Viewpoints Blog: China's Changing Manufacturing Industry
By Debbie Holton
Director of Events and Industry Strategy
Society of Manufacturing Engineers
Member Since 2005
As the plane touched down in Beijing, I didn’t know what to expect. I had traveled internationally for business many times but never to Asia or specifically China. I was excited to embark on a new adventure, but a little nervous about being in a country where I was obviously a stranger and couldn’t speak a word of the language.
I was fortunate to have been invited by The Association for Manufacturing Technology (AMT) to visit CIMT '13 (the China International Machine Tool Show) as their guest in the USA pavilion. Forty-five AMT-member companies exhibited in the sold-out area with many more on the waiting list. This was an awesome opportunity to learn and be immersed in the manufacturing market that vies with the US for number-one status worldwide.
CIMT is approximately the size of IMTS, with over 1 million ft2 of exhibits. However, the China Machine Tool and Tool Builders Association (CMTBA) can only accommodate one-third of the space requested. So, essentially, CIMT should be the largest manufacturing event in the world--double the size of EMO in Germany. The event is currently space-constrained with plans to expand the facility delayed.
Riding from the airport through Beijing, the city reminded me of Toronto--modern and new, and crowded with traffic. In my mind I had pictured streets crammed with bicycles and carts, but instead the highways and roads were teeming with cars, and luxury cars at that. Mercedes, BMW, Audi--only the taxi cabs are Hyundai. There is a feeling of wealth and prosperity here. In fact, the luxury automakers have all established factories here for Chinese consumption.
We arrived at the exhibition Monday morning and I was struck by how old the exhibition facility looked, when in fact it is only about eight years old. The cleaning crew sports brooms made of branches tied together, which could explain that. Having produced tradeshows and events for over 20 years, I had to calm myself after watching ‘freestyle rigging’. I looked up and saw a man 20 feet off the ground with one foot on a pipe jutting out of the wall and the other balanced on top of a booth structure, stapling drape to the back of the exhibit. His ladder was 10 feet away and he seemed quite comfortable up there. “This is China,” I was told.
The sheer size of equipment on display was tremendous. It has been many years since I’ve seen vertical boring mills and large equipment at events in North America. At CIMT, there were dozens of companies displaying large gantry-style machines and double column machining centers 25 and 30 feet high. These machines are capable of making massive parts – ideal for the significant infrastructure building happening in China. One to two coal-fired power plants are built in China every week. Rail systems, ship building, wind turbines and other large scale industries are big business in China and dozens of companies are major manufacturers in these industries.
Pavilions from many countries including Japan, Germany, Korea, Taiwan, and Switzerland filled the event with recognizable company names. However, many of the exhibits were clearly Chinese manufacturing FOR China. Not a word of English anywhere. With 1.5 billion people, there’s enough manufacturing activity to keep Chinese equipment manufacturers busy. The Chinese machine tool market is the largest in the world at $35 billion; the US is $4 billion. China is the largest manufacturer and consumer of machine tools. The market there is so much larger than others that these manufacturers can focus on the Chinese market alone. In fact, machine tool demand in China is projected to rise 14.2% per year through 2014.
One Chinese manufacturer, SANY, started out as a construction machinery company. The founder, Liang Wengen, one of the richest men in China, thought it would be a good idea to go into the machine tool business. So, several years ago he purchased a few companies, started manufacturing equipment and just this year was one of the finalists to purchase MAG’s Aerospace sector.
SMTCL (Shenyang Machine Tool Co., Ltd.) is now one of the largest machine tool builders in the world. A state-owned company, they have only existed since 1995. Their purchase of SCHEISS, a German company, in 2004 provided them with advanced technology and they continue to upgrade their equipment and expand worldwide.
At CIMT '13, Fair Friend Group (Feeler) was advertising that they will be the "largest exhibitor at EMO" Although a Taiwan-based company, Fair Friend’s ‘Good Friend’ operation in China comprises a major manufacturing facility in Hangzhou and 28 branch offices. Good Friend started production in September 2002 and will soon be the manufacturing resource center for all Fair Friend machinery, domestic and international.
Robotics and automation drew crowds at CIMT as an increase in large-scale automation was apparent. Automation is progressively important in China for two reasons:
• The ‘one-child policy’ is creating a changing demographic in China. Long range projections anticipate a labor shortage in this market.
• Chinese wages continue to rise annually – approximately 10% per year. People I spoke with told me that the average worker salary in Beijing last year was 4,000 RMB per month and this year is 5,000 RMB per month (about $800). These are still low wages compared to other industrialized countries, but high compared with lower cost markets like India.
The Chinese manufacturing market is a tremendous opportunity for US manufacturers, and a reachable goal with the proper guidance and expertise. "Guanxi," the relationship and business network, is essential in Chinese culture. From incubating business for new entrants and facilitating the growth of member companies already operating in China, AMT provides a valuable service to its members. Through its tech center in Shanghai and offices in Beijing and Guangzhou, AMT members benefit from local representatives, experienced international business staff and the "tribal knowledge" amassed from over 20 years in China. The Shanghai Tech Centre has over 120 member companies now successfully marketing their manufacturing technology there.
China’s importance as a market cannot be ignored. The impressions we have of what Chinese manufacturing is are changing every day. The rate of change in China and the commitment to that change by their government is significant. Change is constant, but opportunity is great. China’s government recently committed $50 million per year to developing additive manufacturing technology and 3D printing. The US’ NAMII (National Additive Manufacturing Innovation Institute) is $45 million over 3 years. China didn’t create additive manufacturing technology, in fact they know little about it, but they are committed to advancing the technology and developing their knowledge and expertise in this game-changing field.
Americans who have been to numerous factories in China tell me that some of the best manufacturing in the world is there and that the technology is closer than we think. There’s a saying in China: "Everything is possible but nothing is easy." As for manufacturing, we can assume that they are committed to remaining the world’s largest producer and consumer of machine tools and manufacturing equipment and that in the future, if US companies choose to grow, they will be competing with German and Japanese companies for Chinese market share.
As I departed Beijing, I felt that my horizons had been permanently expanded. An adventure I embarked upon with some trepidation had become an eye-opening experience where I will now see our industry through a different lens. US manufacturing is resurging and exciting, but we must look outside our own borders to see the real opportunities available, the scenarios we should plan for, and what the future will hold. ME