Market Insight

China’s machinery market suffered mixed fortunes in the first half of 2018, with more downward pressure expected

August 16, 2018

Teik Chuan Goh Teik Chuan Goh Analyst, Manufacturing Technology

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Even with strong 8.1 percent year-over-year growth, China's machinery production is growing at a slightly slower rate in 2018 than that it did in 2017. Machinery production in China will continue to rise at a compound annual growth rate (CAGR) of 7.5 percent from 2018 to 2022.

In the first half of 2018, the performance of machinery industry segments in China suffered mixed fortunes. While robots and other high-end equipment-manufacturing machinery maintained high growth rates, some traditional manufacturing-related machinery – such as agricultural machinery, paper and paperboard machinery – have different market growth expectations, due to their differing market and policy environments.

Industrial robotics

As “Smart Manufacturing 2025” continues to advance, while demographic dividends disappear, labor costs increase, and machine generation accelerates, the demand for industrial robots in China has increased dramatically. According to the latest data from the International Federation of Robotics (IFR), the annual sales volume of industrial robots in China ranked first in the world for five consecutive years from 2013 to 2017. IHS Markit predicts that industrial robot production will continue to grow at 38 percent through 2018.

Agricultural machinery

The Chinese economy entered the new normal of single-digit growth in 2015 and the double-digit growth in the “golden decade” has ended. China's agricultural machinery production grew 6.8 percent in 2018, with a 7 percent compound growth rate through 2022.

Paper and paperboard machinery

The production of China’s paper and paperboard machinery will increase by 2.3 percent in 2018. However, certain downward pressures on the equipment market are expected in the second half of the year, especially considering the downstream papermaking industry is encountering economic headwinds leading to a reduction in capacity utilization.

Photovoltaic (PV) machinery

The promulgation of China’s new PV 6.1 policy in the first half of 2018 will lead to overcapacity in the downstream PV industry, leading to falling short-term prices. In the long run, policies will force companies to increase the development of unsubsidized markets. It is also bound to make photovoltaic companies pay attention to technology research and development, which could expand development of high-end equipment. The growth rate of PV equipment production in 2018 will reach 24 percent, which is lower than in 2017.

Overall

Although China's machinery production growth performance was stable in the first half of 2018, there are still some unfavorable factors expected in the second half of the year, due to downward pressures on the machinery and equipment market, including the following:

  • With Sino-US and other trade frictions on the rise, there is still a lot of uncertainty in the international environment.
     
  • The infrastructure investment and consumption growth rate is declining, and the underlying economic driving force is insufficient to spur additional growth.
     
  • The tightening of environmental protection policies, along with the uncertainties of industrial policy adjustment, will have varying negative short-term effects on the development of related industries. The strict supervision of environmental protection will also have negative short-term effects on the paper, printing, dyeing and other polluting industries

Machinery Production Tracker Q2 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.

Research by Market
Manufacturing Technology
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