- 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 percent. Machinery production in China will continue to rise at a compound annual growth rate (CAGR) of 7.6 percent from 2018 to 2022.
- The production of China's machine tools will increase by 8.2 percent in 2018, rising at a CAGR of 7.9 percent from 2018 to 2022.
- The overall production of material handling equipment will grow by 12.6 percent 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 percent, rising at a CAGR of 20.6 percent from 2018 to 2022.
National policies to promote the development of machinery production
In 2018, the Chinese government issued a series of favorable policies to promote the development of its manufacturing industry -- for example, the country’s strategic “Made in China 2025” program, 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 centers 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 centers, 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.
China will continue its "The Belt and Road Initiative" policy, strengthening cooperation with the member countries in the initiative and others in Latin America. To a certain extent, this initiative expanded the market for machinery used in automobile manufacturing, construction, electronics, metallurgy and textiles.
The continuous optimization of the industrial environment creates favorable 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 percent, while fixed asset investment grew 7.9 percent.
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 RMB 2.69 billion for the development of its smart machine-tool-industry upgrade projects and technological-innovation platform projects.
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 localization. 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 unfavorable 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 macro-control, 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 optimization of its industrial environment in the next four to five years, China’s machinery production market will steadily rise, even as it transforms.
Machinery Production Tracker Q1 2018
This quarterly tracking service from IHS Markit provides a comprehensive overview of machinery production around the world, including the Americas, Asia-Pacific and Europe.