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Economic Slowdown Hitting Chinese Machine Builders

A China Machinery Federation official tells OEMs at the recent Schneider Initi@tive in Monaco that orders are beginning to slow for Chinese machinery manufacturers.

Aw 3316 0901 News28

Song Xiao-Gang, deputy secretary general, China Machinery Federation, told several hundred assembled executives and engineers of original equipment manufacturers (OEMs) that China has made a big step from a planned economy to a market economy—but that the current financial crisis is affecting it, too. His keynote kicking off day two of the Schneider Electric OEM Initiative in Monaco Dec. 3-4 covered the Chinese economy and the place of machinery manufacturers within it.

“The Industry Sector of the Chinese economy has been showing good growth, and amounted to 49.2 percent of the gross domestic product in 2007,” Song reported. “Interestingly, imports are growing almost as quickly as exports at 20.8 percent growth versus 25.7 percent. Total exports in 2007 amounted to $1,218 billion while total imports were $955.8 billion.”

The Chinese economy is not immune to global financial events. Recent challenges to the Chinese economy include low productivity, limited resources, labor and environmental cost increases, a big gap between city and rural income, appreciation of currency (up 20 percent), and the world financial crisis.

Policy changes

“These challenges are being met with policy strategies with the goal of constructing a resource-saving, environmentally friendly, harmonious society. Specific policies center on energy saving and emission control, fusion of information and industry to increase productivity, lower interest rates, and a stable currency,” Song said. Government is changing policy rapidly this year in response to a changing economy, as China moves from worrying about inflation to stabilizing and stimulating the economy.

The Chinese machinery industry comprises almost 73,000 enterprises with employment of 13.9 million, ranked fourth in the world. The machine industry accounts for 7.8 percent of the country’s gross domestic product (GDP), with an average annual growth rate of 20 percent.

Exports of machinery are declining, while imports are increasing. In the first three quarters of 2008, machinery exports totaled $184.1 billion while imports were $149 billion. Challenges to the machine industry sector in China include higher prices, overcapacity, low-end products with lower added value, labor and environmental costs, and slowing growth in orders.

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