The year 2023 marks the tenth anniversary of the the Belt and Road Initiative. Up to now, China has conducted diplomatic activities with Iran, Saudi Arabia, Russia, France and other countries. The construction of the the Belt and Road is expected to accelerate. Under the resonance of the revaluation of central enterprises and the the Belt and Road Initiative, central enterprises in infrastructure, construction machinery and other fields not only have policy catalysis, but also have fundamental improvements. Relevant investment opportunities also deserve attention.

Positive policies for the 10th anniversary or industry themed opportunities that may be followed

According to data from the General Administration of Customs, exports (denominated in US dollars) increased by 14.8% year-on-year in March 2023, and decreased by 6.8% from January to February; Import decreased by 1.4%, with a decrease of 10.2% from January to February; The trade surplus is 88.19 billion US dollars. Whether viewed from a year-on-year, month on month, or two-year average year-on-year basis, exports in March were significantly stronger than expected.

The reason for this is that, on the one hand, from October last year to February this year, the epidemic and the return to hometown for the Chinese New Year have continued to suppress production capacity, but the supply side may have recovered well in March. On the other hand, the countries along the the Belt and Road have obvious export pulling effects on China, which is especially critical.

In March 2023, ASEAN's exports to China increased significantly by 4.1 percentage points year-on-year to 5.4%, significantly better than other economies. ASEAN countries have strong resilience in their economies, and manufacturing PMIs in Indonesia, Thailand, and the Philippines are still in the expansion range. In addition, ASEAN has a high demand for Chinese raw materials and production equipment, such as textiles, metal products, mechanical equipment, etc., reflecting the complementary relationship of the industrial chain. In addition, China's exports to Russia increased by 136.4% year-on-year in March, driving an overall export growth rate of 1.9 percentage points. China's exports to Africa increased by 46.5% year-on-year, and the overall export growth rate reached 1.9 percentage points. Under the background of interest rate hikes in Europe and the United States and the marginal weakening of economic momentum, the economies along the the Belt and Road have formed an important support for export data.

At present, the external environmental pressure is still great. It is of great significance to continue to promote the the Belt and Road. Jointly building the the Belt and Road has become a popular international public product and international cooperation platform. And 2023 marks the 10th anniversary of the proposal, and the third summit forum is expected to be held. It is expected that more policy benefits will be announced.

At the same time, since 2023, leaders from multiple countries have visited China, especially with the release of the Sino French joint statement, which clarifies that in order to achieve the common aspiration of low-carbon transformation of the energy system, the two countries will carry out practical cooperation in civilian nuclear energy and encourage the acceleration of energy and climate transformation. In particular, the French side will also attend the third summit forum this year.

The the Belt and Road will help promote China's economic transformation and upgrading, optimize the industrial structure, reduce the risk of overcapacity and foreign exchange, and achieve sustainable development. With the advent of intensive catalysis, related industry themed investment opportunities are worth paying attention to.

High frequency data improves the visibility of infrastructure, construction machinery, and other landscapes

To promote the high-quality development of the joint construction of the the Belt and Road, it is expected to strengthen the cooperation between central infrastructure enterprises, international engineering enterprises and countries along the line in the field of infrastructure construction. The number of investments and funds for major overseas projects is expected to continue to increase, improving the international influence of China's construction projects.

The data shows that the infrastructure industry is currently in a high prosperity period. From January to February, infrastructure investment (excluding electricity) increased by 9.0% year-on-year. Among them, investment in water conservancy management industry increased by 3.0%, investment in public facility management industry increased by 11.2%, investment in road transportation industry increased by 5.9%, and investment in railway transportation industry increased by 17.8%.

In March 2023, the PMI of the construction industry was 65.6%, a significant increase of 5.4 percentage points compared to the previous month. Infrastructure has continued to enhance the landscape of the construction industry. The business activity index of the construction industry in March was 65.6%, an increase of 5.4 percentage points compared to the previous month. It continued to climb from a high level and remained at a high level for three consecutive months in 2023.

In March 2023, China issued a total of 529.892 billion yuan of new special bonds, a year-on-year increase of 26.0%. As of March, the progress of issuing new special bonds in 2023 has reached around 35.7%, slightly higher than the same period last year (35.6%). The current situation of both the capital and project sides of infrastructure is performing well, and it is expected that the broad infrastructure investment in the second quarter will still maintain a relatively high growth rate of about 10%.

From the perspective of construction machinery closely related to infrastructure, according to the statistics of the Construction Machinery Industry Association, 25600 excavators of various types were sold nationwide in March, an increase of 19.2% compared to the previous month. Moreover, after years of layout, in 2022, China's exports of excavators to countries along the the Belt and Road will account for 40% of the total exports, and the export amount will account for 51% of the total amount.

From the equipment startup data, the operating hours of Komatsu China's excavator in March were 105.0 hours, with year-on-year/month on month increases of 4.0% and 40.0%, respectively. The data on the operating end showed a monthly recovery. With the implementation of optimization measures for real estate financing, the bottom-up effect of real estate and infrastructure is gradually emerging, which is expected to stimulate a rebound in operating rates and accelerate the recovery of the domestic market for construction machinery.

From the perspective of forward-looking indicators, non-financial enterprises added RMB 2.07 trillion in medium and long-term loans in March, a year-on-year increase of 53.9%; The average year-on-year growth rate of new RMB medium and long-term loans to non-financial enterprises in December was 58.3%, maintaining a positive growth rate for six consecutive months, and the growth rate gradually accelerated. With the continuous marginal improvement of funding, the prospects for industries such as infrastructure and construction machinery are promising.

With the successful completion of the three-year action of state-owned enterprise reform, the reform of state-owned enterprises in 2023 has entered a new stage, mainly emphasizing the creation and realization of value for state-owned enterprises. Since the Chairman of the China Securities Regulatory Commission proposed the Chinese characteristic valuation system last year, not only at the capital market level, but also the role of state-owned enterprises in economic development and industrial transformation has become prominent. The coordinated promotion of multiple departments shows how strong the policy momentum of central state-owned enterprise revaluation is.

In addition, in 2023, the State owned Assets Supervision and Administration Commission of the State Council began to pilot the "one profit five ratio" indicator system, improve the net return on assets and cash flow assessment weight, which will guide central infrastructure enterprises to continue to improve operating efficiency. Overall, the valuation level of central enterprises is significantly lower than that of other types of enterprises. Under the Chinese characteristic valuation system, measuring the value of enterprises requires full consideration of policy factors. In the future, with the promotion of policies, the value of central enterprises is expected to be reassessed, and the infrastructure and construction machinery industries may fully benefit. Editor/Xie Li