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Machinery in rebound mode

By Tong Hao (China Daily)
Updated: 2009-07-29 07:59

A worker assembles motorbikes at a machinery firm in Tangyin,Henan province.[China Daily]

The machinery sector in China began to rebound in the second quarter of 2009 due to the country's attempts to expand domestic demand after industry exports plunged since the second half of last year due to the global financial crisis, a report said.

Agricultural machinery and automobiles were the two sectors that benefited the most from the country's policy. The electrical, metallurgical and mining equipment sectors also witnessed growth, the China Machinery Industry Federation (CMIF) said in a report yesterday.

CMIF estimated that the output value of the industry would increase by 12 percent year-on-year throughout this year while profits would go up by 8 percent. It also warned that exports were still declining and over-investment in certain areas would lead to an imbalance between supply and demand.

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Output value growth of China's machinery industry dropped continuously from 18.31 percent last October to 2.9 percent in the first two months of 2009. After that, the output value climbed month by month to 11.65 percent in June, reaching a historical high of 1 trillion yuan.

During the first six months, output value of the industry increased by 7.28 percent to 4.79 trillion yuan.

Besides, profits of the industry dropped 7.73 percent to 189.8 billion yuan from January to May. The downtrend has been controlled compared to the 25.81-percent plunge in the first two months.

According to Cai Weici, vice-president of CMIF, such a rebound was a result of the country's policy to expand domestic demand.

"The government increased the subsidy to farmers buying agricultural machinery, from 4 billion yuan in 2008 to 13 billion this year, which obviously spurred the sector. Production of large- and medium-sized tractors and combine harvesters increased by 32, 28 and 43 percent respectively during the first half of 2009," Cai said.

Meanwhile, a similar situation prevailed in the auto industry. Due to an increase in subsidy and tax cuts, auto production and sales in China increased by 15 and 18 percent each to 5.99 million and 6.1 million, respectively.

CMIF warned in the report that export decline of machinery products would continue, hindering the recovery of the whole industry.

From January to June, export of China's machinery industry dropped 24.11 percent year-on-year to $89.15 billion, and 0.21 percent down compared with the previous five months.

"Overseas demand, such as in Southeast Asia and the European Union, continues to decline and there is no sign of obvious recovery in the near future," Cai said.