinery, were all in decline this year.

But overall, the development of the agricultural machinery industry is still progressing steadily, maintaining a 9% growth rate. There are still bright spots in the market, such as the rapid growth in corn machine production and sales, which is a remarkable achievement. The large-horsepower tractor market achieved certain growth, especially the 120-130 horsepower tractor market, which grew by more than 150%. This reflects that product structure adjustment is further deepening and has achieved results.

From the perspective of industry structure, long-term progress has also been made in structural adjustment. At the 2014 China International Agricultural Machinery Exhibition, it could be seen that the quality level of agricultural machinery products has greatly improved. New products such as large-horsepower tractors, large combine harvesters, and green feed machines also appeared on the market one after another. The product structure is more complete and reasonable.

In addition, enterprises' technological transformation has gradually strengthened. Although the total investment in the industry fell by more than ten percentage points from the 25% growth rate of previous years, overall, due to the accumulation of investment in earlier years, great progress was made in 2014 in technological transformation and equipment, especially in informatization construction, significantly improving product quality.

Therefore, from the above aspects, the current development trend of the agricultural machinery industry conforms to the judgment of the “new normal”. The growth rate has declined somewhat, but new progress has appeared in structural adjustment and good results have been achieved, with new development.

The “new opportunities” of the agricultural machinery industry

Overall, the adjustment of the economic structure and industrial structure has brought changes and new demand, and this is our “new opportunity”.

The first is the adjustment of the rural economic structure. The adjustment of the agricultural economic structure, the construction of a new economic system, the acceleration of large-scale production, and the construction of a socialized service system, this series of changes in the economic structure has brought opportunities.

The second is the adjustment of the agricultural industrial structure. Under the primary premise of ensuring food security, agriculture, forestry, animal husbandry, and sideline production must also develop comprehensively. In addition to grain, the meat industry such as meat, eggs, and milk is also an important component of ensuring the safety of agricultural products, and the market needs equipment for forestry and fruit farming, animal husbandry, fisheries, and livestock product processing machinery.

The third is the adjustment of the labor structure. With the accelerated development of the “four modernizations”, the full replacement of human labor by agricultural machinery is no longer a distant future, but will become a reality. Therefore, the market needs more varieties of agricultural machinery and equipment, and the task is arduous and the road is long.