China Machinery Market overview

China’s Construction Equipment Market is expected to experience a growth of 4.8% in the span of 2020 – 2025. China along with being the largest manufacturer of construction equipment globally is also the largest market for construction machinery in the world. The consequent interest in this sector is mainly due to the increase of rural construction activities, urbanization, and the rise in public-private partnerships.

Belt and Road Initiative Map

Moreover, China also has one of the world’s best construction machinery supply chains, with all parts of the supply chain being located in China. The increasing focus on infrastructure and the development of automation in the construction and manufacturing processes had a significant impact on the market expansion. Furthermore, the road construction machinery market has recently witnessed a substantial increase in the road improvement programs such as the Belt and Road Initiative.

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Renting and leasing of 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.

China Machinery Sector: Key Market trends

China Machinery Market trends

Growing Demand for Second-Hand Machines

China is one of the largest manufacturing countries and consumers of building construction equipment globally. However, industry earnings are expected to rise to annualized 1.5% as it has been doing over the past five years till 2019.

However since 2012, spending in China surpassed those of the US, nonetheless, it is important to note that the demand for construction equipment has decreased in China, creating an excess of both unused and used construction equipment.

Low demand from the construction industry has resulted in generating low income, especially concerning major companies. The competition inherent to the market has also been very intense, which pushed the major equipment manufacturers to lower the prices of their equipment in order to attract more consumers.

Consequently, the used equipment is gradually becoming more popular, for the reason that used equipment is generally sold in good condition and at substantially affordable rates. A significant economic obstacle in shipping costs, unfavorable exchange rates, and heavy import taxes on new equipment can cost a lot more, resulting in companies being reluctant to buy new equipment. This can be a challenge, especially for upcoming business and local players.

The second-hand market also seems to offer a wider range of choice, regarding machine types, models, and manufacturers, but also it offers more pricing options. Allowing for the waiting period between purchasing the equipment and the actual delivery to be avoided.

China Growing Investment in the construction industry

The world’s major construction machinery makers have been setting up factories and joint ventures in China. Also, regarding the restrictions on foreign investments, high-end hotels, office buildings, international exhibition centers, and the construction and operation of large theme parks have been lifted. This has been done in order to expect to increase the demand for construction equipment in the country, thus driving the construction equipment market.

The Belt and Road Initiative mentioned above is expected to create increased demand for construction equipment. The Belt and Road Initiative (BRI)*, the most recent flagship project of China, has resulted in a significant increase in demand for construction equipment in the country. Although all the construction projects are executed overseas, the machinery is purchased and shipped from China as the government offers to reduce taxes to construction companies that buy the equipment for participating in the BRI*. Kobelco, Tadano, Caterpillar, and Liebherr have been working in increasing their presence in the country, as they anticipate massive demand from the country’s flagship BRI*.

As a result, major companies have been establishing manufacturing factories in different parts of China in order 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.

Industry Equipment in China: a Competitive Landscape

China Construction Equipment Market is consolidated with existing players such as Kobelco, Tadano, Caterpillar, and Liebherr, who captured the significant market share in 2019. The market is also dominated by local players such as Sany, XCMG, Zoomlion, etc…

Caterpillar research Results on Baidu

Since numerous international and regional players characterize the construction machinery market, construction manufacturers are trying to gain an advantage over their competitors by making joint-ventures, partnerships, and launching new products with advanced technology.

The Machine tools segment in China

While China continues to import premium tools from developed countries in the near term, the government is keen to raise the localization rate of Chinese mid-range and high-end computer numerical control (CNC)* machine tools to 80 percent by 2020.

CNC machining involves the use of computers to control machine tools in the manufacturing process. It facilitates the efficiency of China’s strategic industries, such as aerospace, telecommunications, and shipbuilding industries.

source

China is the largest producer, consumer, and importer of machine tools in the world.  China’s imports of machine tools reached 8.74 billion U.S in 2017 most of which are CNC* machinery and core components from Germany, Italy, Japan, and South Korea. Presently less than 20 Chinese companies can manufacture CNC machine tools. Many municipal governments in China have released policies to encourage R&D (Research and development) investments in the sector as well as to compete with key local enterprises, such as Shenyang Machine Tools, China’s largest machine tools manufacturer.

Agricultural machinery

China has a plan to produce 90% of its farming equipment and plans to hold a 60% share in the global high-end agricultural machinery market by 2025. China sees the adoption of advanced technologies and methods as crucial to enhance farming activity and gain environmental protection.

Nevertheless, these ambitions appear to be stretched as China only produces 15% of the agricultural machinery’s global production and is heavily reliant on the import of high-end farming equipment. The Chinese government has thus issued subsidy policies to promote farm mechanization.

John Deree on Weibo

These policies have been issued in order to encourage farmers to use high-end equipment, such as tractors, combine harvesters, and cotton pickers. Both Chinese manufactures and non-Chinese brands that manufacture in China are eligible for the subsidy plan.

In addition, the technologies of mechanized planting, such as vertical axis harvesting machinery, and others are also priority growth sectors for China.

Market access barriers for foreign companies in China

Since China’s entry into the WTO, the country’s machinery sector has been open to foreign investments, though subject to certain restrictions ;

  • For instance, the Chinese government imposes a number of ownership restrictions on power generation equipment manufacturers. Foreign companies can only enter the sector by establishing joint-ventures with local partners.
  • Some sectors also require more than 50% Chinese ownership, such as in the manufacture of electric machinery and equipment.

Under increased international pressure, China is likely to ease ownership limits on foreign joint-ventures in strategic sectors. Foreign machinery manufacturers should, in turn, develop proper protection strategies in order to prevent illegal copying or distribution of their products.

A large demand for technology transfers in China

As stated above, China has a huge demand for technology transfers from developed countries in the high-end machinery industry.

Major and leading foreign machinery manufacturers can make use of these opportunities to export, both, equipment, and expertise that is urgently-needed by China. The Chinese government is offering financial and tax incentives for introducing advanced technologies from developed countries.

For instance, China has exempted import duties and related value-added tax (VAT) for the import of key R&D equipment, raw materials, and components.

However to enter the Chinese market, foreign companies must find chinese distribution partners.

Machinery Market: Lead Generation in China

If the classic way to go for lead generation in the machinery market is partaking in fairs and exhibitions it is not necessarily the most efficient. Why is that?

Well, it is quite expensive to join fairs but while you’ve spent a lot of money for the right to exhibit, your stall, your flyer, the traveling costs, and so on. And will all that money spent, you still have not done any work prior to work on your reputation and visibility in your target market aka China.

Prepare ahead for machinery exhibition in China

Make one stone two birds by working on your Online reputation ahead of any fairs you want to join. Not only working on your online reputation means the visibility you’ll get during the fair won’t be wasted (potential customers can find you online after the fair) but that also means that customers can find you at any time online.

In B2B, More visibility means better Conversion Rate

The other benefit of a strong online presence is an increase in your conversion rate. The reason is simple, the more positive online presence you are the more legit and trustworthy your company looks in the eyes of the customers.

Eventually, after seeing thirds parties referring to you, and be reminded of your existence consistently, customers will turn to you when needed.

Tools to build Online reputation in China

  • A website in Chinese combined with a strong Baidu SEO effort. Organic results are always more qualitative than paid ads.
  • Paid ads combined with SEO are great to drive initial traffic to your website.
  • Press releases, forums, and Q&A are the base ingredient of a strong online reputation. Keep in mind that having third parties recommendations is always more powerful than self-promotion.

Chinese people prefer to find information about you on their own; They will not only be looking for your website but also for third-parties channel recommendation.

Keep in mind: A single machine is responsible for the whole production process. It’s their investment, so they want to make sure they get a good value for money and buy from a reputable manufacturer, be it a foreign producer or the local one. They go to Chinese portals specializing in automation and trends to get more recommendations from the publications. It is a good idea that they find out you are mentioned at least a few times there.

Nurture your existing Leads with Chinese Social Media

Even though you will attract loads of leads if you follow the above mentioned steps, not all of them have been having this intention to buy an automated machine right now. Maybe they will do it in a few months or later. Or they don’t plan anything at all yet but you can have an influence.

The key to staying present in your potential client’s life is reminding him about yourself regularly. Otherwise once he really set his mind on buying that automated machine he might search again and find someone else.

WeChat Marketing

  • An official account is a must here to attract relevant followers
  • Keep digital hand-out material (H5 e-brochure) for clear introduction purpose;
  • Use newsletters to inform your followers about everything related to automated machines;
  • Keep your content up-to-date;
  • Use it for customer support.

Use Weibo

Weibo has fewer users than WeChat, but it has similar functions to Facebook and offers good opportunities to spread your information and engage more people, make more of them follow you. Weibo is actually a great place to share information massively and rank the content on Baidu without too much effort if it gets enough engagement.

Retargeting is your friend

Re-targeting is an important step to get in touch with the professionals who never contacted you and never followed your accounts. However, maybe they got on your website and put you on their list to check later or whatever. You can follow them and remind them about yourself with special tools that are invisibly placed on your website and then track your visitor’s behavior and place ads about you while he browses the pages. This is effective and will make him sooner or later contact you because it gives an impression you are omnipresent in the Chinese market of automated machines.

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