Report on China's Development of Production Material Market

2005-2006 Report on China's Development of Production Material Market was formally released on March 31, compiled mutually by MOFCOM Department of Market Operation Regulation and Research Institute of Market Economy of DRC.

　　The Report made a multi-layer and all-directional analysis on operation and supply and demand of China's production material in 2005 and the Tenth Five-Year Plan, predicted and estimated the tendency of market development in the Eleventh Five-Year Planning.

　　According to the Report, China entered into the period of industry and urbanization, rapid development of the Secondary industry drove up the growth of market requirement for production material. During the Tenth Five-Year Plan, sales of China's production material increased from RMB5.3 trillion in 2000 to RMB14.27 trillion in 2005 and the annual growth rate hit 15.6%, the period with the highest growth rate in the history. Under the guidance of national macro control measures in 2005, the national economy maintained a sustainable and faster development, investment in fixed assets amounted to RMB8.86 trillion and GNP RMB18.23 trillion, up by 25.7% and 9.9% respectively, industrial added value reached RMB7.26 trillion and import and export RMB1.42 trillion, up by 11.4% and 23.2% respectively. Profit of above-norm industrial enterprises was RMB1.4362 trillion, up by 22.6%, creating a favorable condition for further development of production material market. And the market made great achievements in 2005.

　　1, Total sales of production material amounted to RMB14.27 trillion, up by 16.2% compared with the previous year calculating at constant prices.

　　2, Market environment was improved remarkably, effectively restricting the overheated investment in steel, alumina and cement. Shortage of supply of production material like energy resource was relieved. And growth of dependence of main mineral products on foreign trade slowed down.

　　3, Price of production material market fell obviously and the general price level decreased from 13.6% in 2004 to 2.9% in 2005, relieving the pressure of inflation.

　　4, Reform of circulation industry obtained new progress, opening-up was further expedited, circulation became the key industry of foreign investment enterprises and a diversified pattern of market circulation formed.

　　5, The basic function of market to allocate recourses was further utilized, and allocation between international and domestic markets and resources was closer.

　　6, Modern circulation technology was applied and transformation of growth mode of circulation made new progress.

　　According to the analysis in the report that while developing, the production material market faced with some restrictive and unsteady factors:

　　1, Major basic industrial products had a conflict of surplus production capacities owing to structure of production, pressure of supply exceeding demand increased gradually.

　　2, Shortage of supply of production material such as energy resource and basic mineral products still existed.

　　3, Pricing of resources products was unreasonable, price reform of controlled products lagged behind, causing by which, the unfavorable influence was severe.

　　4, Change in supply and demand for major basic raw material at international market affected domestic market step by step, resulting from which, international trade frictions and disputes possibly increased, we should earnestly treat with and settle down properly them in the process of market progress.

　　Report pointed out that there were still many favorable conditions for production material market to develop external environment:

　　1, Global economy developed steadily, increase of international aggregate trade volume pushed forward the growth of China's foreign trade.

　　2, China was in the period of accelerating development of industrialization, urbanization, marketlization and internationalization, strategies of development of West China, Revitalizing Northeast China and Other Old Industrial Bases and expediting to build a new socialist countryside drove up the requirement for production material.

　　3, To realize sustainable and faster development of China's economy requested production material as the guarantee.

　　According to the development goal of the Eleventh Five-year Planning, it was predicted that GDP in 2006 would increase at a rate of about 9%.

　　According to prediction, production material market in 2006 will present the following 3 features: 1, Owing to the slowing down of investment and production of heavy industry, increase of both supply and demand at the market will fall to some extent. 2, General price level of production material market will maintain steady. 3, Supply and demand at the market will remain balanced.

　　The Report stressed that we should attach importance to 3 aspects in the process of market operation to push forward sustainable, healthy and steady development of production material market: 1, Should work better to keep supply and demand of the market balanced to realize consumption upgrade, urbanization and industrialization. 2, Should improve market system of production material through developing modern circulation mode. 3, Should enhance regulation construction of the market and build up a commercial credit system to push forward orderly development of the market.