What Is Economic Inventory?

For destocking, CICC divides destocking into two categories, narrow stock destocking and broad stock destocking. The CICC report pointed out that the de-stocking in the narrow sense only refers to reducing the level of product inventory. For example, companies may reduce the inventory of raw materials, which may be realized quickly. In the broad sense, destocking, that is, the process of digesting excess capacity will not end soon. Excessive investment and insufficient consumption make digesting excess capacity longer and more painful than narrowly destocking.

Out of stock

In the economic upturn cycle, especially in 2006 and 2007, Chinese companies increased a large number of finished products or raw material inventory, and even expanded investment, due to various reasons such as rising expectations for raw material prices, good export conditions, and promising corporate profits. Purchase of machinery and equipment has greatly expanded production capacity.

In the second half of 2008, when the international and domestic macroeconomic situation turned sharply, these formed inventories. Only after digesting these inventories in 2009 can companies reorganize and move forward, and the economy can return to the track of growth.

narrow sense

The real estate industry sounds good to usher in the trumpet of inventory?

Real estate stocks on Wednesday showed a long-lost rise, and many market participants attributed it to the real estate industry's rumor of destocking, and a series of favorable policies are about to be ushered in the future.

"According to the current situation, the domestic real estate industry has a significant surplus, and a series of powerful policies must be adopted to accelerate the process of destocking the real estate industry. ^[1]

Eliminating inventory requires a multi-pronged approach

"In addition to the pressure to remove inventory from real estate, there are also pressures to remove inventory from traditional manufacturing industries such as automobile manufacturing and home appliance manufacturing."

Near the end of the year, "destocking" has become the key word for various industries, but it can also be seen that some industries have steadily advanced destocking. Industry online statistics show that the total output of air conditioners in November was 5.85 million units, a decrease of 28.38% year-on-year, and the sales volume was 5.71 million units, a decrease of 15.01% year-on-year.

Regarding how to resolve the pressure of destocking in various industries, Han Changji believes that first of all, it is necessary to increase sales efforts and adopt multiple marketing methods to increase product sales; secondly, companies should change their thinking and occupy the market by reducing costs through large-scale production. If it doesn't work, enterprises should use new technologies such as the Internet and big data to produce products that meet individual needs and directly interface with the market. As many products as the market needs, companies will produce as many products as possible to achieve inventory removal at the source.

"It takes a multi-pronged approach to resolve destocking.

The first is to reduce the financing cost of the real economy, revitalize the enterprise, and naturally reduce the pressure on destocking;

The second is de-administrative, which is conducive to the role of market regulation;

The third is to eliminate some outdated restrictive measures. "Appropriate inventory will help the industry and enterprises maintain a certain vitality. ^[2]