Entrepreneurs must lead tool companies to accelerate the pace of restructuring and promote transformation

Core Tip: According to the information currently available, it is predicted that the sales of domestic enterprises in this year (2014) will increase by about 5% year-on-year, and the sales performance of foreign-funded tools enterprises in China will continue to lead, with an increase of about 8%.

——Review and Thoughts on the Ups and Downs of China's Tool Market since 2012

Keynote speeches made on behalf of the Secretariat at the 7th General Assembly of the Tools Branch held in November 2014

China's tool market has experienced two years of severe storms, and this year, the beginning of the dawn, the sales performance in the first three quarters maintained a steady and rising trend. Figure 1 is a graph showing the year-on-year growth (decrease) of corporate sales revenue based on the monthly sales report data of the member companies of the tool club from January 2012 to September 2014. The enterprises participating in the monthly report account for about 40% of all members. Although the number is smaller, the composition is relatively stable. As a sample to analyze the trend of sales trends in the industry, the comparability is better and more timely. By the end of the quarter and at the end of the year, it will be revised based on the more representative quarterly and annual report data.

According to the information currently available, it is predicted that the sales of domestic enterprises will increase by about 5% year-on-year, and the sales performance of foreign-funded tools companies in China will continue to lead, with an increase of about 8%. According to preliminary forecasts, the size of the domestic tool market this year is about 35 billion yuan, of which 12.5 billion yuan is imported and 22.5 billion yuan is domestically produced, a total increase of about 6%. In terms of tool exports, tool exports have rebounded significantly this year, and the export of measuring tools has declined slightly.

Looking back at the ups and downs of the domestic tool market in the past three years, we can still sort out some veins and sum up some lessons.

First, the tool market contracted sharply in 2012. In fact, it was caused by the tightening monetary policy implemented by the government to curb inflation in 2011. However, due to the delay in transmission, the manufacturing industry has not noticed that the crisis is approaching, and the tool procurement contract is fulfilled as usual. feel good. Until the beginning of 2012, the OEM suddenly found that the order contract was greatly reduced, and emergency measures were taken to protect the cash flow, which greatly reduced the procurement of tools, and the imported tools were expensive and the orders were the first to bear the brunt. Foreign businessmen who have been hit by accidents have asked the association: What is the Chinese manufacturing industry? I changed my face overnight. But then the 2012 economic data released by the Bureau of Statistics is even more confusing: GDP increased by 7.8% over the previous year, and the added value of industrial enterprises above designated size increased by 10%. Although it has fallen back from the past, it still ranks among the best in the world. In such a macroeconomic context, it is difficult to explain from any angle why the tool market will dip by 15%. It now appears that the real reason for the sudden emergence of the tool market in the cold winter is the consequences of excessive government regulation in the economic transformation.

Second, in 2013, the sales situation of the tool industry really turned around. After the new government took office, it made major adjustments to China’s macroeconomic policies. In the face of economic downward pressure, the country did not introduce a large-scale stimulus plan again. The ups and downs of macroeconomic regulation and control, but clearly put forward that "reform and innovation is the inexhaustible motive force for development", a series of "combination boxing" centering on transforming government functions and vigorously promoting the reform of administrative management system, indicating the direction of reform. Premier Li Keqiang repeatedly stressed that in the face of the new situation and new changes in economic development, we must maintain a certain strength, calmly respond, comprehensively implement policies, and make precise efforts. In particular, we must focus on releasing the biggest dividend of reform, stimulating market vitality, and focusing on adjusting the economic structure. Transforming the way of development to organically combine reform and steady growth. These clear guidelines and policies have enabled the majority of enterprises to have an accurate expectation of the development prospects of China's economy and no longer wait and see. This correct policy orientation has had a huge impact on national manufacturing enterprises and tool companies. First, it has lost the illusion that the government is expected to rescue the market again. Secondly, a group of enterprises that are at the forefront of development recognize that the country’s macroeconomic development has entered a transformational track. Consciously accelerating the pace of development of “adjusting structure and promoting transformation”, these “leaders” actions have played a role in demonstrating and promoting industry enterprises. It should be pointed out that in 2013, the sales of tools began to stabilize and stabilized, which was achieved under the condition that the sales of low-end tools continued to decline. It shows that the high-end tools urgently needed by modern manufacturing industries have recovered their strong demand, and the pace of localization is also accelerating. The scale of import substitution has further expanded. The market situation has forced the combination of a number of tool companies to combine “stable growth” and “adjustment of structure”, and the low-end losses have been supplemented by high-end and achieved sustainable development. In this way, the product structure adjustment of the tool companies saw results in the beginning of 2013, and continued to move forward along this road in 2014, and it achieved good results in the industry's sales performance steady and rising. It is worth mentioning that in 2013, China's GDP increased by 7.7% year-on-year, and the added value of industrial enterprises above designated size increased by 9.7%. The growth rate of these indicators also dropped by 0.1 and 0.3 percentage points respectively compared with the previous year. It can be seen that the correct policy orientation and development strategy choices have a greater impact on the development of enterprises than on the fluctuation of GDP growth. This is another lesson we should learn.

Third, the development of the ups and downs of the tool market in the past three years is relatively clear from the industry as a whole. Generally speaking, the excessive tightening policy in 2012 led to a sharp dip; in 2013, the reform of the New Deal introduced sales to stabilize and stabilize; in 2014, the structure was strengthened. The adjustment has achieved steady growth. However, for every enterprise, the development is still very uneven. Although the overall market situation is improving this year, 40% of enterprises are still in the downward channel. Of course, the situation is different, and some are stepping up their adjustment structure, which is a temporary decline for the development reserve. However, there are still some companies that have low overall competitiveness and are worried about the new changes in the market. Why in the past period of rapid economic growth, the phenomenon of uneven development among enterprises was not as serious as it is today, because the driving force for development is different. In the past, the government was too involved in economic activities. Every round of economic prosperity basically relied on a new round of investment expansion supported by currency overshoot and unconventional expansion of credit. Under the strong demand, the products are in short supply regardless of the high-end and low-end. Almost all companies can take a ride and have a better life. However, the situation has undergone fundamental changes. China's economic development has entered a new normal. The government must change its functions, let enterprises return to the dominant position of the market, optimize the allocation of resources through competition, and implement the survival of the fittest. The protection role of the government will be greatly reduced. For each enterprise, the competitiveness construction must be mentioned as the primary position. Improving competitiveness will be the only guarantee for the survival and development of enterprises in the future. It’s gone forever. If the vast majority of enterprises in the tool industry can see the ruthless law of the market economy's survival of the fittest from the ups and downs of the market changes in the past three years, creating a sense of crisis and inspiring enterprising, then the toss of these years is worthwhile, and the progress of our industry is There is great hope.

Focus Analysis - This year most tool companies' sales have entered a rising channel, is it a short-lived, or a stable growth period?

This is a question that everyone cares about. Although no one has the ability to accurately predict the future, through the analysis and research of various related factors, it is still possible to make a relatively reasonable prediction of the future development trend, and help the enterprise to formulate its development strategy.

We believe that there are three positive factors that affect the growth of tool companies: first, the macroeconomic situation is stable, there is no ups and downs; second, the development of the tool market itself has room for growth; third, the market subject consciousness and sense of crisis of tool companies Enhance and develop through increased competitiveness. We now give our analysis and judgment on these three aspects.

1. China's macroeconomic situation will be stable and stable under the new normal

Premier Li Keqiang recently pointed out that "China's economic operation in the first three quarters is still in a reasonable range, and there have been some positive and profound trend changes. The structural optimization led by the service industry and the emergence of new business forms has become more apparent. The new development momentum that has been promoted by the reform has accelerated growth. The indicators of employment, energy conservation and consumption reduction are better than expected. At the same time, the external environment is still complex and volatile, and the downward pressure and difficulties affecting China's economic development are still not small. In short, we are full of confidence in the Chinese economy, and we are not taken lightly on the challenges we face. We will achieve the main tasks of the year with a spirit of hard work."

The most impressive sentence in this passage is "We are full of confidence in the Chinese economy and we are not taking it lightly." The central government is full of confidence in the development prospects. It is based on a full understanding of the difficulties and challenges and preparations for the response. It is not blindly optimistic. As early as February of this year, the media reported that the central government made important judgments on China's current economic situation, called "three-phase superposition" (economic growth rate shift period, structural adjustment pain period, early stimulus policy digestive period), this important judgment Explain that the central government has a clear understanding of the long-term accumulation of China's economic and social development, and the formation of intricate cross-over and superposition of various contradictions and problems, and its severe challenges to the current economic development, with a clear understanding and adequate preparations. To illustrate this point, the following are some of the major contradictions and challenges that have emerged in the economic development in the past two years. It shows how the central government responds with reform and innovation, carefully measures, treats both the symptoms and the root causes, and takes a long-term perspective. Resolving and deepening the reform measures will lay a better foundation for long-term development.

For example, last year's "6.20 financial risk" was ostensibly an incident, and the so-called "money shortage" reflected by the sudden rise in the interbank lending rate in Shanghai was essentially a long-term dependence on currency over-issuing and credit expansion. The financial risks accumulated by the rapid growth of investment and GDP have reached a critical point close to the outbreak. This is a typical contradiction caused by the "three-phase superposition". The current government has early warning and is included in the scope of control. After the incident, we saw that the central government had a good idea and responded quickly. The report said that Premier Li Keqiang personally handled the "one-day instruction" and arranged relevant leaders and department heads to hold intensive meetings to discuss countermeasures (including the central bank's selective provision of partial liquidity support), which quickly resolved the crisis. At the same time, we quickly followed up on in-depth reforms such as financial reform, fiscal and tax reform, interest rate and exchange rate marketization, and local debt control. At present, these reforms are still in the “time of progress”, and strive to solve the problems left by history fundamentally through the method of treating both the symptoms and the root causes and comprehensively applying policies.

Another example is that China's economy has been facing downward pressure in the past two years, which has aroused strong concern from all walks of life at home and abroad. It is still a major controversy. In this situation, the call for all parties to urge the government to introduce loose monetary policy is still endless. However, the central government has long seen that the essence of the current economic downturn is not the general cyclical fluctuations, but the accumulation and superposition of institutional, structural and policy contradictions for a long time, bringing together a systemic major contradiction, such as the productivity of many industries. Excess, the overall downturn in the real estate market and so on. To resolve this contradiction, one or two measures (such as loose monetary and fiscal policies) or one or two reforms (such as financial and fiscal reforms) can be effective, and must be comprehensively systematically applied. Therefore, at the Third Plenary Session of the 18th Central Committee, the "Decision on Comprehensively Deepening the Reform of Some Major Issues" was adopted, and the most comprehensive and perfect reform top-level design in history was firmly introduced to properly solve this comprehensive and systematic problem. Paved the way. The Fourth Plenary Session of the 18th CPC Central Committee this year passed the "Decision on Comprehensively Advancing Several Major Issues in Governing the Country According to Law", and further promoted comprehensive and deep reforms with good governance and good governance, which will make major reforms well-founded in law and enhance the implementation and popularization of reforms. Sex and authority.

The practice in the past two years proves that the new central leadership collective always points out the efforts and goals of the whole party and the whole nation at a critical moment, and insists on grasping the correct direction of China's economic and social development in a complicated and ever-changing environment at home and abroad. Breaking the waves. In the past two years, the vast number of tool companies have been correctly guided by the changes in the market storms and rains. The effective countermeasures of “adjusting the structure and promoting transformation” have finally turned the corner, and they feel the same.

Based on the above analysis, we believe that under the correct navigation of the new central leadership collective, we will be in a "dare to take responsibility, break through the difficulties", and solemnly declare "the determination of a strong man to break the wrist and fight back, promote structural reform and adjustment, and promote Under the strong leadership of the government, which is focused on reforming the whole system and focusing on solving the long-term problems, there is no suspense in the fact that China’s macroeconomic situation will be stable under the new normal. It should be emphasized that the stable and good can not be mechanically understood that China's GDP growth rate must remain above 7.5%. Premier Li Keqiang has repeatedly stressed that this year's goal is to grow by about 7.5%. This is very important. I hope everyone can remember, don't just remember 7.5%. A few percentage points of low or high zero are about 7.5%, which are within a reasonable range we have determined. The judgment that the economic operation is in a reasonable range is mainly based on the fact that economic growth can achieve relatively adequate employment and basic price stability. In the course of development, the income of residents is increased, the ecological environment is improved, and the quality and efficiency are continuously improved.

2. China's tool market has a stable growth space, providing a good development prospect for tool companies.

The practice in the past two years proves that in the context of the economic downturn, the demand for modern high-efficiency tools in China's manufacturing industry has not declined, but has increased. In the future, as the demographic dividend disappears and the relationship between labor supply and demand changes, the trend of high-end tool demand growth will be further strengthened, thus effectively promoting the process of China's manufacturing modernization. A large number of so-called "low-end" manufacturing enterprises engaged in export processing are gradually bidding farewell to the era of extensive management relying on cheap labor and national tax rebates to maintain their livelihood, and truly begin to enter a new era of survival and development by virtue of their own competitiveness. Under this new business structure that is in line with international standards, China's manufacturing enterprises will continue to improve their labor productivity by relying on innovation, and use their own strength to win a place in global competition and become sustainable in the new era. The development of new manufacturing enterprises, writing a historical chapter of China's manufacturing industry from large to strong.

In this struggle to continuously improve labor productivity, China's vast number of tool companies will work closely with manufacturing users to fight side by side and jointly accomplish the transformation of this "breaking into a butterfly." This process is also a development opportunity for our tool companies to “tune structure, promote transformation” and enter the high-end market. In other words, the transformation and upgrading of the manufacturing industry has opened up a brand new market space for the majority of tool companies, and the development prospects are very good. Our judgment on the market prospect is in line with the law of development of the manufacturing industry, and international counterparts agree.
Figure 3 shows the scale and growth rate of the tool market in major regions of the world published at the European Tooling Conference in May this year. It can be seen that Asia has the highest growth rate, reaching 2.5 times the global average. In addition, Figure 3 also reflects the impact of the turbulent turmoil in China's tool market over the past three years on the Asian and global tool market. The 2012 Asian and global tool sales declines sharply in 2012, which actually reflects the unique double bottoming phenomenon in the Chinese market. Because the European, American and Japanese tool markets slowly recovered after the financial crisis, although there was a slight fluctuation, there was no double bottoming. Figure 4 shows the steady rise of sales of OSG in Japan after the 2008 financial crisis, which roughly reflects the situation of tool companies in developed economies after the crisis. This also proves that the sharp decline in China's tool sales in 2012 is a consequence of domestic macroeconomic regulation and control, and has nothing to do with the international economic situation.

Figure 5 is also published in this year's European Tooling Conference, which covers the global consumption of the five major machine tool consumer countries in China, the United States, Germany, South Korea and Japan in 2013 (64% for machine tools and 68% for tools). In the picture, China's machine tool consumption ranks first in the world, which has been going on for several years. But a very interesting phenomenon is that all manufacturing countries have a higher proportion of tool consumption than machine tools in the world, but China's tool consumption is far less than the machine tool in the world.

Of course, this is just a relative ratio and it is not very intuitive. According to the information we have, the annual machine tool consumption of each major manufacturing country is roughly twice that of tool consumption, but China's machine tool consumption has reached 5-6 times of tool consumption. The difference between domestic and foreign is so great that there is only one possible explanation: the tools used in domestic manufacturing are cheap and inefficient. The vast number of tool companies must not only see the gap from the backward, but also the business opportunities that the latecomer advantage may bring.

3. Continuously improving competitiveness is the key to determining the development of the company

With the in-depth development of China's market-oriented reforms, the market is increasingly playing a decisive role in resource allocation, which means that competition among enterprises will intensify, and the law of survival of the fittest will have a role. The survival and development of enterprises will depend on improving competitiveness. Efforts and progress, the era of taking a ride in the government-run economy is gone forever.

How to improve the competitiveness of enterprises? Here are some views on some common issues.

(1) The development trend of the domestic tool market——The high-end market is expanding, and the low-end market is shrinking. Enterprises should accurately target the target market according to their own conditions and formulate corresponding development strategies.

For domestic tool companies, entering the high-end market is currently the main development opportunity. The reason is that the equipment of most domestic tool companies has improved significantly, close to the level of foreign-funded enterprises. The biggest gap lies in research and development and services. According to the theory of the latecomer advantage of economics, we have the opportunity to catch up. However, for most companies, it is difficult for R&D capabilities to catch up in the short term, and only adopt a transitional approach that is to create, digest, absorb and innovate. However, the service should not be sloppy. It must be followed up immediately, and it should be solved by learning and gradually improving. It should be emphasized that the service capability is a necessary condition for the tool enterprises to enter the modern manufacturing industry, and it is also a short-term for most of our enterprises, and must be made up as soon as possible.

It should also be noted that the so-called "high-end tool" is actually the abbreviation of modern high-efficiency tool. From the current stage of composition, it is based on cemented carbide tools, including high-performance high-speed steel tools and super-hard materials. Since the boundaries between “high-end” and “low-end” are actually difficult to accurately delineate, there is a common consensus in the industry that “import substitution” is high-end. Conversely, at this stage, companies enter the high-end tool market, and the goal is to achieve import substitution. It can be told that in recent years, tool companies that have established import substitution development goals have made remarkable progress.

As for the so-called "low-end knives", we must first exclude the inferior and low-priced export knives produced by township and village enterprises since the 1980s and 1990s. They were the products of the government's oversight of export products at that time, and they are gradually shrinking. Some products have been transferred to the domestic non-mainstream manufacturing market (such as metal decorative materials processing, etc.), so such tools should not be classified into the low-end tool category. The low-end tools used in the manufacturing industry here refer to the traditional high-speed steel standard tools as well as some common carbide standard tools and blades. In developed economies, low-end tools account for less than 30% of all tools, while China’s low-end tools still accounted for 70% at the beginning of this century, and have gradually fallen to 50%-60%. Neglected market. In recent years, under the efforts of a group of tool companies, through the hard work of deepening users, stabilizing quality, establishing credibility, and creating brands, the credibility of both domestic and international markets has gradually recovered. From a short-term perspective, China's tool exports are still dominated by low-end products, and the price/performance ratio is relatively competitive. Due to historical reasons, China's enterprises that produce traditional standard knives have strong strength and have been working in domestic and foreign markets for many years. There are not many opportunities for late-stage enterprises in this field.

(2) To develop high-end tools to avoid homogenization competition, resulting in consequences

In the past ten years, with the acceleration of the modernization of China's manufacturing industry, more and more tool companies have joined the ranks of expanding the market space of high-end tools. This development trend has changed the situation that the domestic high-end tool market is dominated by imported tools. Very gratifying. At the beginning of this century, only a small number of large state-owned enterprises entered the field, and most of them were small and medium-sized private enterprises. Naturally, they formed a development trend of matching size, demonstrating their own capabilities, clear targets, and replacing imports. They became the first batch of high-end tooling fields in China. The top players, multinational companies have also begun to feel the competitive pressure of domestic companies, although this pressure is not very strong.

In recent years, with the gradual shrinking of the traditional low-end tool market in China and the rapid expansion of the high-end tool market, the high-end tool industry has attracted more investors' attention, and a number of investors in the background of state-owned and private capital have increased their hardship. The investment in high-end knives for alloys ranges from hundreds of millions to more than one billion, with world-class equipment, and some employ high-paying professionals at home and abroad. From the perspective of manufacturing technology, the strength is indeed strong. In just a few years, some of these new projects have been completed and put into production, and they have entered the stage of sales promotion. However, from the information feedback from the market, the situation is somewhat abnormal. The performance of these new production capacity has a great impact on the domestic low-end cemented carbide tool market. Some small and medium-sized cemented carbide tool enterprises are facing fierce low-price competition. Some have also led to a broken capital chain and bankruptcy restructuring. In contrast, foreign companies have not felt that they have increased their competitors in China. Therefore, we speculate that most of the newly added capacity has not entered the high-end market, and it is competing with foreign-invested enterprises to replace imports.

In the past, high-speed steel cutters have experienced years of fierce competition caused by overcapacity. The industry has characterized this phenomenon as “low-end products, blind expansion, disorderly marketing, and more losses”. Now, the tool industry has seen similar signs in the field of high-end products, should be alert and take measures to avoid it. With such good equipment and technology, the tools produced should be high-end products. Why are they crowded into the low-end market and fall into homogenous competition? We believe that except for a few companies that neglect their profits due to institutional reasons, the problems of most companies are mainly in the areas of high-end tooling, in terms of production capacity, research and development capabilities (even if they are digesting and absorbing), market development and service capabilities. Failure to do a balanced development has affected the improvement of competitiveness. We have repeatedly stressed that the selling point in the low-end field is the tool (product quality), while the selling point in the high-end field is the solution, and the tool is only the carrier. Therefore, if enterprises only pay attention to expanding production capacity and not improving their R&D and service capabilities in time, they will not be able to occupy the high-end market. They can only release new capacity through the channels of low-end homogenization competition, thus causing multiple losses. The serious consequences of the injury. Fortunately, this homogenization competition phenomenon has not been produced for a long time, and it has not reached the seriousness of the high-speed steel cutters in the past. It is not too late. It is hoped that new tool companies entering this field must take care to prevent this from happening. The method is very simple. The development of high-end tools must be real. At present, it is necessary to clearly target the substitution of imports, not to be realistic, and to reduce the situation. Even if the development is slower, it is necessary to prevent the trap of entering low-price competition. The experience of many companies in the tool industry has shown that it is necessary to maintain a certain level of strength, overcome the difficulties in the early stages of development, and aim at the goal of import substitution, and will certainly usher in good prospects.

Having said that, we have completed the analysis of the three conditions that affect the stable growth of tool companies. The conclusion is: the first item, the macroeconomic situation is stable and there is no suspense; the second item is also positive for the domestic tool market prospects. Opinion; only the third item - the competitiveness of the enterprise is a variable. Therefore, the results are clear. Whether the enterprise can develop steadily and steadily, under the external conditions of stable macroeconomic environment and promising tool market, the key depends on whether the enterprise can enhance the market subject consciousness and continuously improve its competitiveness.

Entrepreneurs must take on the historical responsibility of leading the tool enterprises to accelerate the pace of “adjusting the structure and promoting transformation”

The above has been said so much. To sum up, the most important point is that entrepreneurs should take on the historical responsibility of leading the tool enterprises to accelerate the pace of “adjusting the structure and promoting transformation”. In the past two years, the reform and innovation advocated by the new central government has focused on improving the construction of market mechanisms. The most important change is the reorientation of the role of government and enterprises. The government wants to change its functions, and enterprises must restore their market status. What is the task of the market entity? It is to optimize resource allocation and promote economic development. What was previously arranged by the government is now mainly on the head of the enterprise. The burden is very heavy. Such a heavy burden will ultimately fall on the shoulders of the entrepreneur’s family, the entrepreneur.

It now appears that the reorientation or transformation of roles is not an easy task for governments and businesses. For example, the government has changed its functions, and the central government is determined to cancel. A large number of approvals have been cancelled or decentralized in the short term, and significant progress has been made. However, according to media reports, the Central Inspection Team visited the local authorities and found that many officials had problems such as “will not approve the approval”, “fascination with approval, and confusion over supervision”. After changing their functions, they did not know what to do and how to do it. In fact, it is not only the local government but also the central government that has this problem. For example, China is the biggest driver of global economic growth, but it has the world's lowest stock market. Is this the result of the CSRC's “fascination with approval and confusion for supervision”? It seems that there is still a long way to go to transform the function.

There are also many complicated factors in the transformation of the role of the enterprise. The restoration of the status of the market and the strengthening of competitiveness depend not only on whether the transformation of government functions is in place, but also on whether the market subject consciousness and independent efforts of the enterprises are in place. For state-owned holding companies, it is even more involved in breaking through some institutional constraints. The problem is more complicated and needs to be stepped forward step by step through deepening reforms.

Although the process of deepening reform will encounter numerous difficulties and challenges, we are convinced that the wheel of historical development cannot be stopped: the dominant position of enterprises in the market will surely be consolidated, and the decisive role of the market in resource allocation will inevitably strengthen. The law of survival of the fittest will definitely work. It must be noted that the major changes that are taking place in this series have raised the important role of Chinese entrepreneurs in economic development to an unprecedented height. They must take the lead in accelerating the transformation of China’s economic development. The important task of adjusting the structure and turning the way is to play a key role in leading the company's historical mission of “breaking into a butterfly” in the new round of sublimation of China's economy.

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