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Machinery production by sector: China. (Source: IHS Markit)
Machinery production by sector: China. (Source: IHS Markit)

China's machinery production is growing at a slightly slower rate in 2018 than that it did in 2017, but the industry is exhibiting strong growth of 7.9%, according to IHS Markit. Meanwhile, the overall production of material handling equipment will grow by 12.6% in 2018.

IHS Markit expects the machinery production in China will continue to rise at a compound annual growth rate (CAGR) of 7.6% from 2018 to 2022.

Favorable national policies

In 2018, the Chinese government issued a series of favorable policies to promote the development of its manufacturing industry -- for example, the country’s strategic “Made in China 2025” program, which encourages enterprises to use high-end machine tools.

As of April 2018, China's Ministry of Industry and Information Technology (MIIT) had founded five national innovation centers for material manufacturing, to focus on batteries for electric vehicles, optoelectronic information technology, traditional and flexible display panels and robots.

The ministry also cultivated about 60 manufacturing innovation centers, at the provincial level. At the same time, the government’s implementation of comprehensive tax cuts for productive enterprises also provided policy support for machinery manufacturers.

China will continue its "The Belt and Road Initiative" policy, strengthening cooperation with the member countries in the initiative and others in Latin America. To a certain extent, this initiative expanded the market for machinery used in automobile manufacturing, construction, electronics, metallurgy and textiles, says IHS Markit.

Continuous optimization of industrial environment

In China, new industries are growing fast. In the first quarter of 2018, the added value investment of high-tech manufacturing (i.e., information technology, biological engineering and new materials) increased by 11.9%, while fixed asset investment grew 7.9%.

As said, equipment manufacturing and consumer goods manufacturing grew faster than other categories. Industrial robots, new energy vehicles, integrated circuits and other new products are growing rapidly. Faster development of the downstream industry has led to demand growth in related machinery products.

The emergence of artificial intelligence, big data and other Internet of Things (IoT) technologies is injecting new vitality into China's machinery market. Its leading machinery manufacturers introduced the IoT concept into machinery, actively transforming themselves from traditional machinery producers to manufacturing services companies.

Machinery production forecast

In 2018 China's machinery production development will be buoyed by the country’s national policy guidance and support, a large influx of investment funds and the initial effect of industrial structure adjustment. However, other more unfavorable development factors for development in 2018 cannot be ignored, comments IHS Markit.

With trade disputes, like the China-US friction in 2018, on the rise, there is still a lot of uncertainty in the international environment. Domestic infrastructure investment in China is affected by national policies and macro-control, which strengthens its supervision of Public-Private Partnership (PPP) projects this year, but might also negatively affect infrastructure investment growth, causing some pressure on China’s domestic economy.

Still, China’s machinery production will grow steadily under this pressure in 2018. With the continuous optimization of its industrial environment in the next four to five years, China’s machinery production market will steadily rise, even as it transforms, IHS Markit concludes.

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