China risks & rewards
China is currently spending more than US$6 billion a year on excavators, cranes and other construction equipment to build an infrastructure that is suitable for the twenty-first century. It is investing some US$10 billion a year in the development of a national grid, making huge efforts to establish itself as a major maritime power and has embarked on a massive programme to expand its ports, as its share of world trade soars. It also has by far the biggest demand for machine tools, with consumption rising to over US$9 billion in 2004. In short, the machinery and equipment sector is now the country's second largest industry after textiles.
This huge market presents numerous new opportunities for foreign manufacturers — and some of the foremost companies are already very active there. China can also call on a large workforce, with about 300,000 engineers graduating from university each year, and low labour and capital costs. But it is socially and culturally very different from the West, which often makes it difficult for overseas firms to do business there.
Moreover, China's indigenous suppliers are rapidly catching up. Most of the domestic producers are still relatively small, can only produce a restricted range of goods and lack the technological expertise of their German, Japanese and US competitors. But China can boast a growing number of heavyweights, as private enterprise transforms the sector and some of the biggest firms expand abroad. Machinery and transportation equipment now top China's list of exports, and some of the leading companies have been making overseas acquisitions in a bid to secure new technologies and new sources of business.
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