China Becomes Top Machinery Exporter for the First Time

By Lily Wang

The website of Germanys Die Welt reported that according to the recent research results published by the VDMA， China has become the worlds most important machinery equipment and system supplier for the first time in 2020， while German machinery manufacturers lost the world championship in machinery exports.

Change of champion is not unexpected

According to data from the statistical departments of many countries， the global machinery trade volume reached EUR 1.05 trillion（approximately USD 1.24 trillion） in 2020. Due to the COVID-19 pandemic， this amount decreased by nearly 10% from the previous year. Chinas share of international sales is approximately 15.8%， while Germanys market share is approximately 15.5%. This means that for the first time， China was able to lead the world in terms of machinery trade volume. Back in 2019， German suppliers were still 1.4 percentage points ahead of Chinese enterprises.

Besides Germany， the shares of other major machinery exporting countries have decreased. However， the ranking remains unchanged. The U.S. still takes the third position， accounting for 9.1% of the export market. Japan and Italy follow in the rankings， accounting for 8.6% and 6.7% respectively.

The German media has stated that the change in champion is not surprising. VDMA trade manager Ulrich Ackermann said， “China is the worlds largest machinery manufacturing country. It was only a matter of time until China became the leader in machinery exports.”

Ackermann also said： “Now， China is competing at the medium-level product. Its export destinations are no longer limited to the emerging industrial countries of Africa and Asia. It is also the largest foreign supplier for Germany.”

Ackermann also explained that Germany is still the most important supplier in the European market： “If the EU economic recovery is strong， we are confident that Germanys machinery exports will grow faster and take back the top position again.”

However， VDMA research shows that in the long run， the situation will be more favorable for China. This is not only because of Chinas productions scale， but also due to the Chinese governments support of the machinery manufacturing and export. For example， in 2010， German suppliers are leaders in the Russian market， with a market share of approximately 25%； at present， the share for German suppliers has dropped to 15%， while the share for Chinese suppliers has surpassed 20%.

Ackermann continued： “Germany and the EU should not advocate protectionism， but must cope with the challenges through market measures. We will raise our competitiveness to achieve that goal.”

Experts predict that this year the price of raw materials in Chinas machinery manufacturing industry will further rise， which will also increase the costs of machinery manufacturing and reduce profits. Moreover， the industrial chain of mechanical products is long. Although the pandemic situation in China has been effectively controlled， there are still cases of infections from time to time in various regions. Once cases occur， local factories may be shut down and the length of construction will be infinitely prolonged. Companies will face heavier pressure， a more tense capital chain and the risk of liquidity issues. However， one certain thing is that Chinas machinery manufacturing has great prospects， and more and more countries are beginning to recognize the machinery products developed and produced by China.

Intelligent manufacturing is needed

At the time of the alternation between the new and old driving forces， major countries have taken the upgrading of manufacturing industry as their strategic focus. Intelligent manufacturing has become an important vehicle， as both states and enterprises have been making plans， issuing policies and promoting implementation to improve the competitiveness of the manufacturing industry through technological innovation and application upgrading. They hope to mitigate rising labor costs and maintain manufacturing advantages， while keeping the manufacturing industry in their country.

However， the difference in the foundation and advantages of various countries has led to a disparity in their key needs and strategic focus in terms of developing intelligent manufacturing.

The U.S. started to face the hollowing out of its manufacturing industry after the second World War， and its major focus is to promote manufacturing rejuvenation through intelligent technology. The information technology used in the U.S. manufacturing industry is the best in the world， especially in the areas of industry software and the Internet. The strategic focus is on the production， design and service of the value chain， the integration of intelligent equipment and software， and also on big data analysis.

Germany is a global leader in the field of industrial automation， with strong precision manufacturing capabilities and highly reliable high-end equipment. Its national strategy focuses on promoting intelligent manufacturing through CPS（cyber-physical systems）， in the hopes of consolidating and defending its national industrial technology sovereignty through the integration of digital innovation and industrial manufacturing.

Japans manufacturing industry focuses on product quality and technological innovation， and has occupied the high-end position in the industrial chain. As Japanese society is faced with the problem of aging and low fertility， the development of intelligent manufacturing mainly focuses on solving these issues， and incorporating the industrial intelligence into all walks of the society. The purpose of this is to support the structural transformation of Japanese society and create a “super smart society”.

Yang Yan， Director of the Sense Time Industry Research Institute， explained that China has been issuing various favorable policies to promote the development of intelligent manufacturing. The major driving forces derive from supply-side reform and change in the demand side.

From the perspective of the supply side， Chinas manufacturing industry is on a large scale， which is mainly reflected in four aspects：

First， the comparative advantage of the production costs in China is decreasing. In addition to labor costs， energy， land and financing costs are rising. Boston Consulting once compared the manufacturing cost index of 25 export economies， and the results showed that the comprehensive cost of Chinas manufacturing industry is basically equal to that of the U.S.

Second， China has been seeing serious issue in terms of overcapacity. According to experts estimations， Chinas capacity utilization efficiency is lower than the normal range of 79-83%， showing that the match between supply and demand needs to be improved and that the overall production efficiency is low.

The third is that Chinas manufacturing industry is in the process of manufacturing with a low profit margin， and low technology and added value. The matter of industrial upgrading is urgent. At the same time， due to the lack of basic materials， key components， advanced basic technology and industrial technology upstream of the industrial chain， the whole industry is still short of an independent system. As the international situation becomes complicated and uncertainties increase， the stability of the industry chain and the supply chain is facing challenges.

Fourth， the development of Chinas manufacturing industry is highly dependent on energy and resources. In the past， the extensive production model caused great damage to the environment. According to statistics from the World Bank in 2017， Chinas energy consumption per unit of GDP is approximately 1.53 times that of the world average level. Industrial manufacturing accounts for more than 70% of the total carbon emissions. Facing the new missions of controlling carbon emissions and aiming for a carbon peak in 2030， the future development of the manufacturing industry will be increasingly constrained by energy and environmental factors.

From the demand side， there are two irreversible trends in the consumer market： first， users are paying more and more attention to the consumption experience， product services， and personalized demand. Such changes have driven manufacturing enterprises to change their production mode to become more customized. The second is that customersdemand for new products comes at a faster pace. This has required manufacturing enterprises to shorten the period required for product innovation and manufacturing and respond to market changes.

Generally speaking， the problems accumulated on the supply side and the changes at the demand side constitute the main driving forces for China to develop intelligent manufacturing.