Market report China: The Development of the Tool Industry
Since the sales scale of tool enterprises of China has reached the peak in 2011, the changes of sales situations are quite huge. The development was complicated and changeable, and the uncertainties increased.
The data from the monthly small sample statistical bulletin of branch shows that the average sales revenue in January – April reduced by 12% compared with the same period of last year. The large sample data of the first quarter shows that it is reduced by 9%. It has not been bottomed out, and the situation is still very severe.
The sales information feedback by the tool enterprises shows that, since the fourth quarter of 2014, the pressure on overcapacity in production accumulated by the manufacturing industry has increased rapidly, and the effect of measures for steady growth taken by the government – previous incentives – was reduced rapidly. Since 2015, the situation was worsened, and the sales situation of tools was deteriorated significantly.
The proportion of the enterprises which achieved the growth of sales accounting to the member enterprises has been reduced to less than 1/3 compared with more than 2/3 in 2014 (according to quarterly statistical data of the branch). The overall consumption scale of the tool market was reduced by 9.6% to 31.2 billion Yuan (RMB, the same as below), including the market share of tools in China of 19.6 billion Yuan, which is reduced by 11.3% year-on-year- The imported tools of 11.6 billion Yuan is reduced by 6.5% and exported tools of 7.6 billion Yuan is reduced by 2.6%.
The “12th Five-year Plan – achievement and gap of structural reform of tool enterprises in China
Looking back upon the development of tool industry during the “12th Five-year Plan”, compared with the continuous rapid development during the previous several five-year plans, it performed ups and downs. It was complicated and changeable and the uncertainties were increased greatly. This kind of development formation was marked deeply by the continuous impact of global financial crisis on the manufacturing industry – the recovery was slow and went up and down. For the tool market in China another shock wave is the so-called “four trillion strong stimulation” increase in security measures announced by the government, and this strong stimulation contributed that the manufacturing industry in China formed the rapid V-shaped bounce immediately and reached the peak in 2011. Under this influence, the domestic cutting tool market scale made a historical record of RMB 40 billion Yuan.
According to the exchange rate at that time, it had been exceeded 6 billion dollars, which was increased by 50%, and became the strongest manufacturing industry in the whole world and was ranked first in the world. In the situation of slow recovery of manufacturing industry market of developed countries, the tool market in China was rebounded quickly, became a bright spot and attracted substantial investment of cross-border tool enterprises from Europe, America, Japan and so on, including the construction of production facilities, increase of sales outlets, setting up the technical demonstration center, etc. And it claimed that the double sales in China would be achieved within three to five years. This kind of new development trend was foreshadowing for the today economic downturn and fierce competition in the domestic tool market. It is now clear that the artificial strong stimulation has caused the very serious negative impact on the domestic tool market. So far, the tool enterprises in China still pay the price for the after-effects caused by this kind of strong stimulation.
It can be seen that from the charts, driven by the strong stimulation, the sales revenue of tool market in China reached the peak in 2011, subsequently the double-digit negative increase appeared and the market situation was reversed completely due to the too hot economy, high inflation, and implementation of tight monetary policy by the state. Since the domestic tool market scale reached the peak of RMB 40 billion Yuan in 2011, until this year, the overall trend has been decreasing, although the modest rebound during 2013 – 2014 was appeared under the “directional micro-stimulation” of government, however, this kind of short-lived rebound did not resist on the great impact of rapid decline of overall economic demand of China. It should be noted that this runs counter to the gradually recovered general trend of global manufacturing industry.