Page 158 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
demand growth driver of the home appliance sector, He the minimum wage, the quality of staff, suppliers, and
said (Consumer Appliances in China). infrastructure is increasing. These developments reinforce
China’s ability of remaining an excellent location for
The rural market for kitchen appliances should not be manufacturing companies. Furthermore, selling to the
underestimated even though penetration remains low. Chinese market requires a local presence for most foreign
Their ownership of color televisions and refrigerators companies (BBSO Dalian).
rose but was basically satisfied following the continuous
growth per capita net income of rural residents and the The electronic equipment and machinery
implementation of the “rural home appliance subsidy” manufacturing industry in China produces a wide array
policy a few years back; however, the penetration rate of of items used by a range of downstream industries.
range hoods and gas stoves is expected to expand. Rural The 2009 financial crisis resulted in a difficult operating
markets of course have rural characteristics. Appliances environment for many of the industry’s customers. This
directed at this demographic should be simpler than those resulted negatively for the manufacturing industry;
sold in cities where the education rate is so much higher. however, the gears started rolling faster the next year and
Suppliers should also enhance product promotion and by 2011 revenue grew by 30 percent. Industry revenue
after-sale service in order to boost consumer confidence has increased 12.4 percent annually for the past six
(China Kitchen Electrical). years to $11.4 billion. According to IBISWorld, for every
dollar spent on labor (including wages, management
Office Equipment and Supplies administration and research and development costs)
about 43.4 cents are invested in capital in this industry.
Increasing domestic demand and new foreign markets This indicates a high capital intensity in particular since a
are driving revenue for the stationary and office supply high level of capital is tied up in technological advanced
manufacturing industry in China. Revenue has been manufacturing equipment. The industry has a greater
increasing over the past five years at an annual rate of demand for corresponding manufacturing equipment
about 8.3 percent. The industry is primarily concentrated in with substantial demand for electrical equipment and
East China where Zhejiang, Guangdong, Shanghai, Jiangsu machinery. The installation of new, advanced equipment
and Shandong accounted for 74.2 percent of the industry and the upgrades of old equipment lead to high
revenue in 2016 (Stationary and Office). The Chinese depreciation levels (Electronic Equipment and Machinery).
stationary industry accounts for 8.6 percent of the world’s
stationary market. The academic market for paper supplies Still, China’s machinery industry is a leading pillar of
is enormous. There are approximately 180 million students the nation’s economy. Its main business revenue increased
in primary or secondary schools, 3 million in colleges, and about 7 percent in 2016, reaching a total value of $35 trillion.
50 million adult students. That does not even count the The Chinese government aims to control capital outflow
34 million enterprise leaders in the country. A diversified so that it focuses more on the high-tech manufacturing
and multi-leveled consumption is focusing toward high- technology industry. Small and medium-sized enterprises
end products. Due to this massive consumer group, the dominate the low-end machinery market, but the high-
Chinese stationary market is growing at an average rate end machinery market is mostly captured by state-owned
of 12 percent per year and is expected to increase by 5-10 enterprises and international players (China-Machinery).
percent in the near future (Frankfurt).
Initially, China was primarily self-sufficient with most
Machinery companies doing everything in-house. A swing toward
outsourcing and value-added service has developed.
The rise of China’s manufacturing industry has been Flexibility is becoming a primary concern for machine tool
exceptional as production capacity relocates from producers. In order to effectively address the diverse needs
developed countries to emerging markets like China. of regional markets, this industry needs to accommodate
As early as 2010, KPMG’s Global Manufacturing Outlook diverse customer needs. Moving production operations
claimed that China was the most important sourcing closer to the markets in which they are sold is a factor
location for manufacturing capacity. That year China driving the shift from low-end tool production towards
accounted for more than 35 percent of the global output. high-end production in China, as high-end international
While the low-cost “advantage” of production in China’s companies set up regional operations (China’s Machine
eastern coastal provinces fades a bit with the rise of Tools). The total output of machine tools reached about
$22.9 billion in 2016, an increase of 3.6 percent over the
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demand growth driver of the home appliance sector, He the minimum wage, the quality of staff, suppliers, and
said (Consumer Appliances in China). infrastructure is increasing. These developments reinforce
China’s ability of remaining an excellent location for
The rural market for kitchen appliances should not be manufacturing companies. Furthermore, selling to the
underestimated even though penetration remains low. Chinese market requires a local presence for most foreign
Their ownership of color televisions and refrigerators companies (BBSO Dalian).
rose but was basically satisfied following the continuous
growth per capita net income of rural residents and the The electronic equipment and machinery
implementation of the “rural home appliance subsidy” manufacturing industry in China produces a wide array
policy a few years back; however, the penetration rate of of items used by a range of downstream industries.
range hoods and gas stoves is expected to expand. Rural The 2009 financial crisis resulted in a difficult operating
markets of course have rural characteristics. Appliances environment for many of the industry’s customers. This
directed at this demographic should be simpler than those resulted negatively for the manufacturing industry;
sold in cities where the education rate is so much higher. however, the gears started rolling faster the next year and
Suppliers should also enhance product promotion and by 2011 revenue grew by 30 percent. Industry revenue
after-sale service in order to boost consumer confidence has increased 12.4 percent annually for the past six
(China Kitchen Electrical). years to $11.4 billion. According to IBISWorld, for every
dollar spent on labor (including wages, management
Office Equipment and Supplies administration and research and development costs)
about 43.4 cents are invested in capital in this industry.
Increasing domestic demand and new foreign markets This indicates a high capital intensity in particular since a
are driving revenue for the stationary and office supply high level of capital is tied up in technological advanced
manufacturing industry in China. Revenue has been manufacturing equipment. The industry has a greater
increasing over the past five years at an annual rate of demand for corresponding manufacturing equipment
about 8.3 percent. The industry is primarily concentrated in with substantial demand for electrical equipment and
East China where Zhejiang, Guangdong, Shanghai, Jiangsu machinery. The installation of new, advanced equipment
and Shandong accounted for 74.2 percent of the industry and the upgrades of old equipment lead to high
revenue in 2016 (Stationary and Office). The Chinese depreciation levels (Electronic Equipment and Machinery).
stationary industry accounts for 8.6 percent of the world’s
stationary market. The academic market for paper supplies Still, China’s machinery industry is a leading pillar of
is enormous. There are approximately 180 million students the nation’s economy. Its main business revenue increased
in primary or secondary schools, 3 million in colleges, and about 7 percent in 2016, reaching a total value of $35 trillion.
50 million adult students. That does not even count the The Chinese government aims to control capital outflow
34 million enterprise leaders in the country. A diversified so that it focuses more on the high-tech manufacturing
and multi-leveled consumption is focusing toward high- technology industry. Small and medium-sized enterprises
end products. Due to this massive consumer group, the dominate the low-end machinery market, but the high-
Chinese stationary market is growing at an average rate end machinery market is mostly captured by state-owned
of 12 percent per year and is expected to increase by 5-10 enterprises and international players (China-Machinery).
percent in the near future (Frankfurt).
Initially, China was primarily self-sufficient with most
Machinery companies doing everything in-house. A swing toward
outsourcing and value-added service has developed.
The rise of China’s manufacturing industry has been Flexibility is becoming a primary concern for machine tool
exceptional as production capacity relocates from producers. In order to effectively address the diverse needs
developed countries to emerging markets like China. of regional markets, this industry needs to accommodate
As early as 2010, KPMG’s Global Manufacturing Outlook diverse customer needs. Moving production operations
claimed that China was the most important sourcing closer to the markets in which they are sold is a factor
location for manufacturing capacity. That year China driving the shift from low-end tool production towards
accounted for more than 35 percent of the global output. high-end production in China, as high-end international
While the low-cost “advantage” of production in China’s companies set up regional operations (China’s Machine
eastern coastal provinces fades a bit with the rise of Tools). The total output of machine tools reached about
$22.9 billion in 2016, an increase of 3.6 percent over the
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