Machinery and industrial equipment manufacturing is one of the biggest industries in China. It’s also the biggest exporter of the products globally, having a market share of around 30% and with many foreign companies relying on its supply market.
In this article, we review the industry in China, what kinds of machinery and equipment are produced, and more.
China’s Machinery and Industrial Equipment Manufacturing Industry
The machinery manufacturing industry comprises the manufacturing of all machinery used in mining, manufacturing, energy, construction sectors, and domestic appliances. Examples of specific products include machine tools, material handling systems, heavy machinery, industrial machinery, and propulsion and powertrain technologies.
When reviewing the size of the industry, it grew at a rate of 8.2% from 2012 to 2021, which speaks for itself. By the end of 2021, more than 105,100 enterprises in the equipment industry had realized significant growth in revenues while total assets, operating revenues, and profits climbed 92.97%, 47.76% and 28.84% since 2012.
Overall, the Chinese equipment manufacturing industry is at a key stage for the development of high-end technology. These days, due to the heavy investment in industrial independent development ability, industrial equipment manufacturing in China, such as shield tunneling machines and cranes, has continuously developed innovation while the degree of localization and autonomy has been significantly improved.
Notably, China now masters core technologies such as digitalized high-speed and high-precision motion control and multi-axis linkage at the same time covers the most complete engineering machinery categories and the most integrated supply chain around the world.
What types of machinery and equipment are manufactured in China?
China is a leading country in the production of many machinery and equipment categories. Below we have included some examples.
Rail transit equipment
Urban rail transit equipment includes, for example, escalators, air conditioning, ventilation equipment, subway vehicle traction, switch equipment, power control equipment, and more. The export of rail transit equipment has developed quickly in recent years, from around 530 million USD in 2008 to 7.51 billion USD in 2021.
Vehicles account for much of the rail transit equipment production and exports, currently around 75% percent. Related parts and components accounted for less than 25% in 2021, on the other hand. Rail transit equipment has been exported to most parts of the world, yet developing countries account for more than 70% of the imports.
Worth mentioning is also that the global rail transit equipment industry is highly monopolized by a few companies. China’s CRRC, located in Hunan province, dominates the global market with a market share of more than 50%. In 2021, CRRC, Bombardier of Canada, Alstom of France, Siemens of Germany, and other enterprises have a relatively high market sales share of 54.2%, 10.5%, 9.8%, and 7.6% respectively.
However, the competitive landscape is constantly changing and intensifying due to the strong demand for technological improvement. Meanwhile, because of the loosened restriction on private enterprise in China, more and more regions and private enterprises have accelerated the layout of the whole rail transit industry chain and gradually formed the capacity to provide systematic solutions. In the context of competition, downstream enterprises can find alternative suppliers easier.
The manufacturing of industrial robots increased 10-fold from 2015 to 2021, which speaks for itself. According to the International Federation of Robotics (IFR), China has been leading the race in implementing industrial robots for the last decade, having 243,000 robot installations in 2020 alone. Now, it has almost half of all the industrial robots in the world.
There is no doubt that the US has the most advanced manufacturing of automation, precision, and industrial robots. Most of the smart sensors and other core components, which are used in Automatic Mobile Robots (AMR), were mainly sourced from foreign brands in the past. However, depending on the technology upgrades, China can not only offer relatively economical industrial robots but also provide customized services for different downstream customers while maintaining a short supply cycle, meeting the application demands in more downstream processes, from consumer levels to industrial levels. So far, industrial robots have been applied in 52 industrial divisions and 143 industrial groups in China, including automobile, electronics, metallurgy, light engineering, petrochemical, and medicines.
China has the world’s largest market for industrial robots, and the market is expanding with huge potential. Localization is a must for foreign products to win a share in the Chinese market while domestic manufacturers are closer to Chinese enterprises and are in a better position to learn about domestic demand for industrial robots.
According to the 14th Five-Year Plan issued at the end of 2021, China will build itself into a global hub of technological innovation, high-end manufacturing, and integrated application in the robotics industry. The country will also nurture some globally competitive and innovative manufacturers of robots and build three to five industrial clusters with international influence.
Heavy equipment mainly refers to heavy-duty machines or vehicles, specially designed for executing construction tasks or other earthwork operations. Major heavy equipment business products include concrete machinery, excavators, cranes, pilling machinery, road machinery, material handling machinery, and more.
China has been the world’s largest manufacturer of heavy equipment and construction machinery by volume for many years and accounted for nearly 40% of all global heavy equipment sales from 2016 to 2021.
The production and export volume of China’s construction machinery industry has been ranked first in the world. By the first half of 2021, as many as eleven Chinese companies were listed among the top 50 construction machinery companies in the world. In 2021, thanks to the productivity revival from the epidemic, industry exports hit a new high, surpassing the all-time high set in 2008.
To illustrate, the heavy machinery industry reached a 24.36 billion USD export value, increasing 34.6% year on year while the export surplus was 19.86 billion USD, increasing 46.58% year on year.
China is one of the largest manufacturers of farming equipment, and the largest market for agricultural machinery globally. As China experiences rapid urbanization, with many farmers leaving rural areas, farmer shortages and the aging population have increased the dependence on agricultural machinery significantly.
Besides, the implementation of the agricultural machinery purchase subsidy policy has promoted agricultural mechanization greatly. While the import of agricultural machinery fluctuated little from 2021 to 2022, the exports climbed to US $6.4 billion, up 28.2%.
Most agricultural machinery industries are mainly concentrated in Shandong, Henan, Jiangsu, Liaoning, and Zhejiang provinces. The bestselling types of agriculture machinery include large tractors and harvesting machinery products with high horsepower and high degrees of automation.
In the Chinese agricultural machinery market, companies are not only competing based on equipment quality and promotion but are also focused on strategic moves to gain higher market shares. New product launches, partnerships, and acquisitions are the major strategies being adopted by leading companies.
The Chinese agricultural machinery market is fragmented in nature while the top five domestic manufacturers only account for less than 25% of the market. Notably, foreign brands occupy the leading position in the high-end products market.
China’s Major Export Markets of Machinery
According to the German Machinery Manufacturers Federation (VDMA), the global trade volume of machinery was estimated at 1.10 trillion USD in 2020, decreasing 10% compared to 2019. Here, China’s exports of construction machinery products reached about 172.7 billion USD, accounting for 15.8% of the global market share.
Germany’s exports amounted to 169.8 billion USD, accounting for 15.5% of the global market, showing that, for the first time, China has overtaken Germany to become the world’s largest machinery exporter.
However, problems such as rising costs and decreasing demand still exist, putting pressure on China to ensure the industry’s stability in the export market. In the next few years, the Chinese government aims to control capital outflow to foreign industries such as real estate, sports, and entertainment, while focusing on investment in high-tech manufacturing technology industries, according to the 14th Five-Year Plan.
Given this focus, sub-sectors such as CNC machine tools, robotics, 3D printing equipment, and energy-efficient and environment-protection equipment may receive the most input and achieve the most development in products, bringing commercial opportunities to foreign importers.
Import Duties for Machinery Imports from China
In 2021, China’s exports to the EU reached 494 billion USD, accounting for about 15% of China’s total exports, and 25% of the EU’s total imports. Yet, since December 1, 2021, European countries have no longer given China the Generalized System of Preference tariff treatment, putting pressure on China’s machinery exporters. Meanwhile, due to the Carbon Border Adjustment Mechanism (CBAM), the cost of European clients’ machinery imports from China may be affected and increase correspondingly.
Since the US-China Trade War started, large-scale machinery products are included in the additional tariff list imposed by the United States. However, the US government announced in March 2022 that it would reinstate 352 tariff exemptions for Chinese products which include many machinery products meanwhile according to Morgan Stanley, the U.S. may further ease tariffs on Chinese goods, showing a positive signal for machinery product export to America.
Leading Manufacturers in China
China is home to some of the biggest heavy equipment manufacturers in the world. We have listed two of the most prominent below.
Sany is a Chinese multinational heavy machinery manufacturing company headquartered in Changsha, Hunan Province, one of the top ten biggest heavy equipment manufacturers in the world. Examples of products produced include some of the world’s best concrete machinery, excavators, hoisting machinery, road machinery, port machinery, and wind turbines.
Sany has a dozen industrial parks in China plus manufacturing facilities in Brazil, Germany, India, Indonesia, and the United States, and has around 90,000 employees all over the world.
Zoomlion is one of the largest heavy equipment manufacturers in China. Its headquarters are in Changsha, Hunan province. Zoomlion’s heavy equipment and construction machinery products have been well sold to markets in the Middle East, South America, Africa, Southeast Asia, and Russia as well as many high-end markets in the USA, Europe, and Australia. The company has subsidiaries in nearly 20 countries in East Asia, Southeast Asia, and Europe. They have industrial and technological parks in Italy, Germany, India, Brazil, and Belarus, as well as more than 50 resident offices around the world.
As a consequence of the labor shortage and aging population in China, the level of mechanized production is crucial for industrial development. According to the 14th Five-Year Plan issued at the end of 2021, the machinery and industrial equipment industry in China now is at a critical stage of industry transformation and upgrade, accelerating its development toward digitalization, networking, and intellectualization.
China has long been an industrial manufacturing giant, meanwhile, thanks to continuous technological innovations, it now shows strength in mass customization and takes the leading position in many segmented machinery industries such as rail transit equipment, heavy equipment, industrial robots, and agricultural machinery, promising a relatively flexible supply relationship by providing plentiful substitute suppliers and short leading time.
However, in the context of frequent trade conflicts, tariffs are easily influenced by government policies. At the same time, due to the pandemic lockdowns in China, foreign companies need to pay attention to the potential risks of rising costs affected by the duty policy change and long delivery cycle.