The European mechanical engineering industry faces a complex economic and political business environment in China. Sinolytics conducted a joint study and survey with VDMA and Swissmem to assess the impact of China’s domestic policies and geopolitics on German and Swiss machinery companies.
The study finds that more than half of surveyed machinery companies see a high relevance of China’s 14th Five-year Plan for their business. They expect in particular to benefit from China’s greater emphasis on domestic consumption as primary growth driver under the “Dual Circulation” strategy.
Made in China 2025, the study finds, shows mixed results: although many targets for technological substitution have not been reached (such as for high-end machine tools), Chinese competitors are catching up (for instance in five-axis machine tools). 70% of surveyed German and Swiss machinery companies expect that their competitors will significantly catch up until 2025.
By responding to the geopolitical conflict with the U.S., the 14th Five-Year Plan puts more emphasis on decreasing dependence on foreign “bottleneck” technologies for the sake of national security, including equipment for smart manufacturing. Almost half of the surveyed firms reported to have been affected by China’s drive for tech self-sufficiency and rising geopolitical tensions.
Regarding China’s regulatory environment, the tightening cybersecurity regulations present significant challenges to machinery companies, but only few companies already assessed the impacts on their operations.
To effectively cope with the political challenges and opportunities in China and build political factors into strategy planning, the study concludes with recommendations for example with regard to technological and IP risks, localization and government affairs.
The study focuses also on the specific implications for seven sub-sectors: agricultural machinery, drive technology, hydraulics, machine tools, plastic and rubber machinery, precision tools and textile machinery.
The press releases and summary of the study (in German) are available here.
VDMA press release: VDMA
Swissmem summary and recommendations: Swissmem