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        IMA

Machinery: China’s machinery market stays upbeat

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China’s machinery production market is set to grow 7.9% in 2018, while the rubber and plastics machinery production market will achieve a value of US$13 billion in 2018, up 10% yearon- year, according to Teik Chuan Goh, Analyst, Manufacturing Technology, at research firm IHS Markit.

Teik-Chuan-Goh

China’s machinery production is growing at a slightly slower rate in 2018 than that it did in 2017, but the industry is exhibiting strong growth of 7.9%. Machinery production in China will continue to rise at a compound annual growth rate (CAGR) of 7.6% from 2018 to 2022.

The production of China’s machine tools will increase by 8.2% in 2018, rising at a CAGR of 7.9% from 2018 to 2022.

The overall production of material handling equipment will grow by 12.6% in 2018. The production rate of material handling equipment for automated guided vehicles (AGV) is increasing significantly. In 2018, the production rate of AGV will increase by more than 30%, rising at a CAGR of 20.6% from 2018 to 2022.

As for the plastics and rubber machinery production sector, Teik says, “The Chinese rubber and plastics machinery production market will achieve around US$13 billion in 2018, up 10% year-on-year.”

Plastics production machinery garners higher exports

In the first quarter of 2018, China’s plastic machinery export market ranked among the top ten countries, with exports destined to the US, Turkey, Thailand, Indonesia, Mexico, Malaysia and Pakistan and growing rapidly. In fact, Teik says that exports increased by more than 25% year-on-year.

However, he cautions on international headwinds that dent revenues.

Some of the factors that will affect exports of plastics machinery from China are:

  • Brexit negotiations in the UK

  • Rise in US Federal Reserve’s interest

  • US government’s policy toward China’s tariffs

  • Exchange rate fluctuations of the Chinese yuan and currencies in other developing countries

Teik adds, “IHS Markit believes that stable growths will maintain in 2018, due to the benefits from the impact of the recovery of the downstream industry with the demand for plastic products having steadily increased. But we are wary about the Sino-US trade friction.”

Elastic demand for rubber production machinery

For exports in the rubber machinery market, he says that China’s main growth of exports in 2017 and 2018 comes from Southeast Asia. “There are more than ten major tyre projects that are in the works to start in the region to expand their customer set overseas. In addition to that, the international tyre market investment looks to be stable for the foreseeable future. This will lay a foundation for the export of Chinese rubber machinery.”

In 2017 and 2018, China’s rubber machinery market has been growing at a healthy pace of around 10%.

“The underlying reason is that the automotive and tyre industries are improving, promoting new tyre projects. Non-tyre rubber based machinery development has also shown good growths in China,” adds Teik.

National policies to promote the development of machinery production

In 2018, the Chinese government issued a series of favourable policies to promote the development of its manufacturing industry – for example, the country’s strategic “Made in China 2025” programme, which encourages enterprises to use high-end machine tools.

As of April 2018, China’s Ministry of Industry and Information Technology (MIIT) had founded five national innovation centres for material manufacturing, to focus on batteries for electric vehicles, optoelectronic information technology, traditional and flexible display panels and robots. The ministry also cultivated about 60 manufacturing innovation centres, at the provincial level. At the same time, the government’s implementation of comprehensive tax cuts for productive enterprises also provided policy support for machinery manufacturers.

IHS Markit says that China will continue its “The Belt and Road Initiative” policy, strengthening cooperation with member countries in the initiative and others in Latin America.

To a certain extent, this initiative has expanded the market for machinery used in automobile manufacturing, construction, electronics, metallurgy and textiles.

Optimisation of industrial environment for favourable conditions for machinery production

New industries are growing fast. In the first quarter of 2018, the added value investment of high-tech manufacturing (i.e., information technology, biological engineering and new materials) increased by 11.9%, while fixed asset investment grew 7.9%.

Equipment manufacturing and consumer goods manufacturing grew faster than other categories. Industrial robots, new energy vehicles, integrated circuits and other new products are growing rapidly. Faster development of the downstream industry has led to demand growth in related machinery products.

The emergence of artificial intelligence, big data and other Internet of Things (IoT) technologies is injecting new vitality into China’s machinery market.

Its leading machinery manufacturers introduced the IoT concept into machinery, actively transforming themselves from traditional machinery producers to manufacturing services companies.

Construction machinery manufacturer Xugong Group, after it was purchased, built the first domestic IoT big data platform in 2017, achieving real-time monitoring and remote operation of construction machinery. Meanwhile, construction machinery sold to Brazil, Myanmar, Laos and other countries are also connected to this platform, which is a good example of international IoT business promotion.

Shenyang Machine Tool independently developed i5 intelligent CNC machine tools, and in 2017 it established more than 30 intelligent manufacturing bases to be leased to small manufacturing companies. In January 2018, the company cooperated with Tencent Cloud to create an industrial cloud platform, and the two companies continued to deepen their cooperation in the field of smart manufacturing, in order to tap the potential value of industrial big data. At the same time, Shenyang Machine Tool raised RMB2.69 billion for the development of its smart machine-toolindustry upgrade projects and technologicalinnovation platform projects.

Machine tools market a growth potential

The demand potential of the machine tool market is huge in 2018. As downstream industries, like automotive, aerospace, shipping, electrical power and engineering machinery, have developed rapidly, smart machine tool demand growth was especially significant.

At the same time, the promotion and development of consumer electronic devices, such as tablets and wearable devices, will also spur demand for machine tools in this field, as mobile device upgrades accelerate.

China’s machine tool market is currently faced with industry transformations and upgrades, excess low- and mid-range machine tool products, insufficient development of high-end machine tool products, lack of core technology and a small proportion of advanced products.

China’s 13th “Five-Year Plan” and “Made in China 2025” policies have been continuously promoted, to provide positive external conditions for machine tools development, especially high-end computer numeric control (CNC) machine tools.

China’s first development of its high-end CNC machine tool industry area was in the Chongqing Yongchuan district. Now large CNC machine tool enterprises, such as Emark, Liebherr and Degen, are successfully settled in the Yongchuan district. At the same time, SW Machines Company in Germany will invest in machine tool manufacturing in Yongchuan, and the whole project is expected to begin production in the second half of 2018.

Fujian Quanzhou, Shandong Zaozhuang, Anhui Ma anshan and other regions are also actively developing their machine tool industries.

China’s overall machine tool industry is undergoing a two-step development strategy. First, funds will be used to support domestic machine tool brands, to improve their competitiveness and the rate of end-product localisation. Second, the company will introduce multinational machine tool enterprises in China, establishing a sole proprietorship or joint venture that will offer advanced technologies and promote product upgrades.

Machinery production forecast

In 2018, China’s machinery production development will be buoyed by the country’s national policy guidance and support, a large influx of investment funds and the initial effect of industrial structure adjustment. However, other more unfavourable development factors for development in 2018 cannot be ignored.

With trade friction, like the Sino-US friction in 2018, on the rise, there is still a lot of uncertainty in the international environment. Domestic infrastructure investment in China is affected by national policies and macrocontrol, which strengthens its supervision of Public-Private Partnership (PPP) projects this year, but might also negatively affect infrastructure investment growth, causing some pressure on China’s domestic economy.

Still, China’s machinery production will grow steadily under this pressure in 2018. With the continuous optimisation of its industrial environment in the next four to five years, China’s machinery production market will steadily rise, even as it transforms.

(IMA)


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