China - MachineryChina - Machinery
China’s machinery industry is one of the leading pillars of the Chinese national economy. Its main business revenue increased about 7% in 2016 to reach a total value of USD 3.5 trillion. China’s manufacturing industry witnessed a further recovery in 2016, indicating stable development of the world’s second-largest economy. In the next few years, the Chinese government aims to control capital outflow to foreign industries such as real estate, sports, and entertainment, and instead focus overseas investment on high tech manufacturing technology industries. According to the data from China Customs, total exports accounted for USD 375 billion and total imports were approximately USD 273 billion in 2016, a decline of 3.6% and 1.8% respectively over 2016.
The low-end machinery market is largely dominated by SMEs, mainly due to their cost-cutting structures, price-based competition, and ability to—to some extent—crowd out larger enterprises. Chinese machinery SMEs are mainly clustered in and around Shanghai City, Shandong Province, Jiangsu Province, and Zhejiang Province. The high-end machinery market is largely composed of state-owned enterprises and international market players. The fact that they possess significant intellectual property assets in terms of patents, licenses, and trademarks and can leverage their globally recognized brands, means they can differentiate their products beyond the reach and capabilities of smaller local competitors. According to data from China Die Mold Industry Association, in 2013 over 500,000 people were employed by the 2,023 enterprises in the machine tools industry. Of those enterprises, 959 were state owned, accounting for 47.4% of the industry.
The Chinese Government will implement economic restructuring with the Made in China 2025 strategy. This plan aims to remedy China’s manufacturing problems by comprehensively upgrading the sector and making it more efficient and integrated so that it can occupy the highest parts of global production chains. By 2025, China aims to raise the domestic content of core components and materials to 40% by 2020 and 70% by 2025. Some sub-sectors which support the direction of the national economic restructuring could experience a period of growth.
The majority of domestic machine tools companies have accomplished transformation and upgrading by adjusting product structure and innovating technologies. The import structure is still focused on high-precision, intelligent high-end CNC machine tool and accessories. CNC Machining, or Computer Numerical Control Machining, is a process used in the manufacturing sector that involves the use of computers to control machine tools.
The total output of machine tools reached about USD 22.9 billion in 2016, an increase of 3.6% over the last year. Of this, cutting machine tools output were about USD 12.2 billion, nearly identical to that of last year; and forming machine tools were approximately USD 10.7 billion, an increase of 8.1%. The total import of machine tools was about USD 7.5 billion, a decline of 12.8% over 2015. More than 1/3 of high end CNC machine tools and accessories were imported from Japan and Germany; fewer than 20 Chinese companies can provide medium and high end CNC machine tools. Post expects that the demand for metal cutting, forming machine tools, and accessories will grow at a strong pace in 2017.
According to the Robotics Industry Development Plan for 2016-2020, the Chinese Government pledges to support the expansion of the nation’s robotics industry, which aims to produce 500,000 China-made industrial robots annually by 2020. The plan also forecasts that sales of service robots will exceed USD 4 billion by 2020.
As the world’s largest consumer market for industrial robots, China’s industrial robot production reached 72,400 units, an increase of 34.4%, while sales accounted for about ¼ of the world in 2016. Total imports were 38,464 units and total exports reached 10,047 units in the first 9 months in 2016, an increase of 6.71% and 44.04% respectively over the last year. According to the International Federation of Robotics (IFR), about 75 percent of shipments in the past five years were from China, the Republic of Korea, Japan, the United States, and Germany. The average growth of China's robot market over this period stood at 17 percent per year.
The Made in China 2025 goal is to upgrade China’s machinery industry to be capable of manufacturing major machine goods with their own innovation and intellectual property rights, as well as meeting the country’s needs in the energy, transportation, new material, and agriculture equipment sectors etc. Also, a top priority is to adopt high-tech intensive manufacturing by making best use of foreign capital, management expertise, advanced technology etc.
As China is trying to improve the country’s manufacturing industry, U.S. firms, known for being innovative and producing high quality products, will be offered an unprecedented opportunity to export their high quality and durable industrial products and components/parts to Chinese manufacturers in different sectors, particularly the die and mold, robotics, and CNC machinery sectors. The challenges for U.S. exporters are pricing and protecting their intellectual property rights.
Market Entry & Obstacles
Entering the Chinese market often relies heavily upon personal relationships developed and maintained at all levels of distribution. Many companies utilize multiple sales channels to overcome the sheer size and cultural diversity of the country. Chinese companies are very price-conscious, which can affect after-sales service. Labor costs have continued to increase in recent years. While the cost of maintaining service plans is often factored into machinery sales, it is important for exporters to consider this as they determine pricing. Some regions and municipalities may have requirements to provide localized after-sales service, which would require on-site training or local manufacturer representatives to be present.
In addition, a license must be obtained from the Department of Commerce before exporting or re-exporting certain items to China. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is responsible for implementing and enforcing the Export Administration Regulations that regulate the export and re-export of purely commercial items, items that have both commercial and military applications, and less sensitive military items.
Intellectual Property Rights (IPR): While the Chinese government is working to improve IPR protection, U.S. companies should still take precautions to protect their IPR by ensuring that they have undertaken the proper protections to restrict illegal copying or distribution of their safety and security products. It is recommended that U.S. companies establish a clear strategy to handle the challenges of protecting their IPR in a complex legal environment. For more details on China’s IPR environment, please refer to the materials located in the "China IPR Toolkit”.
Trade Shows & Events
China International Industry Fair
Date: Nov 7-11, 2017
Location: National Exhibition and Convention Center (Shanghai)
China Chongqing International Machine Tool Show (organized by CMTBA & AMT)
Date: Nov 13-16, 2017
Location: Chongqing International Expo Center (Chongqing)
China International Machine Tool & Tools Exhibition
Date: June 26-30, 2018
Location: New China International Exhibition Center (Beijing)
Association of Manufacturing Technology (AMT) China
China Machinery Industry Federation (CMIF)
China General Machinery Industry Association (CGMA)
China Heavy Machinery Industry Association (CHMIA)
China Machine Tool & Tool Builders’ Association (CMTBA)
U.S. Commercial Service Contacts for Machinery Sector
U.S. Embassy in Beijing
Zheng Xu, Commercial Specialist
(86 10) 8531-3000
U.S. Consulate in Chengdu
Shiyang Ciu, Commercial Specialist
(86 28) 8558-3992
U.S. Consulate in Shanghai
Ken Shen, Commercial Specialist
(86 21) 6279-7630
U.S. Consulate in Shenyang
Yang Liu, Commercial Specialist
(86 24) 2322-1198
U.S. Consulate in Guangzhou
Linda Lu, Commercial Specialist
(86 20) 3814-5000
China Equipment and Machinery Trade Development and Promotion