China Insights

GCiS shares a mix of China economy and business observations, industry articles based on recently published multi-client reports, infographics composed with public statistics and annual reviews of China demographics.

 

The Gradual Market Expansion of China’s CNC Metal-Cutting Machine Industry

This article is based on a GCiS multi-client report: China CNC Metal Cutting Machine Tools Market Research Report

As China moves away from its legacy of lower end manufactures and modernizes large swathes of its production capacity, the market for quality CNC metal-cutting machine tools is expected to grow over the long run, though the market will take some time to pick up. Historically, China’s broad manufacturing sector has been driven by domestically manufactured machine tools, but a shift in higher quality products necessitates a shift towards higher quality production methods and equipment. While foreign machinery suppliers have worked to address this demand, domestic suppliers have upgraded their offerings and continue to account for the vast majority of CNC machine tool sales in China. Over the next several years, will increasing demands for higher quality production lead to more opportunities for foreign suppliers?

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The New Normal in China for MNC’s: Attrition

MNC’s To Get a Smaller Share of a Much Bigger Market

Again the organizing concept for MNC’s in China is shifting. Whereas once the focus was on setting up, and quick expansion, now this should move to standard business development. The “land rush” is over, and now to borrow agricultural imagery its time to till the soil and produce good crops. Of course land rushes are far more exiting than farming, so there are complaints that growth is much slower than it used to be, and that some government practices and policies are unfair. At the same time, growth is slower than it was in the boom years around 2004-2010, with current official GDP growth rates at about 7%, and true growth likely even slower than this, in the range of 3-5%. In sum, for some of the shine has some off the China market.

While there may be some reason to complain, the fact is that the most recent 10-15 years represented an ideal period for foreign businesses in China: very fast development combined with relatively open access, and an under-developed set of domestic competitors, depending on the market. In the past several years though, these have all begun to change, with greater focus on compliance, stronger domestic players, and slowing growth. As a result MNCs are in effect being squeezed, with many losing market share in their target industries. Much of this though comes down to the natural progression of China’s development, rather than actions by the Chinese government.

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Anti-Corrosion Coating Suppliers Positive on Future Market Prospects in China

This article is based on a GCiS multi-client report: China Anti-Corrosive Coatings Market Research Report.

Over the last few years, the growth of China's anti-corrosion coatings market has dropped precipitously. According to a recent report from GCiS China Strategic research, overall market growth was just 2.8% in 2013 to a RMB 36 Bn or roughly USD 5.8 Bn market - far worse than the 13% growth experienced as recently as 2011. However, both domestic and multinational companies expect conditions to improve significantly over the next few years, pointing to developments below the surface of this headline growth figure. Industry insiders report that the recent slow growth is largely a result of difficulties in the shipbuilding and container sector, while other major end-user industry segments such as construction and petrochemicals are seeing much stronger performance. Improving technology and mounting domestic demand for high-quality products, alongside a likely future revival of the shipbuilding sector, are likely to lead to much healthier growth rates in approximately three to five years.

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Fabric Structure Construction in Second Tier Cities in China Supports Architectural Membrane Market

This article is based on a GCiS multi-client report: China Architecture Membrane Market Research Report.

With the increasing construction of fabric structures, architectural membrane is gaining increasing prominence in China due to its combination of positive qualities such as heat insulation, sound insulation, light-weight for easy transportation, hydrophobic properties that allow rain to create a self-cleaning effect and the semi-transparency that allows UV from sunlight to create an automatic bleaching effect and more. With increasing income level in China, booming demands for leisure and travel will drive up the demand for fabric structure. Given that majority of the current fabric structure projects that use membrane materials are public investment projects such as stadiums and airports and do not generate much profit directly, the growth in this sector is mainly supported by the government’s public infrastructure growth strategies and is subject to high volatility from policy changes. However GCiS believes that it is not likely to be a major concern for the industry’s development in the near future as China is still investing heavily into its second-tier cities. 

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Smart Grids in China – a Reality Check

China’s huge population and rapidly growing economy means that the country’s demand for power is seeing extremely fast growth. At the same time, its historically underdeveloped power grid and strong government control over this sector mean that China has strong opportunities to leapfrog more developed countries in terms of power grid technology. China’s commitment to building out a world-class “strong and smart grid” has meant that the country’s 2013 smart grid investment was the largest in the world.

China’s Smart Grid Strategy: Heavy investment in a “strong and smart grid”

China’s current overall smart grid strategy was set out in the 12th Five-Year Plan, released in 2011, and its supplementary Special Plan for Major Smart Grid Science & Technology Industrialization Projects. This document focuses on the development of large-scale renewable energy technology, along with grid support for these technologies and smart distribution and transmission technology. This is the first specific mention of smart grids in the country’s five-year plan, but it builds on trends that have been ongoing for years or decades.

The country’s largest grid operator, State Grid Corporation of China (SGCC), has led the push towards smart grid technologies. SGCC launched its “Smart Grid Umbrella Plan” in 2009, calling for a total investment of RMB 384 Bn into smart grid technologies from 2009-2020 as part of a RMB 3.45 Tn “strong and smart grid” investment. Smart meters and substations make up an overall majority of this investment, while upgrades to transmission and distribution networks, along with monitoring, communications and scheduling, make up the remainder. In comparison, smaller operator China Southern Grid (CSG) puts much less emphasis on “smart” technologies, although like State Grid it is in the process of a substantial smart meter rollout.

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