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VDMA fall survey: business climate in China clouds over

German machinery and plant engineering in China

09.12.2021 - According to the current fall survey for the second half of 2021, the business climate for the German mechanical and plant engineering industry in China has deteriorated. Nevertheless, the companies expect a very good result for 2021 as a whole. On average, companies are expecting 22 percent sales growth this year and 10 percent in 2022.

Not only in Europe, but also in China, companies are now feeling the shortage of raw materials and materials in particular much more strongly than in the first half of the year. This is shown by the results of the VDMA's fall survey of 850 member companies based in China.

According to the survey, 44 percent of the companies surveyed rate the current business situation as good, 45 percent as satisfactory, and 11 percent rate it as poor. In the previous survey in spring 2021, 61 percent reported good business and only 4 percent reported poor figures. The assessments for the electrical automation, robotics + automation and food and packaging machinery sectors are currently above average.

Capacity utilization declining from a high level

Capacity utilization in China reached its all-time high in spring 2021, but has been declining since then. Forty-nine percent of companies reported above-normal capacity utilization in the current survey, down from 64 percent in the spring.  Currently, 37 percent are reporting normal levels and 14 percent of firms were underutilized.

"Many companies have used the two Corona years to expand their production capacity in China and invest in the future. Thus, we have seen many company expansions this year, and this will continue into the first half of 2022. Beyond that, however, there are not many investment projects pending at the moment," explains Claudia Barkowsky, Managing Director of the VDMA in China.

Order intake declines

Order intake also declined in China in the second half of the year. 44 percent of the companies surveyed report that current order intake is above the normal range. In the spring, the figure was still 55 percent. "This was to be expected. The high level from the first months of the year could not be maintained," Barkowsky explains. Orders from abroad, relevant for two-thirds of the companies (68 percent), on the other hand, have increased slightly.
Braking factor number 1: shortage of raw materials

More companies are facing factors that are hampering their business operations. Whereas in the spring only 30 percent said this, 55 percent now complain about specific braking factors. First and foremost is the shortage of raw materials and supplies, which has increased significantly over the past six months; 62 percent of companies see themselves affected by this, compared with only 44 percent in the spring. Bottlenecks in the supply of electricity posed a challenge for 32 percent of companies.

The effects of the corona pandemic are still clearly noticeable, but are no longer perceived as strongly as they were six months ago: the figure fell from 93 percent to 43 percent. On the other hand, the shortage of personnel is becoming more acute. While this factor represented a challenge for only 14 percent of companies in the spring, it is now almost twice as many (26 percent).

Sales: growth expectations halved

Sales developments in China this year have been better than originally expected for many machinery and plant manufacturers. In the spring, participants estimated their sales growth for 2021 at an average of 17 percent; the fall survey now forecasts an encouraging 22 percent.

Expectations for 2022 are significantly lower at plus 10 percent, but still at a good level. "The outlook for 2022 is cautiously optimistic. Companies expect to face constraints in the wake of the Winter Olympics in February. In contrast, electricity shortages, which had presented the majority of companies with major challenges in the fall, are currently no longer an issue," Barkowsky explains.

Fewer and fewer non-Chinese employees

Of the companies that employ foreign staff in China, 23 percent report declining numbers, while the proportion has remained stable at 68 percent. "The number of employees from the European region in China has dropped sharply with the Corona pandemic. China has become unattractive mainly due to the ongoing travel restrictions from abroad. Travel restrictions are likely to continue in 2022. Also, the cost of foreign personnel will increase in the coming year when previously given tax breaks are then in danger of being eliminated. This will either have to be compensated by the company or the employee will experience painful salary losses," analyzes Barkowsky.

The summary of the VDMA survey on the business climate in China can be downloaded via the button below.

Downloads

Contact

VDMA Verband Deutscher Maschinen- und Anlagenbauer e.V.

Lyoner Str. 18
60528 Frankfurt
Germany

+49 69 6603 0
+49 69 6603 1511

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