In 2006, the first year of the 11th Five-year plan, the building materials export value was as high as USD 12.935 billion, which advanced 32.6% from 2005, creating the record high again. Owing to the fruits the structural adjustment of the building material industry in recent years, the building materials export had increased continuously and rapidly. Meanwhile, a batch of leading enterprises (groups) became increasingly powerful, and was lucrative to push building material export to grow fast. The building materials export in 2006 were featured as follows,
1 Export increased steadily and the growth rate declined sharply
The building material exports increased by USD 10 billion net within five years, from USD 3.302 billion in the first year of the 10th Five-year Plan Period to USD 12.935 billion in the first year of the 11th Five-year Plan Period. The average annual growth rate of building materials exports reached 27.7% during the 10th Five-Year Plan period, and created a record high to 37.1% in 2005 but then fell by 4.5% in 2006.
Building Materials Export Value and Growth Rate, 2001-2006
2 Export Goods Structure got further optimized, and finished product exports accounted for 80%.
The structural adjustment of the building materials industry, the improvement of the technology and equipment level, and the transform of the production and operation mode of the enterprises all drive the enterprises to change the traditional expansive operation mode and pay more attention to the quality, brand and high value add. The export of cement and cement clinker, building and technology glass, glass fiber and products were all concentrated on the large and medium-sized enterprises, and the quality, grade and concentration were all comparatively high. The building-material mining products and finished products exports in 2006 were USD 2.73 billion and USD 10.204 billion, up 18.7% and 36.8% respectively compared to 2005. Among the 17 main export products with exports more than USD 100 million, there were only 2 kinds of mining products: diamond and fluorite, of which fluorite export value fell by 14.6% compared to 2005; there are 15 kinds of finished products, one more compared to 2005, i.e. preliminary processed glass. The export proportions of the mining products and preliminary processed products dropped year by year, yet the finished products and high value-add goods rose gradually. In 2006, the export value of finished products and high value-added products accounted for 80% of the total building material exports, up 2.5% over 2005.
3 The price of export goods rose steadily
The export price of the building materials had been rising slightly since 2003, and the export price indexes in 2006 grew 1.98% from 2005. The prices of 12 out of 17 goods with exports more than USD 100-million increased compared to 2005, except the granitic slabs, glass sheets, fiberglass fabrics, marble tiles and fluorite. Meanwhile, the export prices of ceramic tile, cement and cement clinker rose sharply compared to 2005, up 9.17%, 5.84% and 5.53% respectively. The export price of ceramic tile climbed to the ceiling since 2001and cement since 1998.
4 The international market of export goods expanded continuously, and the USA had become the largest export destination for China building materials.
The steady growth of the world economy provides China building materials with the favorable external environment. China building materials exported to 216 countries and regions in 2006, of which, 27 countries and regions achieved export value of over 100 million USD, increasing by 5 over 2005. Exports to U.S., Hong Kong and Japan exceeded USD one billion. Compared to 2005, the export value increased by USD 3.177 billion in 2006, 78% of which were generated from the countries and regions with exports over USD 100 million; and the international market of export goods continued to expand, which was mainly reflected by exports growth in the main countries and regions. The top five countries and regions by building materials export volume in 2006 were the USA, Hong Kong, Japan, South Korea and Belgium. Meanwhile, the export sum of the building material to the top five countries and regions amounted to USD 6.492 billion, accounting for 50.2% in total export.
Market Shares of Main Countries and Regions
5 The export growth pattern should be changed urgently.
Although the building materials export structure kept being optimized in 2006, the quality and grade of the export goods got improved continuously, yet, there were still some problems to be solved imperatively, for instance, the export growth pattern was still focused on speed and quantity instead of quality and performance; some export enterprises still depended on the cheap labor, resource consumption and preferential policies to win competition advantages; enterprises were lack of the core technology, independent intellectual property and brands; the export enterprises were excessive but not concentrated and relatively weak in defending market risk and participating in international competition; and exports of products with high technological content and value added were in a small proportion.
How to achieve the sustainable development of the building materials export, improve the comprehensive competitiveness of the export enterprises and change the export pattern are all the problems to be settled urgently.
Since the RMB exchange rate adjustment in Jul 2005, its exchange rate has been climbing slightly, and in May 2006, USD against RMB had broke 8 for the first time, and then fell to 7.81 on Dec 31, 2006. Strong RMB against USD means that equivalent RMB can exchange much more dollars for imports, which led to the import cost reduced but export product cost increased, thereby restricting the export. In the terms of the building materials, it promoted the increase of building materials import, and its import value amounted to USD 6.824 billion in 2006, up 23.3% compared to 2005. The import volume of the main import goods including marble and granite rough block increased by 37.2% and 20.1% respectively from 2005. Dampened by RMB appreciation, building materials export income decreased by RMB 2.8 billion over 2005, and its import spending dropped RMB 1.5 billion compared to 2005, of which spending on marble and granite rough block imports reduced by RMB 200 million. The RMB appreciation has both advantages and disadvantages to the building materials industry, so the opportunity and challenge coexisted. The building materials export enterprises should learn to use RMB exchange rate fluctuation to prevent the risks and win returns so as to reduce the disadvantages brought by RMB appreciation.
On Sep 14, 2006, Ministry of Finance, Development and Reform Committee, Ministry of Commerce, General Administration of Customs, and State Taxation Administration jointly issued Notice to adjust the export tax rebate rate, and the new policy has been officially implemented since Sep 15, 2006. According to the Notice, tax rebate policy was cancelled while exporting non-metal ore products, coal, natural gas, some preliminary timber products except for salt and cement.and the export tax rebate rates of ceramics & some of finished leather and cement & glass dropped to 8% and 11% respectively from 13%. During the tax rate adjustment, it called off 54 items of tax file numbers involved in export tax rebate of building materials industry, especially building stone processing industry. The exports of the 54 tax file numbers amounted to USD 2.42 billion in 2006, accounting for 18.7% of total building material exports that year.
The export tax rebate policy adjustment posed a great impact on the import & export companies with export tax rebate as main income sources while less impact on the building materials producers. The enterprises can balance the unfavorable influences brought by the export tax rebate by advancing technologies, strengthening internal management, saving energy & decreasing consumption, cutting down the cost and raising the price etc. In the long run, export tax rebate adjustment can spur building material producers to adjust & upgrade product structure, increase technological content, and allocate resources reasonably so as to shift competition pattern and decrease trade friction.
According to the forecast of International Monetary Fund (IMF), the global economy saw a strong growth momentum in 2006 and will be expected to grow 4.9% in 2007. The prospect of world economy is promising and encouraging: U.S. economy will keep continuously growing, the economy in euro area recovers, and Japan has rid out of the deflation on the whole, China is still the roll booster of the world economy increase, and the majority in Asia, Africa and Latin America continue to move forward. On the one hand, all the external favorable environments offer great potentials for China building materials export to remain developing steadily; on the other hand, due to the drive of domestic market, building materials grows so fast in production scale that it causes overcapacity and oversupply domestically, which pushes enterprises to go abroad to seek overseas markets. Both factors lead to China’s building material export to remain a rapid growth in 2007.
The building materials enterprises, especially the large powerful conglomerations, should grasp the favorable opportunities of steady growth of world economy, build up scientific concept of development, undertake the social responsibility they are supposed to, strengthen the international market research, make clear of the international market, and program price strategies properly. Meanwhile, they should accelerate the R & D on new products, strengthen the brand development and popularization, create own brands, develop in a differentiated way, enhance the comprehensive competitiveness of the export goods and boost building materials industry to move healthy and steady.
It is forecasted that building materials exports will amount to USD 16 billion in 2007, up 23% from 2006.