◎ Deng Yali, President of China Rubber Industry Association
On March 24-27, President Deng Yali gave a speech titled Deepen Supply-side Structural Reform, and Strive to Improve Quality & Efficiency of Rubber Industry Operation at the “Fourth Session of the Ninth China Rubber Industry Association (CRIA) Director (and Managing Director) Enlarged Meeting & 2019 China Rubber Conference” held by CRIA in Guangzhou. Deng Yali briefly reviewed the development history and great achievements of rubber industry in the 40th anniversary of Reform and Opening up, and introduced the basic situation of rubber industry’s economic operation in 2018. In addition, based on the current changes and characteristics of domestic and international situations, she also analyzed the development environment for China’s rubber industry, and put forward the overall requirements and key tasks for rubber industry in 2019.
In 2018, it was the 40th anniversary of Reform and Opening up. Reform and Opening up has injected unprecedented momentum and vitality into the development of rubber industry. Also thanks to the tremendous opportunities brought about by the rapid development of national economy, China’s rubber industry has developed rapidly at unprecedented speed, breadth and depth.
In the past 40 years, the scale of rubber industry has grown rapidly. The sales revenue of rubber product has increased by 321 times and the total profit of it has increased by 70 times. The total output of tire, cycle tire, rubber pipe & belt and various rubber products has increased by several tens to hundreds of times. At the same time, global industrial chain and value chain of rubber industry have been created, in which rubber material, carbon black, auxiliary and framework material are closely connected with technology, equipment, market, etc. Economies of various countries and various types are integrated, interdependent, symbiotic, mutually beneficial and win-win. In the past 40 years, the economic structure of rubber industry has undergone major changes, and scientific and technological achievements have emerged in large numbers. The concept of green development has been deeply rooted in the hearts of people, and brilliance has bloomed in intelligence and internationalization development.
Ⅰ. Basic Situation of Rubber Industry’s Economic Operation in 2018
In 2018, under the complicated domestic and international environment, the economic operation of China’s rubber industry maintained a steady development trend, but some major indicators changed, which deserved attention.
Firstly, the economic operation of rubber industry was stable with slowdown and reduction. The growth rate was from high to low. It showed a trend of vibratory fall after rise, and the growth rate narrowed considerably compared with the previous year.
The total industrial output value (year-on-year, the same below) of enterprises counted by CRIA was 6.11%, with a decrease of 5.12 percentage points; the sales revenue increased by 5.72%, with a decrease of 9.27 percentage points; and the export delivery value increased by 7.37%, with a decrease of 10.96 percentage points.
Thereinto, some of the industries saw a large decrease: the sales revenue of tire industry increased by 1.22%, with a decrease of 12.03 percentage points; the sales revenue of latex product increased by 1.14%, with a decrease of 10.15 percentage points; and the output value, output, sales revenue and export indicator of rubber footwear industry all experienced negative growth.
Secondly, the output of major products increased, but the number of products with declined output increased. The national tire output showed negative growth for the first time in 20 years.
Among the 46 major products closely monitored by CRIA, there were 24 kinds of products with an increase in output, accounting for 52%; and 25 kinds of products with a year-on-year level-off or decline, accounting for 54%, with 11 kinds more than the previous year.
According to CRIA’s statistics, in 2018, the total output of automobile tires in China fell by 0.76%, and it was the first negative growth in 20 years. Hereinto, the output of radial tire decreased by 0.65%, that of bias tire decreased by 2.5%, and the radializaiton rate was 94%. Among the radial tire, the output of all-steel tire increased by 1.53%, and that of semi-steel tire decreased by 1.24%.
Thirdly, economic benefit increased, but the inter-industry and inter-enterprise differentiation was obvious.
In 2018, enterprises counted by CRIA achieved a profit and tax increase of 7.88%, a profit growth of 11.71% and a profit margin of sales revenue of 5.41%, with an increase of 0.27 percentage points. However, the development between industries was not balanced. The sales profit rate of rubber pipe & belt, rubber product, rubber auxiliary and carbon black industries was close to or reached the national average level of manufacturing industry. That of tire, cycle tire, etc. was less than 50% of it. The differentiation between enterprises was serious. Common situation in various industries was that profits were concentrated in leading enterprises, showing a trend that the strong got stronger. The number of loss-making enterprises counted by CRIA has increased by 7.50%, and the amount of loss has increased by 31.49%.
Fourthly, the export was basically stable, and the growth rate narrowed sharply compared with the previous year.
In 2018, the export delivery value of member enterprises increased by 7.37%, with a decrease of 10.96 percentage points. Hereinto, the export delivery volume of tire increased by 4.03%, and the export delivery value increased by 5.03%, respectively decreased by 5.36 and 12.36 percentage points. The export growth rates of carbon black and auxiliary industry were higher than those of the previous year.
In 2018, the national tire export volume counted by Customs increased by 2.16%, with a decrease of 0.53 percentage points; and the export value increased by 6.8%, with a decrease of 3 percentage points. Hereinto, the quantity of semi-steel tire exported to the U.S. decreased by 17.6%, and the value decreased by 14.9%; the quantity of all-steel tire exported to the EU decreased by 48%, and the value decreased by 44%.
Ⅱ. Deepen Supply-side Structural Reform and Adhere to New Development Concept in Entire Industry, and Significant Progress Has Been Made in Various Tasks
Firstly, structural adjustment was deepened, excess capacity was resolved, and high quality development was promoted.
In 2018, the structural adjustment of entire rubber industry made great progress. Tire enterprises such as Doublestar, Triangle, Double Coin, Wanli, Guizhou Tyre, Zhongce, Linglong, Aeolus, etc. successively eliminated backward production capacity by 50% to 60%. According to incomplete statistics, in tire industry, backward production capacity of about 39 million units has been eliminated in the past one year. Tires are undergoing a rapid transformation in the direction of tubeless, wide section, large rim, abrasion resistance, wet skid resistance and low noise.
In 2018, a number of enterprises in various rubber industries were affected by environmental protection, cost and capital flow, and exited, which had a positive impact on the resolution of excess capacity. Enterprises with advantage of scale and strength on technological R&D gained more market opportunities. Excess capacity gradually withdrew, and concentration of the industry continuously improved. Market share of low-end products gradually reduced, and that of middle and high-end products continued expanding. Quality and brand gradually become the main means of competition. Advantageous enterprises’ role on leading the industry to transform, upgrade, innovate and develop was further enhanced.
Secondly, energy conservation and environmental protection levels of the industry were improved significantly, and green development was deepened.
In 2018, enterprises have done a lot of effective work in green development and environmental governance. The investment in environmental governance was increased, and the treatment effects on waste gas and waste water were obvious. Energy efficiency, water efficiency and pollutant emission in production process of key enterprises reached the standard, effectively reducing environmental protection pressure and promoting the green development of the industry. The energy consumption per 10,000 Yuan of tire industrial added value decreased by 6.5% (the first three quarters); the standard coal consumption per 10,000 Yuan of output value of 10 key cycle tire enterprises decreased by 10% on average; and the comprehensive energy consumption per 10,000 Yuan of carbon black output value was 2.764 tons of standard coal, decreasing by 17.90%.
Green development was deepened, and more enterprises focused on green design, green technology and green supply chain throughout the entire production process. A group of enterprises invested in creating green factories and green manufacturing demonstration projects. The development of high-performance green tires was accelerated, and the tire labeling system was continuously promoted. At present, 51 domestic and foreign-funded tire enterprises have applied for green tire labels to CRIA. Among them, 26 enterprises have completed label applications, and enterprises have obtained 149 labels, promoting the green development of product upgrades.
Thirdly, steadily push forward “informatization and industrialization” integration and intelligent manufacturing.
Following after Sentury, Aeolus, Sailun, Doublestar and Triangle that started “informatization and industrialization” integration and intelligent manufacturing earlier, Sentury (Thailand), Hefei Wanli, Double Coin (Thailand), etc. have built tire factories with larger scale and higher level of intelligentialize. The homogeneity of tire quality, production efficiency & effect, energy consumption and emission control on exhaust gas have been improved significantly, and labor employment has fallen sharply. The intelligent manufacturing of leading enterprises in pipe & belt, product, auxiliary and other industries has steadily advanced.
Fourthly, advantageous enterprises accelerated global layout, and international operations have been steadily carried out.
Doublestar Group has completed a significant international acquisition of South Korea’s Kumho Tire. Vietnamese factory of Sailun and Thai factories of Linglong, Zhongce, Sentury and Double Coin had double-digit growth in capacity release; Guizhou Tyre in Vietnam, Linglong in Serbia, Triangle Tyre in the U.S., Jiangsu General, Prinx Chengshan in Thailand, etc. have entered a substan-tive phase. Xingda, Quechen Silicon, Himile and other supporting enterprises have also embarked on the road of internationalized operation.
Through “going global”, enterprises have realized production in sales area, expanded new markets and achieved internationalized development. They have also avoided trade frictions and continuously enhanced the influence and competitiveness of Chinese brands in international market.
Ⅲ. Current Changes and Characteristics of Situations
In the Central Economic Work Conference, it pointed out that China’s development will still be and chronically be in an important period of strategic opportunity. The world faces a big change never met in a century, in which “danger” and “opportunity” coexist. Rubber industry must closely follow the new connotation of strategic opportunity and recognize the situation at home and abroad.
1. In the International Aspect
The world political and economic structure has been profoundly adjusted, the international environment has become more complicated, and the challenges have become more severe. Today, the world is undergoing major development, major change, and major adjustment. The new scientific and technological revolution and industrial revolution are deepened continuously, and the competition for commanding heights in the future has become more and more fierce. The world economy as a whole maintains growth, but the deep-seated impact of the crisis has not yet been eliminated. The transition with traditional economic growth drivers being replaced by new ones has not yet been completed, and the accumulation of various risks has been accelerated. The growth of world economy has slowed down, protectionism and unilateralism have intensified, international bulk commodity prices have fluctuated drastically, instability and uncertainty have increased significantly, and external imported risks have risen. Their impacts on the implementation of China’s Nation Strengthening Strategy and the development of rubber industry cannot be underestimated, and it is necessary to enhance the awareness of unexpected development.
2. In the Domestic Aspect
In 2019, it is a crucial year for the completion of building a moderately prosperous society in all aspects. The national economy will continue being generally stable and move in a positive direction, and China’s economy will maintain a growth rate of 6% to 6.5%, which is also high among the major economies in the world.
In the Government Work Report made by Premier Li Keqiang in the National People’s Congress, it proposed that in this year, effective investment will be reasonably expanded, and the implementation of a number of key projects will be accelerated. 800 Billion Yuan of railway investment and 1.8 Trillion Yuan of highway & water way investment will be completed. A number of major water conservancy projects will also be started, the planning and construction of Sichuan-Tibet Railway will be accelerated, investment will be increased in infrastructures such as inter-city transportation, logistics, municipal administration, disaster prevention, civil and general aviation, and the construction of a new generation of information infrastructure will be strengthened. 577.6 Billion Yuan is included in the central government budget for investment of this year, with an increase of 40 Billion Yuan on last year, promoting the formation of a strong domestic market and continuously releasing the potential of domestic demand. Give full play to the basic role of consumption and the key role of investment, stabilize domestic effective demand, and provide strong support for the smooth operation of economy.
Economic development’s demand for rubber products will continue being stable overall, and China is still the world’s largest rubber consumer market. At present, the low-speed growth of automobiles is a fall after arise following beforehand overdraft of consumption. Although the overall market of automobiles will not experience significant increase in 2019, there is still much room for development in the market.
3. In the Industry Aspect
The transformation & upgrading of the industry has entered a tough period, with more difficulties and more serious tasks. Firstly, the situation of overplus on configuration has not been fundamentally changed. The price war still exists, and disorderly competition still continues. Secondly, Sino-US trade frictions and multi-national trade barriers continue occurring, making the internationalization of enterprises even worse. Thirdly, enterprises face severe challenges in environmental protection, safe production and labor employment. Fourthly, the problem of shortage of funds and talents has become more and more prominent. Fifthly, the issue of import tariffs on natural rubber, etc. has not been resolved yet.
Ⅳ. Overall Requirements and Key Tasks for Rubber Industry in 2019
The overall requirements for industry work in 2019 are to further deepen the supply-side structural reform, strive to consolidate the adjustment results, adhere to green development, focus on “operation stabilizing, quality improving, cost reducing and efficiency improving”, and strive to improve the quality and efficiency of the industry. The following tasks should be focused on:
Firstly, continue promoting the supply-side structural reform, and strive to maintain the smooth operation of the industry.
Secondly, continue working hard to improve enterprises’ ability to innovate, and make new breakthroughs in promoting the industry to accelerate transformation & upgrading.
Thirdly, adhere to green development and continue fighting the uphill battle for pollution prevention and control.
Fourthly, adhere to the deep integration of “informatization and industrialization” and develop intelligent manufacturing.
Fifthly, pay attention to the dynamics of international trade friction and actively prepare for them.
Sixthly, deepen international cooperation and continue promoting the construction of the “Belt and Road”.
