Dealers discuss oil drilling equipment at an exhibition in Beijing. The growth of China's machinery exports is expected to slow in the coming years. [Photo / China Daily]

Yuan appreciation and rising costs will result in lower sales overseas

BEIJING - The growth rate of China's machinery exports will slow during the 12th Five-Year Plan (2011-2015) because of yuan appreciation and rising costs, said Cai Weici, the vice-president of the China Machinery Industry Federation (CMIF) on Friday.

"We will make some progress in high-end machinery exports in the coming years but for now, we will continue to focus on the middle and low-end markets in our overseas business," he said.

China's machinery exports were $258.5 billion in 2010, up 32 percent compared with 2009, while imports were $255.3 billion, a rise of 41 percent from a year earlier.

The average annual export growth during the 11th Five-Year Plan (2006-2010) was 20 percent, but Cai said it is impossible for the country to maintain such a growth momentum during the next five years.

He said the industry will see slower growth in the coming five years both in overseas and domestic markets, but such a slowdown would aid sustainable development of the industry.

The yuan's continued appreciation has added to exporters' difficulties, including those in the machinery sector.

Meanwhile, the increasing price of labor and raw materials such as coal, oil, and electricity will add to the cost of machinery production, which may affect the industry's profits, the CMIF said in a statement.

Cai also estimated that industry output is expected to register average growth of a 12 percent annually.

The industry has seen annual output increase by an average of 28 percent during the last five years, 16 percentage points higher than the target set for the 11th Five-Year Plan.

"It was expanding at a super-high pace, but we are now moving towards a steady developmental stage," said Cai.

According to the CMIF, more of the country's machinery production now caters more to the domestic market than in previous years. In 2010, domestic sales increased to 85 percent from 80 percent of total sales in 2005.

However, because of the strengthening of the yuan against the US dollar and increasing imports of foreign-brand products, the industry's competitiveness has been weakened.

Zhao Xinmin, senior economist at CMIF, told China Daily that in some important high-tech fields, the market is being occupied by foreign companies, presenting a challenge for domestic producers.

The trade surplus of the machinery industry in 2010 decreased 80 percent year-on-year compared with 2009, according to CMIF.

source:China Daily