High-end technology and innovation are the focus of today’s machinery and industrial equipment manufacturing industry in China. As the world’s biggest producer and exporter of machines, China is constantly improving this sector through heavy investment and the development of new technologies, such as digitalized high-speed and high-precision motion control.
China is the biggest exporter of the products globally, having a market share of around 30%, with many foreign companies relying on its supply market.
The machinery manufacturing industry comprises the production 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 and construction machinery, and propulsion and powertrain technologies.
From 2012 to 2021, the size of the industry grew at a rate of 8.2%. 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.
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, such as shield tunneling machines and cranes, has continuously developed innovation.
Core technologies such as digitalized high-speed and high-precision motion control, and multi-axis linkage have been mastered by the industry. China dominates in most engineering machinery categories and has the most integrated supply chain around the world.
At the 2023 World Manufacturing Convention, in Hefei, east China's Anhui Province, a total of 587 investment projects worth RMB 342.5 billion (about US$ 47.75 billion) were signed, according to the organizer.
Covering an area of 80,000 square meters, this year's convention displayed a variety of cutting-edge technologies, including quantum computers, rockets, new-energy vehicles, and maglev trains with a maximum speed of 600 km per hour.
Held since 2018, the World Manufacturing Convention has attracted over 14,800 participants. A total of 3,021 projects have been signed, with actual investment exceeding RMB 1 trillion (around US$ 139.4 billion).
China is the leading producer in several machinery and equipment categories:
Rail transit equipment
Urban rail transit equipment includes: escalators, air conditioning, ventilation equipment, subway vehicle traction, switch equipment, power control equipment, and more. The export of rail transit equipment has developed quickly, from around US$ 530 million in 2008 to US$ 7.51 billion 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. Rail transit equipment has been exported to most parts of the world, yet developing countries account for more than 70% of the imports.
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.
The strong demand for technological improvement is changing the competitive landscape. More and more private enterprises have accelerated the layout of the whole rail transit industry chain and gradually formed the capacity to provide systematic solutions.
Industrial robots
The manufacturing of industrial robots increased 10-fold from 2015 to 2021. 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. That is almost half of all the industrial robots in the world.
The United States remains the most advanced manufacturer 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.
Industrial robots have been utilized 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.
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
Heavy equipment 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 value of this sector is estimated to reach US$ 48.1 billion in 2023, according to Statista.
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 globally. In 2021, thanks to the productivity revival after the pandemic, industry exports hit a new high, surpassing the all-time high set in 2008.
Agricultural machinery
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.
The implementation of the agricultural machinery purchase subsidy policy has greatly promoted agricultural mechanization. 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 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 players.
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.
According to the German Machinery Manufacturers Federation (VDMA), the global trade volume of machinery was estimated at US$ 1.10 trillion in 2020, decreasing 10% compared to 2019. China’s exports of construction machinery products reached about US$ 172.7 billion, accounting for 15.8% of the global market share.
Germany’s exports amounted to US$ 169.8 billion, accounting for 15.5% of the global market. For the first time, China has overtaken Germany to become the world’s largest machinery exporter.
Challenges such as rising costs and decreasing demand are 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.
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.
In 2021, China’s exports to the EU reached US$ 494 billion, accounting for about 15% of China’s total exports, and 25% of the EU’s total imports. 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.
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. According to Morgan Stanley, the U.S. may further ease tariffs on Chinese goods, showing a positive signal.
China is home to some of the biggest heavy equipment manufacturers in the world, including Sany Heavy Industry, and Zoomlion Heavy Industry Science & Technology Co.
Sany is a Chinese multinational heavy machinery manufacturing company headquartered in Changsha, Hunan Province, one of the top ten in the world. Examples of products produced include concrete machinery, excavators, hoisting machinery, road machinery, port machinery, and wind turbines. The company has manufacturing facilities in Brazil, Germany, India, Indonesia, and the United States, and has around 90,000 employees.
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 sold to markets in the Middle East, South America, Africa, Southeast Asia, and Russia as well as in the US, Europe, and Australia. The company has subsidiaries in nearly 20 countries, with industrial and technological parks in Italy, Germany, India, Brazil, and Belarus.
In 2020, Sany increased its R&D investments to US$ 954 million, an increase of 33.2 % over 2019 and the number of R&D employees reached 5,436, a 69% increase over 2019. Sany has launched new innovative products like super-large excavators SY870, SY980 and SY1250, new-generation product line of intelligent excavators and 4000 t crawler crane SCC40000A, which helped the company balance the decline in sales during the COVID-19 pandemic.
The increasing focus on infrastructure, the development of automation in the construction and manufacturing processes, and the introduction of electric construction equipment is expected to have a significant impact on the growth of the market. The road construction machinery market witnessed a substantial increase due to programs such as the Belt and Road Initiative.
Besides being the largest manufacturer of construction equipment globally, China is the largest market for construction machinery in the world. Rural construction activities, rapid urbanization, and the growth in public-private partnerships drove the demand for construction equipment. China also has one of the best construction machinery supply chains in the world, with all parts of the supply chain being in China.
Renting and leasing construction machinery is on the rise. Buying new equipment involves high-cost, maintenance, and storage-related issues. Renting is becoming a viable possibility for newer businesses as well. In fact, for short-term construction applications, renting machinery has been preferable to an original purchase among construction contractors.
Key players are also expanding their manufacturing capacity and launching new products.
In February 2022, Sany unveiled a new SY2600E 300 t class electric-drive hydraulic front shovel to be produced at its Suzhou plant in China. The SY2600E is 15 m long and 8 m high, and it has a bucket capacity of 15 cubic meters. It is powered by an electric drive with a fully electronic control system. The excavator is specifically designed for heavy duty mining applications.
In October 2022, XCMG Port Machinery started operations at their new plant in Xuzhou, China. The new plant produces container reach stackers, forklifts, mobile port machinery and gantry cranes, shore bridge and other large port machinery with an annual capacity of 2000 units.
Additionally, China is a significant manufacturing hub for international equipment manufacturers. Through joint ventures, wholly owned investments, or acquisitions, all of the leading international manufacturers, including Caterpillar, Terex, Manitowoc, Komatsu, Hitachi, Kobelco, Volvo, Liebherr, Wirtgen, Fayat, Doosan, and Hyundai, have manufacturing bases in China.
As a result, major companies are establishing manufacturing facilities in different parts of China to capitalize on the increasing demand for construction machinery. Although the country's competitive situation is intense, many global players are competing with local construction machinery manufacturers to increase their share in the market.
In May 2021, Zoomlion inaugurated the second phase of its smart crane tower plant at Cgangde City in central China. The plant covers 49.33 hectares of total area and is the largest plant for manufacturing wind tower cranes in the world.
Ongoing mega projects in China need a lot of machinery and materials to be displaced from one part of the country to another. Projects like the Zhongwei Ji'an Natural Gas Pipeline project, Liuzhou-Wuzhou Railway Line, Belt and Road Initiative, and the Zhengshen Foshan Expressway are some of the many plans that require the deployment of construction equipment. China plans to invest over US$ 3.4 trillion in infrastructure projects in the coming years.
‘Clean’ technologies are rapidly becoming mainstream, with China's local brands taking a strong position in battery-electric powered machinery.
A Chinese brand launched the world's first pure electric excavator model that will be produced in large quantities. It has zero emissions, low noise and is expected to reduce operating costs by 60%.
Other local companies have introduced remote-controlled machines that use the latest 5G technology to allow operators – wearing VR headsets – to operate them in real time.
Domestic firms are dominating in the fields of autonomy, electrification and 5G based remote control. This trend is no surprise since it is in line with China’s national quest to reduce its dependence on the West for new technologies. Multinationals are learning rapidly that they no longer dominate the premium sector, nor is China any longer a vast dumping ground for outdated technology.
Local Chinese companies are moving away from simple machine sales policies, and instead promoting more holistic aftersales solutions, more flexible financial packages, an improved online customer experience, and smarter telematics solutions.
Customized finance, insurance and warranty offerings are all integrated via e-commerce platforms. The platforms are part of ecosystems that monitor and report machine data, allowing customers to get accurate recommendations on parts and services.
Companies that delegated the customer relationship to their traditional distribution network in China need to rethink their retail strategy towards a more omnichannel approach. This means creating digital channels that keep the customer experience as simple, seamless, and customized as possible.
Because 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, the machinery and industrial equipment industry in China now is at a critical stage of transformation and upgrade, accelerating its development toward digitalization, networking, and intellectualization.
China has long been an industrial manufacturing giant. Thanks to continuous technological innovations, the country will take 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.
Challenges moving forward will include frequent trade conflicts, influenced by government policies, and in a post COVID-19 world, foreign companies will have to pay close attention to the potential risks of rising costs and long delivery cycles.
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