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6 White Paper on the Business Environment in China
2.3 Machinery and Electrical Equipment
Xinhua reports that between 2001 and 2010, remains small,” and that “[The PRC] still relies on imports of
the total output value of the machinery industry increased much high-end equipment.”7
from 1.44 trillion to 14.38 trillion yuan, a sustained growth rate
of 25 percent. In the same period, the number of enterprises in This perceived deficiency resulted in “huge incentives for
the industry grew from 34,000 holding 2 trillion yuan in assets innovation and R&D” and the encouragement that “as the
to 107,000 holding 10 trillion in assets in 2010.1 country expands infrastructure construction, machinery firms
should take the opportunity to upgrade their technology and
According to the National Bureau of Statistics of China’s raise their competitiveness.” It was also mentioned that the gov-
China Statistical Yearbook 2009, the manufacture of machin- ernment would be actively integrating research organizations
ery and electrical equipment* by state-owned enterprises in into the industrial product development cycle and adjusting
2008 resulted in an aggregate 14.8 trillion yuan in revenue from tax policy to “encourage machinery exports and imports of key
principal business activities across 120,106 enterprises above a technologies and machinery parts.”8
designated size,** including state-owned, privately-held domes-
tic and foreign-invested firms.2 Following up on these changes, Chairman of the Nation-
al Committee of the Chinese People’s Political Consultative
The 59,244 Foreign-invested*** enterprises included in the Conference Jia Qinglin remarked that the machinery industry
data alone accounted for 4 trillion of the sectors’ total revenue ought to “raise the quality and efficiency of the industry, accel-
while employing 7.1 million of the total labor force of 26.0 mil- erate mergers and acquisitions to forge conglomerates, and en-
lion individuals (approximately 27 percent of the total).2 hance the industry’s ability to withstand risks.”9
In early 2008, the Vice Director of the China Machinery Over the course of 2012 the Machinery business in China—
Industry Federation (CMIF) described the strong growth of both in terms of production as well as consumption—saw fur-
the machinery industry, saying that, “[We have] upgraded ther (relative) hardship as, according to analyst Zhang Cheng
our products and strengthened the overall manufacturing in- with Changjiang Securities in Shanghai, “The Chinese machin-
dustry,”3 and offering energy-saving and pollution reduction ery sector [was] experiencing a bottoming-out period.”10
equipment, infrastructure equipment and digitally-controlled
machine tools as examples of areas in which the domestic sector That year, for example, “Japanese excavator maker Komatsu
has made great technological progress. […] saw demand in China for construction and mining equip-
ment falling 40 per cent [over] three months,” while “[Komat-
By the end of that year, the PRC’s export volume of ma- su’s] Chinese rival Sany Heavy Industry […] reported a near-60
chinery and electrical equipment was the second-largest in the per cent slump in third quarter profits.”10
world; a year later it was the largest.4 Foreign-invested firms’
exports accounted for 69.4 percent of that year’s total (which Similarly, by October of that year Caterpillar had “slashed its
exports were worth approximately $494 billion). 5 2012 forecast” twice due to sales in China that had “slowed in
the third quarter and had yet to improve.”10
While the machinery sector continued to grow, 2011 saw
expectations of a foreign trade deficit in the field attributed to Hitachi Executive Vice President Toyoaki Nakamura
the rapid growth of machinery imports according to CMIF echoed seemingly worldwide pessimism about the near-term
as including rising input costs, difficulties in financing and in- market for machinery in China, opining that “we are starting to
creased labor costs. Nevertheless, total sales were predicted to see quite a (negative) impact from China, quite suddenly on our
expand by more than 10 percent.6 earnings, especially on construction machinery and high func-
tional materials, areas where the immediate market conditions
The same year, Chief Director Zhang Ji of the Ministry of are quickly reflected on results.”10
Commerce’s Department of Mechanical, Electronic and Hi-
Tech Industry noted that “the proportion of high-tech products Still, there appeared widespread optimism about the Chi-
in the country’s exports of machinery and electronic products nese government’s willingness and ability to enact further eco-
nomic stimulus to aid the county’s sagging economy, and in
* The “China Statistical Yearbook” includes six industrial sectors which we group under the title “machinery and electrical equipment”: “Manufacture of General
Purpose Machinery”, “Manufacture of Special Purpose Machinery”, “Manufacture of Transport Equipment”, “Manufacture of Electrical Machinery and Equipment”,
“Manufacture of Communication Equipment, Computers and Other Electronic Equipment” and “Manufacture of Measuring Instruments and Machinery for
Cultural Activity and Office Work.” Figures from the “China Statistical Yearbook” quoted hereafter are aggregates of values from those six categories in the original
publication.
**Here, “above a designated size” is qualified as enterprises with annual revenue from principal business of greater than 5 million yuan.
***This category includes enterprises funded from Hong Kong, Macau and Taiwan.
150
2.3 Machinery and Electrical Equipment
Xinhua reports that between 2001 and 2010, remains small,” and that “[The PRC] still relies on imports of
the total output value of the machinery industry increased much high-end equipment.”7
from 1.44 trillion to 14.38 trillion yuan, a sustained growth rate
of 25 percent. In the same period, the number of enterprises in This perceived deficiency resulted in “huge incentives for
the industry grew from 34,000 holding 2 trillion yuan in assets innovation and R&D” and the encouragement that “as the
to 107,000 holding 10 trillion in assets in 2010.1 country expands infrastructure construction, machinery firms
should take the opportunity to upgrade their technology and
According to the National Bureau of Statistics of China’s raise their competitiveness.” It was also mentioned that the gov-
China Statistical Yearbook 2009, the manufacture of machin- ernment would be actively integrating research organizations
ery and electrical equipment* by state-owned enterprises in into the industrial product development cycle and adjusting
2008 resulted in an aggregate 14.8 trillion yuan in revenue from tax policy to “encourage machinery exports and imports of key
principal business activities across 120,106 enterprises above a technologies and machinery parts.”8
designated size,** including state-owned, privately-held domes-
tic and foreign-invested firms.2 Following up on these changes, Chairman of the Nation-
al Committee of the Chinese People’s Political Consultative
The 59,244 Foreign-invested*** enterprises included in the Conference Jia Qinglin remarked that the machinery industry
data alone accounted for 4 trillion of the sectors’ total revenue ought to “raise the quality and efficiency of the industry, accel-
while employing 7.1 million of the total labor force of 26.0 mil- erate mergers and acquisitions to forge conglomerates, and en-
lion individuals (approximately 27 percent of the total).2 hance the industry’s ability to withstand risks.”9
In early 2008, the Vice Director of the China Machinery Over the course of 2012 the Machinery business in China—
Industry Federation (CMIF) described the strong growth of both in terms of production as well as consumption—saw fur-
the machinery industry, saying that, “[We have] upgraded ther (relative) hardship as, according to analyst Zhang Cheng
our products and strengthened the overall manufacturing in- with Changjiang Securities in Shanghai, “The Chinese machin-
dustry,”3 and offering energy-saving and pollution reduction ery sector [was] experiencing a bottoming-out period.”10
equipment, infrastructure equipment and digitally-controlled
machine tools as examples of areas in which the domestic sector That year, for example, “Japanese excavator maker Komatsu
has made great technological progress. […] saw demand in China for construction and mining equip-
ment falling 40 per cent [over] three months,” while “[Komat-
By the end of that year, the PRC’s export volume of ma- su’s] Chinese rival Sany Heavy Industry […] reported a near-60
chinery and electrical equipment was the second-largest in the per cent slump in third quarter profits.”10
world; a year later it was the largest.4 Foreign-invested firms’
exports accounted for 69.4 percent of that year’s total (which Similarly, by October of that year Caterpillar had “slashed its
exports were worth approximately $494 billion). 5 2012 forecast” twice due to sales in China that had “slowed in
the third quarter and had yet to improve.”10
While the machinery sector continued to grow, 2011 saw
expectations of a foreign trade deficit in the field attributed to Hitachi Executive Vice President Toyoaki Nakamura
the rapid growth of machinery imports according to CMIF echoed seemingly worldwide pessimism about the near-term
as including rising input costs, difficulties in financing and in- market for machinery in China, opining that “we are starting to
creased labor costs. Nevertheless, total sales were predicted to see quite a (negative) impact from China, quite suddenly on our
expand by more than 10 percent.6 earnings, especially on construction machinery and high func-
tional materials, areas where the immediate market conditions
The same year, Chief Director Zhang Ji of the Ministry of are quickly reflected on results.”10
Commerce’s Department of Mechanical, Electronic and Hi-
Tech Industry noted that “the proportion of high-tech products Still, there appeared widespread optimism about the Chi-
in the country’s exports of machinery and electronic products nese government’s willingness and ability to enact further eco-
nomic stimulus to aid the county’s sagging economy, and in
* The “China Statistical Yearbook” includes six industrial sectors which we group under the title “machinery and electrical equipment”: “Manufacture of General
Purpose Machinery”, “Manufacture of Special Purpose Machinery”, “Manufacture of Transport Equipment”, “Manufacture of Electrical Machinery and Equipment”,
“Manufacture of Communication Equipment, Computers and Other Electronic Equipment” and “Manufacture of Measuring Instruments and Machinery for
Cultural Activity and Office Work.” Figures from the “China Statistical Yearbook” quoted hereafter are aggregates of values from those six categories in the original
publication.
**Here, “above a designated size” is qualified as enterprises with annual revenue from principal business of greater than 5 million yuan.
***This category includes enterprises funded from Hong Kong, Macau and Taiwan.
150
