Source: China Merchants Bank Research Institute Note: We use the key indicators of various industries to measure the prosperity of the industry. High scene bearing means that the growth rate of key indicators is above 10%, medium scene bearing means that the growth rate of key indicators is between 0% and 10%, and low scene bearing means that the growth rate of key indicators is negative. The arrow direction represents the growth rate change of key indicators. The upward direction represents a growth rate increase of more than 10%, the flat direction represents a growth rate change of - 10% -+10%, and the downward direction represents a growth rate decrease of more than 10%

Figure 98: Retail sales of major categories in household appliances industry

13.2 The decline of overseas demand suppresses exports, and the low base, exchange rate and maritime transport are alleviated. China US tariff policy is an important variable

Affected by multiple factors such as the decline of consumption subsidies in Europe and the United States, sea congestion and high base number, China's household appliance export growth has been under pressure since 2022. From January to June, China's household appliance export amount has dropped 7.2% year on year. At present, the European and American countries regard the suppression of inflation as the main objective of their economic policies, and there is a possibility of continued tightening of the subsequent monetary policies, which will restrain the demand for local durable consumer goods. We expect that the export of domestic household appliances may continue to show a negative growth trend in the second half of the year.

The relatively favorable factor is that the household appliance export market will enter a low base stage in the second half of the year, which will stabilize the decline in exports at the data level. At the same time, the rapid depreciation of the RMB against the US dollar has eased the pressure on the export of household appliances. In addition, the shortage of shipping capacity has also eased since 2021, and the profitability of export business is expected to rise with the decline of freight. In the current environment of serious inflation in the United States, the media reported that it is possible to cancel the punitive tariff policy against China for many years. If it is finally implemented, the price competitiveness of domestic household appliances will be significantly improved.

图100：人民币汇率

Figure 101: China Export Container Price Index

13.3 The price of raw materials has fallen, and the profitability of household appliance enterprises is expected to be restored

Since 2021, the prices of copper, aluminum, steel and plastic, the main raw materials in the household appliance industry, have continued to fluctuate at a high level. Although the household appliance enterprises transmit cost pressure to the downstream by raising prices, the rapid rise in the prices of raw materials still has a negative impact on the profitability of household appliance enterprises. However, since April this year, the price of raw materials has shown signs of falling back. By the end of June, the price had dropped by 11%, 16%, 28% and 15% from the peak of last year, which will help the profitability of household appliance enterprises to be restored in the second half of the year. White light, kitchen appliances and other household appliances benefit from the highly concentrated market competition pattern. The high selling price of the product has a strong ability to maintain after the price of raw materials drops. We expect that its repair elasticity will be stronger than that of small household appliances with fierce market competition.

14. Pig breeding: the bottom of pig cycle fluctuates, and cost and cash flow are the key

The average price of 2022H1 pig is about 14.1 yuan/kg, - 45% YoY and - 7% MoM. In the first four months of 2022, there will be an overall decline, while there will be two sharp rebounds in the middle and late April and the middle and late June respectively. As of July 1, the price of live pigs was about 20.2 yuan,+24% since this year.

In the middle and late April, the price of live pigs rebounded from a low of 12.5 yuan/kg by nearly 20% to 15 yuan/kg. We believe that the main reason is short-term supply disturbance rather than medium-term supply and demand improvement. Due to the tightening control of the COVID-19 in April and the pig embargo in Guangdong, the reduced efficiency of the supply chain led to the price increase of slaughtering enterprises in order to maintain the quantity, leading to the rise of pig prices. In the middle and late June, the price of live pigs rebounded from 15.2 yuan/kg by nearly 27% to 20.2 yuan/kg. The direct reason is that this winter's epidemic led to a tight supply in the north in June, which made the pig price in the north rise rapidly and then spread across the country. Although the epidemic situation in winter this year is similar to that of last year, the downward trend of the pig cycle was determined at the beginning of this year, and the breeding side tended to eliminate more pigs in accordance with the trend, which led to the shortage of short-term supply in June. We believe that the underlying reason for the recent spike in pig prices is the different price elasticity between the supply and demand sides of live pigs, because the supply at the breeding end can be depressed for 1-3 months, while the demand at the slaughter end is relatively rigid, and the price tends to rise but not fall in the rising trend. Therefore, the essential reason for the recent rise is that the aquaculture side carries the price pressure based on the short-term tight positive news in the north, and there is subsequent downward pressure.

From the perspective of aquaculture profit, the profit of self breeding and self breeding has changed from positive to negative since June 2021, with an average of - 329 yuan/head in 2022H1. Affected by the recent surge in pig prices, the short-term profits have recovered to a certain extent. By July 1, the average profit of self bred and self raised heads was 200 yuan/head.

From the perspective of medium-term supply and demand, the reduction of fertile sows is relatively limited, and it is still in the shock stage at the bottom of the pig cycle. At the end of May 2022, it will be 41.92 million pigs, with a month on month ratio of 0.4%. This is the first time that this round of pig cycle has been able to reproduce sows since the start of capacity reduction in June last year, with a month on month ratio of positive. At present, the decline from the peak (45.64 million pigs in June 2026) will reach - 8.2%. According to the Implementation Plan for the Regulation of Live Pig Production Capacity (Interim) 2021 issued by the Ministry of Agriculture and Rural Affairs last September, the goal of regulating the number of reproducible sows on hand is to stabilize the normal population at about 41 million. Based on this standard, the number of reproducible sows on hand is divided into three grades: green, yellow and red, which corresponds to the middle and upper regions of China where the number of reproducible sows on hand is currently in the green grade. According to the estimation of China's perennial pig demand and PSY level, it is reasonable to estimate that 37 million to 41 million sows can be bred, corresponding to 2-12% of the space for degenerating. Therefore, the current process of degenerating fertile sows is nearly half. If the subsequent pig prices remain at a relatively high level of micro profit or no loss of cash flow, the greater resistance to degenerating in the future will prolong the time of bottoming and reversal of the pig cycle.

In the super pig cycle brought by this round of non plague, the production capacity of Muyuan, Zhengbang, New Hope and other leading enterprises expanded rapidly, and many high-quality project resources were reserved with policy support. However, the rapid expansion has made most large enterprises face large impairment of breeding sows in the downward period of the pig cycle, resulting in losses exceeding their profits in this round of pig cycle. In the future, we need to continue to pay attention to the cost reduction effect and financial situation of large enterprises.

Figure 105: Pig marketing of head enterprises: 10000

New retail: the short-term epidemic has stimulated demand, and the profit prospect is still unclear

Figure 107: Year on year growth of food/clothing/consumer goods in online retail sales 

15.2 The upgrading of epidemic prevention and control forms a new round of stress testing and reverses the upgrading of the platform supply chain

The development trend of the new retail industry over the past two years can be divided into three stages.

The first stage is the outbreak period of the epidemic in 2020. Consumers are less likely to go out and prefer to buy daily goods online. Fresh e-commerce is recovering against the trend. The platform orders are booming, and the platform actively allocates goods and employees. RT Mart, Yonghui Supermarket and Bubu High level large supermarkets also seized the online opportunities, gave full play to the advantages of local warehouses, and developed their businesses through self operation and settling in third-party platforms.

The second stage is the post epidemic era of 2020Q2-2021Q2, and the epidemic situation is relatively stable. On the one hand, Internet giants have entered the market strongly, and the capital field is hot. Every day, Youxian and Dingdong have gone to the United States for listing. Enterprises have strengthened the horse racing enclosure, and the fresh food track competition is particularly fierce. Dingdong has entered the Beijing market to buy vegetables. Meituan and Yonghui have increased their vegetable shopping business layout, and Hema has built its own industrial base. On the other hand, the fresh food platform has cultivated users' consumption habits during the epidemic, and user retention has become a problem that needs to be solved by the post epidemic platform.

The third stage is from 2021Q2 to now, with capital ebbing, and epidemic prevention and control bringing opportunities and challenges to fresh food e-commerce. After 2021Q2, the anti-monopoly regulation of the platform economy will be promoted, and the financing environment of the fresh racetrack will cool down. In the first half of 2022, there are only 7 financing cases, with a total amount of 2.4 million, which is significantly lower than that of the previous year and the previous month. The epidemic situation will be repeated in 2022. Compared with 2020, this round of epidemic prevention and control measures will be strict, the supply side material transportation will be blocked, and there will be many rounds of changes in local epidemic prevention policies. In the face of massive orders and strict epidemic prevention policies, the platform faces greater challenges in terms of commodity supply and transportation capacity. Compared with 2020, problems such as system collapse, shortage of goods, insufficient transportation capacity, and overtime performance are more prominent, forming a new round of stress testing.Therefore, it remains to be observed how much of the terminal demand brought by this round of epidemic can be transformed into GMV of the platform.

The importance of supply chain barriers emerged after the epidemic.Having experienced the test of this round of epidemic, the fresh food platform will be more comfortable in responding to emergencies. With reference to the experience in 2020 and the policy changes in 2022, all major fresh food platforms will urgently allocate sources of goods and personnel, improve the efficiency of procurement and allocation, ensure the normal operation of outlets, and ensure the supply by converting bulk orders to group purchase packages. In the third year of the epidemic, the importance of the platform distribution network and organizational efficiency in the context of epidemic normalization has become prominent, driving the platform to accelerate the improvement of the fresh supply chain, optimize the warehouse allocation model, and attach importance to the creation of offline barriers. In April 2022, the five departments jointly issued the Implementation Opinions on Accelerating the High Quality Development of Cold Chain Logistics Transportation, encouraging fresh e-commerce to strengthen the construction of 'the last mile' facilities such as urban cold chain front warehouses, and set up intelligent cold chain self lifting cabinets in communities, commercial buildings, etc. to improve the service level for the convenience of the people. However, the construction of the supply chain means that the investment in heavy assets will be increased in the early stage, and the industries that are still losing money will be under further pressure.

15.3 The industry is still in the stage of changing money for scale, focusing on the results of leading strategy adjustment

The mainstream fresh food e-commerce models can be divided into two types: the front warehouse model represented by Dingdong and Daily Best Fresh, and the platform model represented by Hema Xiansheng, JD to Home and Meituan Flash Shopping. The front warehouse model highlights timeliness, focuses on assets and operations, and has high front-end performance costs and high traffic costs. The platform mode uses the platform's strong integration capability and abundant traffic to cooperate with brand merchants, and the performance cost mainly occurs at the end. At present, the two modes are still in the single average net loss state.

On the financial side, the leading revenue grew steadily, and the profit was not yet clear.In the 12 months to the end of 2022Q1, JD Home GMV reached 49.1 billion yuan, up 74% year on year; Dingdong's vegetable sales reached 5.44 billion yuan in 2022Q1, up 43% year on year. On the performance side, the company continued to be under pressure, with net loss of 480 million yuan in Q1 Dingdong. The strategy of pre subsidy in exchange for scale, combined with high performance costs and low gross profit margin, has greatly eroded the profit space of enterprises with pre position mode. In terms of cash flow, Dingdong Food had cash and cash equivalents and short-term investment of 4.85 billion yuan at the end of 2022Q1, and 5.23 billion yuan at the end of 2021Q4. In 2022Q1, the net cash flow from Dingdong's business activities of buying vegetables was - 385 million yuan, which has not yet become regular.

Adjust the leading strategy and shrink the front.In order to relieve the operating pressure, the number of front warehouses of daily excellent fresh food has been reduced by more than half; On the other hand, the company is actively building long-term retail smart solutions, trying to develop smart food market and retail cloud industry into the second growth curve, and the effect remains to be verified. In 2022, the internal goal of Hema has been clearly defined as 'from the current single store profit to comprehensive profit'. In order to reduce losses, Hema Linli will withdraw from Beijing, Xi'an, Chengdu and Wuhan in April 2022. From Q3 of 2021, Dingdong will adjust its business strategy from 'scale first, efficiency first' to 'efficiency first, scale first', and transform its profit model from obtaining scale advantage by improving the density of front warehouse to driving customers to repurchase for a long time with commodity power. Specific measures include launching 'Dingdong Ace', 'Boxing Shrimp' and other private brands, strengthening product differentiation and increasing customer price; Close the front warehouses in small markets such as Zhongshan, Zhuhai, Chuzhou and Tianjin, and deepen the front-line and new front-line key markets. By improving product strength and reducing costs and increasing efficiency, the performance fee rate of Dingdong vegetable purchase in 2022Q1 was 27.3%, falling for four consecutive quarters; The net loss rate was - 8.8%, narrowing for three consecutive quarters.

Figure 110: Dingdong Buying Menu Quarterly Performance

Figure 111: Quarterly cash flow from operating activities of Dingdong Buying Menu

图112：叮咚买菜单季度履约费用率

Source: Company announcement, China Merchants Bank Research Institute

16.1线上娱乐：受平台经济反垄断监管，行业格局面临变化

根据CNNIN对全国网民数和线上流媒体用户数统计，截至2021年6月，我国网民数量达到10.3亿，同比+4%。从流媒体整体（包括在线视频、短视频、直播、在线音乐）的用户数来看，基本与全国网民数增长同步回落。 

从细分赛道来看，网络视频用户数增速见顶，在线视频和短视频边际回落；电商直播仍然贡献网络直播（包括电商直播、游戏直播、娱乐直播等）的用户数的主要增量，但增速均有所回落。2021年12月短视频用户数为9.3亿，同比+7%；电商直播用户数4.6亿，同比+20%，但是上半年淘系两大头部主播停播后续电商直播行业面临收缩。其它赛道包括在线视频、游戏直播、娱乐直播、在线音乐等的用户数相对平稳。

图113：中国网民、网络视频、直播用户数：亿

图114：流媒体细分行业用户数：亿

市场规模方面，CNNIC估计2020年流媒体市场约4700亿元，同比增长37%。分赛道来看，在线视频、短视频、网络直播、在线音乐的市场规模分别约1190、2051、1135、339亿，同比增长16%、58%、35%、25%。近几年受短视频拉动，流媒体整体收入增长快速，但2021年行业增速开始有所放缓。

从具体细分赛道来看，平台经济反垄断正在驱动多数赛道发展逻辑和格局变化。对于短视频行业，继续头部化，但多元商业化变现有所受阻。根据易观统计，2022年5月抖音、快手MAU分别为6.9、4.8亿，同比增长分别为2%、16%。对于在线视频行业，受股东生态战略影响，部分头部平台恐有跌落风险，一二线平台差距缩小。2022年5月腾讯、爱奇艺、优酷、芒果TV、B站MAU分别为4.1、4.7、1.7、2.3、2.0亿，同比分别为-26%、-21%、-23%、+10%、+23%。

图116：流媒体整体市场规模增速

图117：短视频平台抖音、快手、微视MAU：亿

图118：在线视频平台MAU ：亿

16.2电影院线：2022上半年全国票房受新冠疫情新一轮扩散影响同比下滑，关注暑期档的修复情况

2022上半年电影票房172亿，同比-38%；由于新冠疫情自4月中下旬以来出现新一轮扩散，导致票房同比大幅低于预期（年初在假设疫情影响逐渐修复下，预计全年票房同比0-18%）。在疫情新一轮扩散下观影需求受挫，优质影片上映的积极性不高，暑期档新片定档冷淡，多部今年春节档影片（《水门桥》、《奇迹笨小孩》）在今年暑期档二次重映。

从节日档期票房来看，除2022年元旦档、春节档票房表现中规中矩之外，清明档等近三个档期均同比大幅下跌，仅相当于去年同期的2-4成。但是由于去年暑期档受疫情影响大幅失速，今年暑期档虽仍然偏弱，但同比应有好转。如果考虑下半年疫情管控边际放松，观影需求修复的话，预计全年票房或在400-500亿左右，同比-15%~6%。

图120：全国电影单月票房及同比：亿元、%

Figure 121: Box office in the holiday period of 2021 and 2022 and its growth compared with that before the epidemic

Looking forward to the second half of 2022, we still need to pay close attention to the impact of the epidemic on the summer holidays. Among the films that have been finalized, the noteworthy ones include Jurassic 3, New Order, Erlang God's Deep Sea Dragon, etc. In the future, we can still expect the introduction of imported films to repair the demand for catalytic viewing. Last year, due to the overseas epidemic, the release of foreign films was delayed, resulting in only 21% of the box office of imported films. It is expected that foreign film screenings will gradually resume this year, paying attention to China's subsequent introduction of imported films.

In terms of business operation strategy, in view of the impact of the overall industry downturn and the COVID-19, the cinema line has been in a weak position for two consecutive years. It is worth noting that this situation is almost the result of the rapid growth of the industry in the past decade. It corresponds to the fact that the current supply side of the industry is very fragmented. There are many cinemas/projectors in the long tail, and the operating efficiency is uneven and most of them are low. Under such a big demand shock, the pace of industry clearing and integration is expected to accelerate. It is suggested to pay attention to the business opportunities brought by the integrated clearing of cinemas.

表3：2022年海外计划上映大片部分汇总

Express logistics: epidemic situation and cost disturbance, slowing down in 'V' trend

17.1 In the first half of the year, the growth of the express industry slowed down significantly due to the impact of the epidemic closure

In the first half of the year, repeated outbreaks throughout the country, as well as the upgrading of containment brought about by the epidemic led to supply chain disruption and logistics disruption. The poor supply of commodity goods exacerbated the decline in demand, forming negative feedback, which had a significant impact on both production and life.From March to May, the total business volume and new orders of China's logistics industry boom index (LPI) were not only below the boom and bust line, but also hit a new low since the first quarter of 2020. This round of epidemic has had a negative impact on the logistics industry as a whole. Among them, express logistics has been significantly affected. China's express logistics index has declined since February, falling below the benchmark for four consecutive months (last time, it was 2020Q1). In addition, China's express delivery development index disclosed by the State Post Office shows a negative year-on-year growth since March.

Figure 124: China's express industry related index shows low prosperity

Figure 125: The growth rate of express business slowed down in the first half of 2022

Figure 126: The growth rate of express business income slowed down in the first half of 2022

From the specific data, the growth of express business volume and business income slowed down significantly.According to the data of the State Post Office, from January to May 2022, the national express business volume will reach 40.94 billion pieces, with a year-on-year growth of 3.26%. The express business income will reach 400.56 billion yuan, with a year-on-year growth of 2.03%. The overall growth of the industry will slow down significantly, from the double digits at the end of last year to the low single digits. From a monthly perspective, the growth rate in February was relatively high due to the Spring Festival; However, in March and April, the national key cities such as Shenzhen, Shanghai, Beijing, etc., as well as the Yangtze River Delta, Northeast and other major cities were affected by the epidemic to take containment measures, resulting in a year-on-year decline in business volume and income. The closure of the epidemic situation in Shanghai has dragged down the Jiangsu, Zhejiang and Shanghai parcel post areas, which have the largest volume of parcels in China, resulting in a year-on-year decline in the national express business volume for two consecutive months (March - 3.1%, April - 11.9%). From the perspective of the regions greatly affected, from January to May, the express business volume of Beijing dropped by 12.5%, and that of Shanghai dropped by 37%. According to the survey data, in April, Shunfeng stopped receiving and dispatching more than 2000 outlets nationwide due to the epidemic, accounting for more than 15%.

 17.2 The growth rate of express industry is expected to go out of the 'V', and the growth center in the medium and long term will move downward

Benefiting from the control of epidemic situation in various regions and the related measures of 'ensuring smooth traffic' in the logistics industry, express logistics was rapidly repaired, showing a 'V' trend throughout the year.In the middle and late April, the State Council issued the Notice on Effectively Ensuring Cargo Logistics' Access and Smoothness, and took the lead in establishing a 'Access and Smoothness' working group to deploy and implement specific measures in key cities. In May, the logistics supply chain began to recover. According to the data of the National Post Office, the growth rate of express delivery business volume and business income in May was both positive, recording 0.2% and 0.9% respectively. In June, with the full resumption of production in Shanghai and Beijing, China's logistics industry boom index (LPI) returned to above the boom and bust line. During the 618 e-commerce shopping festival, express delivery also basically returned to normal. Looking forward to the second half of the year, under the premise of a small outbreak of the epidemic, 'stabilizing the economy and ensuring smooth traffic' will stimulate the rapid recovery of the express logistics industry, and the industry will enter the peak season in the second half of the year. The annual growth rate is expected to be low before and high after 'V'.

It is expected that the growth rate of the express industry will drop to 10% - 15% this year, and the slowdown of e-commerce growth in the next few years will drive down the medium - and long-term growth center of express.For a long time, e-commerce shopping demand has dominated the growth of the express industry, and e-commerce items account for more than 90% of all express orders. Therefore, the slowdown of e-commerce growth will directly drag down the growth of the express industry. In the first five months of this year, the online consumption penetration rate was 24.9%, and there was no growth in the past two and a half years. During the 618 period, the trading volume of Alibaba, JD and Pinduoduo and other integrated e-commerce platforms was 582.6 billion yuan, up only 0.07% year on year. Considering that the number of Internet users has peaked and DAU, the three major e-commerce platforms, has not changed much in the past year, the online consumption penetration rate has reached the bottleneck. The slowdown of e-commerce growth in the next few years will drive down the medium and long-term growth center of express delivery. We expect the growth rate of express business volume and income will slow down to 13% and 12% respectively in 2022, which does not exclude that the epidemic continues to exceed expectations and further depress the growth rate.

Figure 128: The increase of online consumption penetration meets the 'ceiling'

Figure 129: The number of daily active users (DAUs) of the three major e-commerce platforms grew slowly

17.3 Express companies benefit from the stabilization of price repair, but the fuel cost disturbance deserves attention

Although the growth of business volume slowed down, thanks to the stabilization of price repair, Tongda Express Company's revenue in the first half of the year still maintained a high growth rate.From January to May this year, according to the data of the express companies that we focus on tracking, the growth of Tongda's express business volume slowed down significantly, but the growth of business income was still in a relatively prosperous range, mainly driven by the high growth of express prices. At the same time last year, the industry's 'price war' led to revenue pressure. Under policy intervention, the vicious 'price war' in the express industry ended. In the third quarter, the express price started to rise. This year's price is significantly better than that of the same period last year. According to our calculation, the average price of a single ticket of Tongda, a major express delivery company, rose from a low of about 2 yuan last year to an average of 2.5 yuan in Q2 this year, a 25% increase. From March to May, the average price of Tongda Express has not fluctuated much and has risen steadily. We expect that with the industry entering the peak season in the second half of the year, express prices are expected to remain stable, and the annual performance of express companies will also be repaired.

Figure 131: Business income growth of major express companies from January to May this year

It is worth noting that on the cost side, the high oil price operation has pushed up the transportation cost, and the profit of express companies is under pressure.Affected by the Russian Ukrainian war and the recovery of the global economy after the epidemic, the demand for oil increased but the supply was not smooth. The international crude oil price once exceeded $120/barrel, a new high in 10 years, and remained at a high price of $100-125/barrel. The price center of domestic refined oil has moved up continuously, the spot price of domestic fuel oil has exceeded 6400 yuan/ton, and the logistics and transportation costs have risen. According to our calculation, the fuel cost of express enterprises accounts for about 8% - 10% of the total cost. Every 10% - 15% increase in oil prices will affect the net interest rate of one point. Therefore, high oil prices will erode the company's profits. This year, the express industry's profits may continue to be under pressure.

Figure 134: Domestic commodity oil prices hit a new high since 2018 this year

IDC: The demand growth of the industry will be weak in 2022, but the capacity will still be released, and the supply and demand situation is expected to improve by the end of 2022

However, since 2021, this core factor leading to the prosperity of industrial demand is undergoing significant changes. The data of ICT Academy in 2021 has not been published yet. Since Alibaba Cloud accounts for about 50% of the domestic cloud computing market, we use Alibaba Cloud data to analyze the development of domestic cloud computing in 2021.

It can be seen from Alibaba's regular announcements that Alibaba Cloud's revenue growth has declined significantly since the fourth quarter of 2020, and the year-on-year growth rate has declined from the highest 60.4% in the third quarter of 2020 to only 21.3% in the fourth quarter of 2021.

Therefore, we predict that the overall growth rate of the cloud computing industry will be about 30% in 2021, a significant decline compared with 2020. At the same time, some cloud computing giants started to build their own data centers in 2020 and put them into use in 2021, which further led to a significant slowdown in the demand side growth of the third-party IDC industry in 2021 compared with 2020.

The main reasons for the significant decline in cloud computing growth in 2021 are as follows: 1) the impact of high base in 2020; 2) Internet antitrust, slowing down the growth of Internet customer demand; 3) The rectification of the education industry has led to a precipitous decline in the demand of some online education customers.

Looking forward to 2022, on the one hand, as the Internet antitrust is still in progress, the power is still fermenting, and the policy cannot be significantly changed, the cold winter of the Internet is far from fading; On the other hand, the rectification of the education industry is still advancing, and the demand for online education is unlikely to explode, so the impact of these two aspects will remain negative in 2022. Therefore, we expect that the demand growth rate of cloud computing will remain relatively low in 2022. At the same time, cloud computing manufacturers' self built data centers will also be put into production in 2022, further reducing the demand distributed to third-party IDC companies.

On the other hand, the demand of non Internet enterprises and government, another pillar of IDC's demand source, will continue to grow steadily in 2021, but the increase in demand will not make up for the decline in cloud computing growth and the impact of Internet antitrust. According to our analysis of the software industry, the industry may usher in a more obvious development cycle at the end of 2022. We expect that by then, the demand of non Internet enterprises and the government will have a more obvious pulling effect on the third-party IDC industry.

Based on the above comprehensive analysis, we believe that the growth rate of the industry demand side in 2021 will be significantly slower than that in 2020. It is expected that the growth rate will remain at a relatively low level in 2022, and it is expected to turn warmer by the end of 2022.

18.2 Supply measurement: The growth rate of fixed asset investment from 2021 to 2022 is significantly lower than that in 2020, but the production capacity may continue to be put into production by the end of 2022

2020 is a big year for the capital expenditure of third-party IDC companies. The capital expenditure of major overseas listed IDC companies in China nearly doubled in 2020, and the growth rate slowed down significantly in 2021. As the annual report data has not yet been disclosed, we adopt the data of the first three quarters. Among them, the capital expenditure incurred by Wanguo Data in 2021Q1-3 is 7.39 billion yuan, an increase of 29.8% year on year and a sharp decrease compared with 76.3% in 2020; The shrinkage of 21Vianet is more obvious. The capital expenditure of 2021Q1-3 is 1.84 billion yuan, an increase of 6.8% year on year, while the growth rate in 2020 is 95.3%.

Figure 138: Internet capital expenditure and growth from 2019 to 2021

For domestic listed companies, we use fixed assets+projects under construction to estimate the company's operating scale and growth rate. We selected Dataport and Aofei Data, the two companies with the highest proportion of IDC business revenue listed in China and the fastest production in recent two years, as the research objects. Year by year, the sum of fixed assets and projects under construction of the two companies in 2020 nearly doubled in 2019; The growth rate will slow down in 2021. By 2021Q3, the sum of fixed assets and projects under construction of Dataport had reached 5.354 billion yuan, up only 3.3% from the beginning of the year; The sum of fixed assets and projects under construction of Aofei Data was 1.582 billion yuan, an increase of 29.3% over the beginning of the year. The low growth rate of the data port is influenced by the base number of more projects under construction in a single time in the fourth quarter of last year (from the perspective of historical investment, the company does not have seasonal characteristics), but after excluding one-time factors, the growth rate is also below 30% compared with the beginning of the year.

Figure 140: Total and growth rate of fixed assets and projects under construction of Aofei Data

Therefore, from the perspective of domestic and foreign listed companies that can be quantified, we find that the industry's supply will slow down significantly in 2021 after experiencing the peak in 2020.

From the perspective of SMEs and foreign industry entrants, which are relatively difficult to quantify, according to our research interviews and industry cognition, the number of these entrants will decrease more significantly in 2021.

Therefore, in general, the investment growth rate of industry supply in 2021 is significantly lower than that in 2020.

However, it needs to be noted that it will take 1-3 years for the IDC industry to fully release its production capacity from the beginning of engineering construction. Therefore, the impact of production expansion in 2020 will extend to 2022. By observing the revenue growth rate of major listed companies, we can also find this feature. The cycle of revenue growth rate lags behind that of production expansion.

Figure 142: Growth of IDC related business revenue from 2019 to 2021H1

In terms of the prediction of fixed assets investment in 2022, for overseas listed IDC enterprises, due to the international situation and the turbulence of the capital market, we predict that their overseas financing capacity will be significantly reduced in 2022. In addition to the increase in vacancy rate caused by the release of industrial supply, we believe that the growth rate of investment will remain low.

For domestic listed IDC enterprises, with the increase of the company's own debt ratio and the following strategy for foreign leaders in their operations, we predict that their investment growth will also be low in 2022.

Therefore, in general, the IDC industry will still be in the cycle of capacity release in 2022, but the capacity input will continue to slow down, and the supply and demand situation of the industry is expected to be healthier by the end of 2022.