China’s home appliance industry has maintained an overall healthy performance in the first half of 2017, with revenue of 804.6 billion RMB and profit of 50.48 billion RMB, posting a year-on-year growth rate of 16.02% in sales and 9.63% in profit.
1. Performance of China’s home appliance industry in H1
1.1 Domestic sales
White goods sector has seen an exceptional rise in air conditioner sector, a small rise in washing machine and a flat market performance of refrigerator and freezer in H1 2017.
Statistics from China Market Monitor shows that, for this period, air conditioner sector has witnessed a year-on-year rise of 26.3% in retail sales volume and 31.9% in retail sales thanks to the active destocking in 2016, the booming housing market and the early arrival of hot days. Washing machine sector has seen its retail sales volume grow by 8.2% year-on-year to post 17.89 million units in H1, and retail sales climbed by 10.3% year-on-year. Refrigerator and freezer sector has seen their retail sales volume increase by 1.69% and 2.08% year-on-year to register 16.37 million units and 1.46 million units in H1 respectively, and their retail sales grow by 4.81% and -0.37% year-on-year respectively.
Kitchen appliance has maintained a steady performance with a rise in both retail sales and retail sales volume in H1 2017, of which hoods and ranges have seen a year-on-year rise of 7.7% and 5.5% in retail sales volume and 12.42% and 11.34% in retail sales respectively.
Online sales, a highlight of China’s home appliance industry in the past 2016, continue this exciting momentum in 2017. Statistics from All View Cloud suggests that, the year-on-year growth rates of the online sales and sales volumes of sectors including air conditioners, refrigerators, washers, hoods, gas ranges and water heaters have exceed 50% as of June 2017, among which both indicators of air conditioner sector have surpassed 100%.
A number of categories have secured a slight rise in accumulative output in H1 2017. According to statistics from National Bureau of Statistics, the output of refrigerators and freezers in June registered 8.71 million units and 1.88 million units, a year-on-year rise of 1.76% and -3.82% respectively, while their accumulative outputs in H1 posted a year-on-year increase of 8.92% and -0.03% respectively. The output of air conditioners and washing machines has grown by 13.36% and 0.79% in June respectively and 17.95% and 3.55% year-on-year in H1 respectively.
Kitchen appliances perform differently. The output of gas water heater sector has posted a growth of 21.77% in June and 17.65% in H1year-on-year, while that of electric water heater sector a drop of 3.77% in June and a rise of 3.76% in H1year-on-year. Gas water heaters have surpassed electric water heaters to be the dominating category of water heater sector. The output of hoods has grown by 17% year-on-year to register 2.71 million units in June and climbed by 8.79% year-on-year in H1.
1.3 A continued growth of revenue yet a slower growth rate of profit
The revenue of China’s home appliance industry has surged by 16.02% year-on-year in H1, 2017. The profit in June posted a year-on-year growth of 12.44%.
China’s home appliance industry saw revenue of 804.6 billion RMB and profit of 50.4 billion RMB in H1, of which refrigeration sector saw a year-on-year growth of 10.3% in sales and a drop of 1.9% in profit, while air conditioner sector a year-on-year increase of 26.7% in sales and 13.4% in profit. The slower growth rate of profit in these two sectors is partly due to the rising cost of raw materials.
1.4 A slight rise of overall inventory
The inventories of most categories have grown slightly in H1. Enterprises stocked up at the beginning of the year to prepare themselves for the upcoming high season and the possible rise of cost, given the surge of raw material cost in the second half of 2016.
1.5 A slight increase in exports
Accumulative export value of the industry posted a record-setting high of 31.05 billion US dollars in H1 2017, a year-on-year rise of 7.7%, while the accumulative import value 1.93 billion US dollars, a year-on-year rise of 16.2%. The trade surplus has grown by 7.1% year-on-year to reach 29.11 billion US dollars in H1.
Large appliances, except for washing machines, all saw their export volume at a historic high. Refrigerators and freezers have seen an increase in both export value and volume. And the growth rate of the former is higher than the latter affected by aprice hike in Q4 2016. With a slight year-on-year rise of 1.7% in export value, air conditioner sector secured a historically high export volume in H1. Washing machines and microwave ovens both saw a rise in export volume yet a drop in export value.
With a rise in both export volume and value, portable appliances continued the rising momentum in Q1 thanks to a rise in kitchen appliances, room comfort appliances and floor care products. Room comfort and floor care appliances have seen a spike in growth rates of both export volume and value. Exported at a high price, the export value of vacuum cleaner grew faster than its export volume by more than 6%. Currently, all categories of portable appliances have secured a growth in export value in H1, 2017.
China’s home appliance industry witnessed a clear rise in exports to main economic regions of the world in H1 2017, of which those to Asia, Europe, and North America made a historically best performance. The growth rate of exports to Asia and Europe posted 7.8% and 12.6% respectively, 6.5% and 5.9% higher than that of last year respectively. Exports to Europe have grown by 1.1% to account for 24.6%, surpassing North America to be the largest importer. Exports to North America have reversed its negative growth and climbed by 2.4% to account for 23.4% of all, a year-on-year drop of 1.2%. With a recovery in bulk commodity price, the economy of Brazil and Argentina are picking up, and exports to Latin America have grown by 14.5%, up from the -21.8% last year. Exports to Africa continue to go down given the weak economic growth of most Africa countries especially the sub-Sahara ones.
Country wise, exports to the US has climbed by 0.2%. Given the depreciation of RMB, the actual growth is more than 5%. Exports to the EU have grown by 7.9%. Exports to Japan, Australia, Canada and the BRICS saw a recovery growth, of which exports to the BRICS have surged by 30.7%, the highest in the recent three years. Exports to ASEAN stay steady. And exports to the West Asia and the North Africa have grown by 5.4%, of which Saudi Arabia and North African countries saw a drop.
Exports to the BRICS divide, of which exports to Russia surged by 69.1%, to Brazil was below the historically normal level, to India increased by 12.4% while to South Africa fell by 13.2%. Besides, exports to Mexico raised by 11.5% while that to Argentina picked up by about 10% to post a drop of 10.3%.
Exports to the 65 countries along the “Belt and Road” have seen a clear rise with export value of 9.46 billion US dollars, a year-on-year rise of 11.7%, accounting for 30.5% globally a year-on-year rise of 1.2%. Among the 11 countries in East Asia, 18 in West Asia, 8 in South Asia, 5 in Central Asia, 7 of the Commonwealth of the Independent States, and 16 in East and Central Europe, the Commonwealth of the Independent States saw the fastest growth rate of 63.0%. Of the 8 countries in South Asia, India and Pakistan stood out with a growth rate of 12.4% and 34% respectively.
2. Influencing factors
2.1 Real estate market
China’s commodity housing market has been going up from May 2015 to June 2017. The accumulative sales area in H1 2017 posted 0.75 billion square meters, a year-on-year rise of 16.1%.
2.2 Price of bulk commodity
The price of bulk commodity in H1 2017 fell slightly compared to that in the end of 2016, but was still at a high level.
2.3 Exchange rates
As of July 17, the US dollar index fell by 9.1% from the beginning of the year, easing the pressure on multiple currencies including RMB, while the exchange rate of RMB against US dollars has climbed by 2.6% compared to the beginning of the year.
In the first half of 2017, the Federal Reserve has raised interest rates twice, and is expected to further raise it in the second half at a slower pace. Besides, its plan to shrink the balance sheet could drive the US dollars to rally, which might pose further pressure on currencies of many countries.
3. Outlook on the second half of 2017
3.1 Domestic market
Amid the government call of supply side reform, enterprises must continue their efforts in transformation and upgrading to identify new opportunities and new driving forces to bring more vitality to this industry.
3.2 Overseas market
With opportunities brought by the recovery of overseas markets and challenges posed by rising protectionism, we should keep a cautious yet optimistic attitude. China’s home appliance industry, with its complete industrial chain and an integral global position, is very likely to see a slight increase in exports in 2017.
3.3 Consumption upgrading
The swelling 80s’ and 90s’ generations and middle-class consumers are pushing the industry to go high-end, stylish and diversified. Chinese are looking for quality products.
Transformation and upgrading will continue to set the tone for the industry in 2017. Putting more weight on consumption upgrading and technological innovation, the ongoing quality reform is set to bring more vitality to China’s home appliance industry.
3.4 Manufacturing upgrading
The technological transformation is going deep to transform the industry from a scale expansion to an efficiency-driven expansion. With moves such as “human-to-machine” and smart manufacturing, the industry is changing from mass production to mass customization to usher into a new era of modern manufacturing.
3.5 Global strategy
After years of efforts, China-made products are gaining recognition across the world with its home grown brands such as Haier and Hisense standing strong internationally.
China’s home appliance industry is transforming from an export-dependent mode to a new mode. With Chinese government’s active diplomatic strategy in place, home appliance industry is exploring new paths of global expansion.