Auto-Tire Cross-border Development Summit - Analysis concerning Impacts of Economic Trend and Auto Environment on Tire Market in 2016 was held on Dec. 16 in Beijing.
Zhang Wenkui, deputy director and Researcher of the Enterprise Institute, Development Research Center of the State Council, participated in the event.
In his keynote speech, Zhang elaborated the impacts of supply-side and demand-side on China's future economy.
China's supply-side reform mainly focuses on de-capacity, de-leverage, de-stocking, cutting costs, and making up for the deficiencies.
Governments' decision of de-capacity based on one of their judgments: severe overcapacity.
In general, once the capacity utilization of an industry falls down to or below 70%, it is considered as an industry with severe overcapacity; if the capacity utilization is below 80%, it is also believed as an obvious overcapacity.
The average capacity utilization of the tire industry over the past two years was below 70%, many localities included tire industry in those for de-capacity, Shandong province is the most active one.
Zhang believed that with respect to the data in the past, the prosperity of some markets came just after governments' enforcement of the de-capacity policy.
It shows that whether it is an industry with overcapacity depends more on market demand rather than administrative measures.
Therefore, Zhang reckoned that the economic recovery in 2016 is real and the basic reason is the improvement in the demand-side, such as real estate, auto, and export-oriented industries.
But it doesn't mean the improvement in demand will continue. It is unlikely to see demand expansion again due to a few uncertainties.
Nevertheless, structural, phased opportunities still exist, such as manufacturing industrial transformation and upgrade, and high-tech industry. Enterprises should look for and exploit these opportunities by themselves.
