This year, the investment growth rate of real estate industry continued to slow down, sold area of commercial housing also dropped significantly, which brought huge pressure to the domestic air conditioning manufactures. In the first half of the year, by relying on high growth in national financial expenditure, along with investment in public infrastructure construction, the central air conditioner sector still maintained relatively satisfactory development momentum, but in the second half of the year it may face tremendous challenge.

SMM learned through survey that after entering August, manufacturers of copper tube for central air conditioner use faced tremendous pressure:

Firstly, competition pressure further intensified. Since the beginning of August, the new “Refrigeration year” of the air conditioner industry has begun, yet against the background of weakening domestic economy, enterprises of copper tubes for central air conditioner use experienced sharp reduction in the number of orders, the schedule of order volume of projects also shortened from the 2 years in previous years to the current half year. In order to obtain more orders, all major enterprises vied with each other to lower prices in bidding, which intensified industry competition pressure, SME enterprises struggled to eke out a living.

Secondly, public infrastructure construction lacks sustained momentum. In the first half of the year, high growth of central air conditioner sector is mainly attributed to high growth in national financial expenditure in the first half of the year, beginning from the second quarter, the government quickened the progress of financial expenditure, there was a period of concentrated spending. This results in the financial accumulated surplus of only 548.4 billion in the first half of the year, 339.3 billion less than that in the last year. The market is worried that after government purchase power was overdraft in advance, in the second half of the year there will be less balance available, and it will further become difficult to sustain public infrastructure construction in the second half of the year, and suppress demand for central air conditioners；

Thirdly, the performance of commercial real estate sector, which is another source of demand of central air conditioners, was unsatisfactory. According to data from the statistics bureau, total completion area of domestic office buildings from January to June is 9,803,100 sqm, totaling a growth rate of 14.0%, which marks a sharp decline from the figure of the same period last year of 30.2%, furthermore, total sales area in the first half of the year dropped by 12.6% than that of the same period last year, which will also suppress the late-stage demand for associated supporting equipment.

Finally, as the rate of bad accounts of domestic banks rose, the state government's anticorruption efforts intensified, many enterprises are facing pressure in cash flow, across China unfinished buildings began to emerge in many places, projects now under construction also have delayed construction schedule due to lack of funds. Fund pressure obstructed late-stage demand for central air conditioners.

In summary, under multiple constraints from bank, real estate and financial pressure, central air conditioner and supporting enterprises may have to face tremendous pressure in the second half of the year.