B R O O K S M A R K E T I N T E L L I G E N C E R E P O R T S

CHINA’S SHEET METALWORKING SECTORA MARKET OVERVIEW

B R O O K S M A R K E T I N T E L L I G E N C E R E P O R T S

Brooks Events Ltd © 2015. All rights reserved. A Brooks Reports Publication

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CHINA’S SHEET METALWORKING SECTORA MARKET OVERVIEW

CHINA’S SHEET METALWORKING SECTOR - A MARKET OVERVIEW Brooks Events Ltd©2015 3

CONTENTS

INTRODUCTION 4China in the 21st Century 4 Geography 5 Culture, politics and the economy 6 Balance of manufacturing, services and agriculture 8

1. INFRASTRUCTURE 10Government priorities 10 Transport 11 Telecommunications 13 Energy 13

2. MANUFACTURING 15

Machine Tools & Metalworking 15 Trading overview 15 Machine tool builders 15 Trade associations and exhibitions 16

The Automotive Sector 18Market trends 18 Manufacturers and locations 19 News from the sector 22 Components and supply chain 23

Aerospace 25Airbus and Boeing in China 26

Shipbuilding and Offshore / Petrochemical Engineering 28

Construction Equipment 30

Railways 31

Domestic Appliances 33

Steel Industry 34

3. DOING BUSINESS WITH CHINA 35

4. USEFUL LINKS/WEBSITES 36

CHINA’S SHEET METALWORKING SECTOR - A MARKET OVERVIEW Brooks Events Ltd©2015 44

INTRODUCTION

CHINA IN THE 21ST CENTURY The People’s Republic of China, according to IMF calculations, has now narrowly overtaken the USA to become the world’s largest economy. With over 1.35 billion inhabitants it is the world’s most populous country, and is generally regarded as the most significant global economic success story of the past 30 years, with growth in annual GDP averaging around 10%. However, this growth rate has not been sustained over the past two years; in 2014 economic growth was the slowest in 24 years, narrowly missing the official target (7.5%) with a headline GDP figure of 7.4%. For the first quarter of 2015, GDP growth was 1.3%, down from 1.6% for the same period in 2014; the overall 2015 forecast is to continue at 7.0%, which is the government’s bottom line for annual economic growth. According to the National Bureau of Statistics (www.stats.gov.cn), China’s inflation rate was recorded at 1.4% in March; this is set against an average of 5.63% from 1986 to the end of 2014.

Despite the relative slowdown, according to KPMG’s report ‘China Outlook 2015’ (www.kpmg.com), both outward direct investment (ODI) by Chinese companies, and foreign direct investment (FDI) into China were at record levels in 2014.

Until the late 1970s the economy was mainly agricultural. However growth has been characterised by a long-running manufacturing boom, and the subsequent expansion of domestic industries and infrastructure. This rapid transformation means that the country now covers every sector in its manufacturing capacity for consumer and industrial products. Economic development is to some extent driven by a burgeoning middle class, predicted to rise to over 300 million by the end of 2015 (ie approximately equal to the population of the USA), and to 1 billion by 2030. Growth in the middle class is strongest in the smaller inland cities, rather than the urban centres of the eastern coastal regions. The urban population of over 740 million is now over 54% of the total, surpassing the rural population, and this is expected to rise to 66% by 2030.

There is a major demographic concern in that China is now one of the most rapidly ageing countries in the world; a quarter of the population are likely to be over 60 by 2030. This trend removes the economic advantages of a rising proportion of working-age adults, and in the long term will put a strain on the economy, and compromise the ability to pay pensions. It is a consequence of measures to check population growth, embodied in the ‘one-child’ restriction introduced in 1979. China declared it was relaxing this policy in late 2013, but this move will take time to have an effect; in any case many urban dwellers are now choosing to stick with one child, for practical and economic reasons, and as a result of decades of government propaganda. In January, the China Spectator reported that the working age population (between 16 and 60) had dropped by 3.7 million in 2014, the third consecutive year of continuous decline; and The Chinese Academy of Social Sciences estimates the labour force will decline by 1.55 million people every year before 2020, 7.9 million between 2020 and 2030 and 8.35 million between 2030 and 2050.

The country is blessed with vast natural resources including coal, iron ore, petroleum, natural gas, mercury, tin, tungsten, antimony, manganese, molybdenum, vanadium, magnetite, aluminium, lead, zinc, rare earth elements, uranium – and the world’s greatest hydropower potential. However, the infrastructure needs to be developed and there are environmental issues including those associated with air pollution from reliance on coal-burning power stations; water shortages, particularly in the north, and pollution from untreated wastes; deforestation and the loss of agricultural land due to soil erosion and economic development.

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INFRASTRUCTURE1

GOVERNMENT PRIORITIES Sustainable growth requires efficient use of resources, and there is strong demand in China for better infrastructure to establish the links required by the government’s urbanisation philosophy. Significant infrastructure investments are being made in road and rail transport which will benefit local economies. Coastal cities such as Beijing, Shanghai and Shenzhen as well as some inland cities are relatively well developed, so the government is focusing on cities in mid and western China. The interior provinces of Inner Mongolia, Shaanxi and Gansu, rich in natural resources, require the transport links needed to exploit them, as well as the appropriate environmental protection measures. In addition water related projects, such as wastewater treatment, recycling and desalination are also important, given water scarcities.

The country continues to develop non-fossil fuel power generation capacity to offset its reliance on coal. New guidelines this year help to standardise the way large industrial firms measure and report greenhouse gas emissions. China has pledged to bring its CO2 emissions to a peak by around 2030, and firms could be obliged to participate in a nationwide carbon trading scheme by early 2016. Seven existing pilot carbon schemes force around 2,000 firms to buy permits to cover their emissions. To support the development of low-carbon cities the China Development Bank has continued to implement in its lending practice the national green-credit policy that favours environmentally friendly projects. These include industrial upgrading for energy conservation and clean/renewable energy.

As part of the 12th Five Year Plan in 2011, the National Development and Reform Commission approved 60 major infrastructure projects worth over €110bn. These included 13 highway construction projects; 25 rail transit and intercity railway projects, mainly in the east; and seven port construction and channel reconstruction projects. In March 2015 the government announced infrastructure projects worth €230 billion including five airports and 16 railways. Work on the new projects could begin in 2016.

An important element of the next Five Year Plan is expected to be the ‘One belt, one road’ (OBOR) plan, announced in 2013. A network of regional infrastructure projects, OBOR aims to re-establish ancient land and sea routes across Eurasia, putting China at the hub of development across the region. The National Development and Reform Commission (NDRC), released a new action plan outlining key details in March this year. The main features are The Silk Road Economic Belt, a planned network of overland road and rail routes, oil and natural gas pipelines, and other infrastructure projects; and The 21st Century Maritime Silk Road, a network of port and other coastal infrastructure projects.

Many of the infrastructure projects proposed as part of OBOR would run through some of China’s poorest and least developed regions and could provide stimulus to help cushion the effects of the slowdown. Also, by improving connectivity between regions OBOR will enable internal economic integration and competitiveness and more regionally balanced growth. Related construction is intended to exploit industrial overcapacity and ease the entry of Chinese goods into regional markets.

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TRANSPORT

Air: The country now has 463 airports with paved runways, 44 unpaved airports and 47 heliports. These handled a total of over 831 million passenger trips last year, a 10.2% year on year rise, according to the Civil Aviation Administration of China.

In 2014 the top ten airports handled these passenger numbers:

�Q Beijing Capital International Airport – 86.1 million

�Q Guangzhou Baiyun International Airport – 54.8 million

�Q Shanghai Pudong International Airport – 51.7 million

�Q Shanghai Hongqiao International Airport – 38.0 million

�Q Chengdu Shuangliu International Airport – 37.7 million

�Q Shenzhen Baoan International Airport – 36.3 million

�Q Kunming Changshui International Airport - 32.2million

�Q Chongqing Jiangbei International Airport – 29.3 million

�Q Xian Xianyang International Airport – 29.3 million

�Q Hangzhou Xiaoshan International Airport – 25.5 million

The 2011 5-year plan called for the construction of 82 new civil airports and the expansion of 101 existing Chinese airports. This would produce a total of over 230 airports by the end of 2015 with an estimated 80% of China’s population living within 100km of an airport. In the event, more than 100 new airports were built, boosting local economies.

To accommodate growth of passenger numbers, Beijing New Airport, due to be operational in 2019, will eventually handle 100 million travellers per year. Shanghai last year announced a renovation project at Pudong International Airport’s Terminal 1 which aims to boost passenger capacity by 80. Pudong is expected to become one of the top 10 busiest airports in the world by 2020, with an expected passenger volume of 80 million per year. The Economist has reported on a development at Zhengzhou, the inland provincial capital of Henan province, where building is under way for a second terminal and runway for the city’s airport. Zhengzhou is an established trading and transport hub, with an abundant supply of labour. By 2030, two terminals and five runways are expected to handle 70 million passengers yearly. Zhengzhou airport aspires to be the centre of an ‘aerotropolis’ a city with a built-in airport which links central China to the rest of the global economy.

Road: Over the past decade China has built over 640,000 kilometres of roads, taking the total up to 4.1 million kilometres, including 85,000 kilometres of expressway. The main points of entry by land are at Alataw, Baketu, Erenhot, Friendship Pass, Hunchun, Ji’an, Kunjirap, Manzhouli, Mohe, Nyalam (Zhangmu), Pingxiang, Ruili, Suifenhe, Tumen, Wanding,

In 2013, the China Development Bank (CDB) pushed funding for the expansion of national highway and road networks, especially in central and western China. Key projects included the Zunyi-Guiyang section (in Guizhou province) of the Lanhai National Highway and the Liuzhou-Wuzhou Highway (in Guangxi). CDB loans in 2013 supported the construction of 6,200 km of highways, 4,300 km of first and second-grade roads and 27,900 km of rural roads.