Mechanical engineering in China is running at full speed

The current business situation for machinery and equipment manufacturers in China evolves well for 2021. This is shown by the results of the VDMA's spring survey of member companies based in China. They indicate that the mechanical engineering sector in the People's Republic will continue its broad-based upswing that began in the second half of 2020. According to the survey, 61 percent of the companies surveyed rate the current business situation as good, while 35 percent rate it as satisfactory. Only 4 percent rate it as poor. In the previous survey in autumn 2020, it was still 16 percent who complained about poor business. The assessments for the fluid technology, electrical automation and textile machinery sectors are now above average.

Capacity utilisation at all-time high

Capacity utilisation in China reached a new high in spring 2021. 64 percent of companies reported above normal capacity utilization, 29 percent reported normal levels, and only 7 percent were underutilized. "Company expansions, which were put on hold last year, are now back on top of the agenda" explains Claudia Barkowsky, Managing Director of VDMA in China. Many sales sectors are currently experiencing strong demand, including pharmaceuticals, automotive (including e-mobility and battery production) and petrochemicals, but also wind power, aviation and woodworking.

China has also seen a strong improvement in new orders. 55 percent of the companies surveyed reported that current order intake is above the normal range. Only 8 percent said orders were below normal. This compares to 20 percent in the fall of 2020.


Travel restrictions and lack of supply materials are slowing down business

However, there are also slowing factors in the Chinese market that 30 percent of the companies surveyed complain about. The persistent travel restrictions are still at the top of the list. Behind this, however, the picture has changed significantly: Within this group, seven months ago it was the lack of orders (66 percent in fall 2020, 33 percent in spring 2021) that caused a subdued mood, but currently it is the shortage of raw materials and supplies (44 percent in spring 2021, 6 percent in fall 2020). "Supply chains are very tight right now, largely because China is no longer the only region booming. The huge price increases for steel, sheet metal parts, electronics and many other products, as well as the low availability of semiconductors, for example, are building up pressure. Delivery times are extremely long," says Claudia Barkowsky Managing Director VDMA China.

Course remains set for growth

Sales developments in China last year were better than originally expected for many machinery and plant manufacturers. In the fall of 2020, participants estimated their sales growth for 2020 at 5 percent; according to the survey, an average of 9 percent was realized. For 2021 as a whole, companies gave an encouraging average growth expectation of 17 percent. "After storming growth in the first half of the year, companies expect it to continue at a lower but good level in the second half. There are currently no signs of a slowdown," the VDMA expert affirmed.

Importance of Chinese market for mechanical engineering increases

The importance of the Chinese market for VDMA member companies in China has increased during the pandemic, with 76 percent of companies reporting a significant (36 percent) or slight (40 percent) increase. "During the pandemic, China was a reliable market that quickly got back on its feet. Currently, it is the course set for the next five years that is causing continued optimism," Barkowsky explains.


Bottleneck Travel Restrictions

The flip side of the coin is that one in four companies (23 percent) is experiencing significant economic damage due to the travel restrictions in place to China. The lack of qualified local service technicians has either meant that the customer is still waiting for the order to be completed or that machines could not be sold and the potential order went to a local competitor. Only 20 percent of the companies surveyed said they had managed to send service technicians to China despite travel restrictions.