Chinese Demand For Machine Tools

A Growing Demand for Machine Tools
China is set to further consolidate its status as the world’s leading producer and consumer of machine tools, with demand expected to grow by 14.2% in 2014. The machine tools industry is also set to further benefit from a series of government measures being introduced, which are designed to ensure that Chinese society becomes “innovation-oriented” by 2020.

The forecast, detailed in a study by the Freedonia Group, follows the general trend within the country over recent years. Previously, in 2012, the machine tools industry grew by more than 12%, with the total industrial output value reaching CNY 721 billion. By 2017, if growth continues as anticipated, this value will exceed CNY 1,100 billion.

At present, the Chinese market accounts for 16% of all machine tool demand across the globe. This continued expansion will help to ensure that China remains one of the industry’s most attractive markets, with only India posing a threat to its status as the market leader.

Chinese Government Initiatives
Over the next few years, the industry’s continued growth will be assited by a number of measures being put in place by the Chinese government, as part of its 12th Five-Year Plan. The Plan, which details a number of economic targets, includes the machine industry in its list of Strategic Emerging Industries (SEIs). As a result, it will be promoted extensively by the government and will receive subsidies from the government at both a central and local level.

The machine tool industry will benefit from preferential treatment afforded by the government to those industries which provide “Indigenous Innovation,” and sales of machine tools will be further assisted by a favourable tariff policy, which was implemented to promote domestic product sales.

For the duration of the Five-Year Plan, the Chinese economy is expected to maintain its rapid development, leading to a steady rise in demand for machine tools domestically. This should, in turn, ensure that the machine tool industry maintains around a 10% annual average growth rate for the duration of the Plan – enough to keep it ahead of India as the top market for machine tools.

In terms of product segments, metal cutting machine tools such as lathes, EDM machines and milling machines cater for the largest percentage of machine tool sales. The metal cutting segment accounts for around 40% of the total market and around three times as much as the metal forming segment.

China’s Main Trade Partners
Currently, Japan exports more machine tools to China than any other country, with Germany exporting the second most goods to the country. China is the number one export market for both of those countries, which demonstrates how high the demand is for machine tools, as well as showing the popularity of China as an export market for counties around the world.

Industrial machinery is the largest sector and accounts for almost half of China’s total demand for machine tools. Meanwhile, the automobile sector is the second biggest user, accounting for around 23% of the demand. This coincides with the rapid expansion of the automobile industry within China over the last ten years, which has seen the country rise to being the world’s top market for the purchase of automobiles.

However, it is the high-end and heavy duty sector which is expected to experience the quickest growth in the coming years. This is partly the result of a direct injection of government capital within the sector, as well as government policy, which favours this particular area of the Chinese economy.

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