Chinese Industrial Production Bifurcates As Growth Moves West

Top 5: Hainan, Yunnan, Hubei, Guizhou, Anhui. Bottom 5 (from bottom up): Shanghai, Shandong, Jilin, Tianjin, Tibet.

21st Century: 马达轰鸣工业增速分化：东部放慢中部坚挺

How to find new growth industries
The 21st Century Business Herald reporter learned that the slowdown of the national industry in the past few years was mainly due to the slowdown of the Northeast region, and then spread to the northwest region, and then spread to the North China region and the East China region. At present, the industrial development in the eastern region has slowed down and become a new feature.

Why is the industrial development in the eastern region the slowest?

This is because the industrial consumption characteristics of the eastern coastal areas are obvious, with the decline in demand for mobile phones, home appliances, automobiles, etc., coupled with the slowdown in residential consumption and the slowdown in household income. In the past few years, the demand for heavy industry in the Northeast has been reduced, which has led to a slowdown in the economy. However, the state has reduced production capacity for steel and coal, and the price of steel and coal in these areas has rebounded, which has given the economy a certain improvement.

Jiang Feitao, a researcher at the Institute of Industrial Science of the Chinese Academy of Social Sciences, pointed out that the eastern industry is now shifting to the central and western regions, and the central and western regions still have great development advantages.

“The land cost, labor costs, and cost of living in the eastern region have risen rapidly, which has led to the transfer of industrial low value-added industries to the central and western regions. This has become a law,” he said.

According to our understanding, many commodities have low demand in the east, but they are not the same in the Midwest. For example, in the case of automobiles, in addition to some growth in Zhejiang in the eastern region, other regions generally have a low growth rate in the first two months of this year, but production and sales in some areas in the central and western regions have grown rapidly.

For example, Henan's automobile production in January-February was 108,100 units, a year-on-year increase of 39.2%, and automobile consumption was 35.19 billion yuan, an increase of 7.5% year-on-year. This is in stark contrast to the negative growth of automobile production and sales in the country.

The slowdown in consumption of household appliances in the country is actually related to the slowdown in residential sales, especially in the east. In January-February, the sales area of ​​commercial housing in the eastern region was 54.37 million square meters, down 9.7% year-on-year. The decline was 4.7 percentage points higher than that in 2018; sales were 684.4 billion yuan, down 1.2%, and the annual growth in 2018 was 6.5%. In the first two months of this year, the sales area of ​​commercial housing in the central, western and northeast regions only fell by 0.6%, by 2.2%, or by 4.8%.

Liu Xuezhi believes that the eastern coastal areas are now facing rising costs, mainly due to rising house prices and land prices, which have led to the squeeze of the survival of enterprises with low added value. The economy in the eastern region needs to reduce its dependence on the secondary industry and gradually improve the tertiary industry. The proportion, from the industrial field alone, the eastern region should shift from low value-added industries to high value-added industries, such as improving product quality, product technical content, product R&D and design.

"In the eastern region, industries should expand their industrial chains, such as upgrading services and brand building. The western region should increase its revenue as soon as possible, digest industrial products, and then generate momentum for economic development," he said.