China’s slowing growth hits machinery industry

A slowdown in China’s economy has impacted the machinery industry, weakening industrial activity, slashing orders and eroding enterprises’ profitability, an industry association said Monday.

The industrial value-added output of the sector, which contributes to nearly 20 percent of the country’s total industrial production, rose nine percent year on year in the first six months of the year, sharply down from a 16.2-percent increase registered last year, said Cai Weici, vice president of the China Machinery Industry Federation (CMIF).

Orders at major machinery enterprises dipped 0.95 percent in the first half of the year, compared to rises of more than 20 percent registered in the same period over the last few years, Cai said.

He said this year will likely be the toughest year for the industry since the outbreak of the global financial crisis in 2008.

According to the federation, global and domestic economic difficulties had driven 16.38 percent of the country’s machinery enterprises into the red as of the end of May, 3.82 percentage points higher than one year earlier.

However, Cai said the chance for further weakening in the sector in the second half will be slim because of a low comparison base from last year.

He also ruled out the possibility of a quick rebound, adding that he expects the industry to stabilize and continue to expand at a slow pace in the second half of the year.

Enterprises in the machinery sector will have to “tighten their belts” next year, as the economic climate will remain grim, Cai added.

The CMIF predicted that the industry’s annual output and combined profits this year will rise by 14 percent and 5 percent year on year, respectively.

The estimates are considerably less than the 18-percent and 12-percent estimates the federation made in February.

China’s economy grew 7.6 percent in the second quarter this year, the lowest rate since the global recession. Its growth eased to 6.6 percent in the first quarter of 2009 before a massive government stimulus package provided double-digit growth.


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