Industry Overview
The growth rate has stayed above 20% for four consecutive years.
China's instrumentation industry maintains rapid and steady development. Among the 13 sectors of the machinery industry, its annual growth rate ranges from 20% to 27%, not ranking the highest.
The industry suffers a substantial trade deficit, the largest across all machinery sub-sectors. In 2005, total import and export volume reached 19.359 billion US dollars, including 14.014 billion US dollars in imports (a year-on-year increase of 15.7%) and 5.245 billion US dollars in exports (a year-on-year rise of 30.8%).
Restructuring has advanced rapidly in the electromechanical sector. Numerous state-owned enterprises have transformed into private entities, while Sino-foreign joint ventures, cooperative and wholly foreign-owned enterprises thrive. Many world-renowned multinational instrumentation corporations have invested or expanded production in China. Statistically, domestic state-controlled and private enterprises contribute 55.12% of industrial sales revenue and 54.59% of total profits, with foreign-funded enterprises accounting for the rest.
Insiders noted notable industrial characteristics. Firstly, as a developing country, China lags 10 to 15 years behind developed nations in instrumentation technology, yet boasts the largest, most complete industrial chain and strongest comprehensive strength among developing economies.
Secondly, domestic market demand surges, making China one of the fastest-growing markets globally. While the global annual growth rate stands at 3% to 4%, China has sustained over 20% yearly growth for four years running, with some products claiming one-tenth of the global market share.
Thirdly, the industry faces direct competition from foreign investors, whose local development has entered the third phase. It started with joint ventures and technology licensing, followed by foreign equity holding dominance around the 1990s, and now features wholly foreign-owned operations and mergers of outstanding domestic enterprises.
Fourthly, mid and low-end products enjoy scale advantages and global competitiveness. Ordinary digital multimeters occupy a large global output share, and household electricity meters account for 50% of worldwide production. China is a major manufacturer and exporter of electric meters, microscopes, telescopes, thermometers, pressure gauges, water meters, gas meters and optical components. Breakthroughs have also been achieved in exporting high-end products such as container inspection equipment.
Market Prospects
Sustained rapid growth during the Eleventh Five-Year Period
Industrial output value exceeded 100 billion yuan for the first time in 2004. It is projected to surpass 200 billion yuan at the early stage and hit 300 billion yuan by the end of the period, with an average annual growth rate of 20%. It took 55 years to realize the first 100-billion-yuan output value, while each subsequent hundred-billion-yuan growth only takes roughly three years.
Instrumentation export growth will remain around 30% annually, exceeding 10 billion US dollars midway and 15 billion US dollars by 2010. Annual import growth is estimated at 20%, with import volume topping 20 billion US dollars at the end of the period.
Industrial automation instruments and control systems are expected to grow by 25% annually, approaching 100 billion yuan in output value by 2010. Core products including DCS, PLC, transmitters, flow meters, control valves and electric actuators will rank among the world's top three in market demand, presenting enormous market potential.
Power sector forecasts indicate at least 20 new supercritical thermal power units will be installed annually. The imported DCS for a 600MW unit costs about 11 million yuan, while domestic alternatives are 20% to 30% cheaper. Large-scale oil refining facilities with annual processing capacity over 5 million tons also drive robust demand. Automation systems take up 8% to 13% of total project investment worth billions of yuan. Upgrading retrofits of existing production facilities further fuel market demand for updated automation equipment.
