Aspects of Foreign Investment in Equipment Manufacturing Industry

Abstract After years of rapid development, China's equipment manufacturing industry has now formed an output value of about 20 trillion yuan, and has entered the top four of the world's equipment industry. Foreign direct investment and technology exchange have played a crucial role in promoting this. With the reform and opening up,...

After years of rapid development, China's equipment manufacturing industry has now formed an output value of about 20 trillion yuan, and entered the top four in the world's equipment industry. Foreign direct investment and technology exchange have played a crucial role in promoting this.

With the reform and opening up, foreign-invested equipment manufacturing enterprises have successively entered the layout and development of investment in China. From setting up a sales representative office in China to setting up a branch office and investing in a factory, foreign investors have taken part in the development tide of the domestic equipment manufacturing industry and market competition through various means such as sole proprietorship, joint venture, and merger and acquisition. Through tracking research on the construction machinery industry and the machine tool industry, in the past three decades, foreign investment equipment manufacturing companies have shown three characteristics and trends in their investment and development in China:

The pace of international equipment companies entering the Chinese market is accelerating

As early as the end of the 1970s, some leading international equipment companies have been keenly aware of the potential development prospects after China's reform, and have begun to lay out China. In 1978, Caterpillar opened an office in Beijing, which can be said to be the earliest test of the international construction machinery industry during China's reform and opening up. In 1980, Komatsu also opened a Beijing office. Compared with machine tools, heavy machinery, shipbuilding, electrical appliances, instrumentation, aviation, rail transit equipment, etc., the international giants of construction machinery and the automotive industry (such as Volkswagen) boldly and quickly invested and laid out in the early days of reform and opening up. The industry has laid a solid foundation for sharing the cakes of the Chinese market in the later period.

However, before 1990, the entry mode of foreign-funded equipment companies only stayed at the level of opening offices, liaison offices and sales points. On the one hand, they were cautious about China's industrial development, and more importantly, domestic manufacturing. The level of development is still very primitive. The incoming processing industry and urbanization construction on the eastern coast do not require much high-end equipment and technical support. General processing equipment and semi-automatic operation machinery can meet most requirements.

After 1990, the direct investment of foreign-funded equipment enterprises began to show a significant acceleration, which is reflected not only in the FDI data of the same period, but also in the top 50 international construction machinery. From 1994 to 2000, Caterpillar established subsidiaries of engineering machinery assembly, parts and investment departments in Xuzhou, Beijing and Tianjin. In 1995, Komatsu established construction machinery and foundry subsidiaries in Changzhou and Jining. In 1991, Terex South Road Machine (Quanzhou) Mobile Crushing Equipment Co., Ltd. was established. In 1995, Terex Noor Lifting Equipment (China) Co., Ltd. was established in Xiamen, Fujian; 1995 In the year, Xuzhou Liebherr Concrete Machinery Co., Ltd. was established; in 1995, Hitachi Construction Machinery (China) Co., Ltd. was established in Hefei, Anhui; in 1994, Sumitomo Heavy Machinery Reducer (China) Co., Ltd. was established... It seems to be much quieter. Only a few companies such as Japan's Yamazaki Mazak, Germany's Schuler, Japan's Doosan Invigo, American Harding, Germany's Siemens, etc. have established branches, and the proportion of the manufacturing sector is also relatively high. small.

Since the beginning of the new century, under the pressure of rapid development and progress of China's equipment counterparts, international equipment giants have begun to choose a stronger and competitive entry strategy. Taking the construction machinery industry as an example, the case of the acquisition of Xugong by the US Carlyle Group in 2005 was a sensation. Although Carlyle only harvested 40% of Xugong's shares, international giants such as Atlas, Caterpillar, Bosch and Siemens have infiltrated into more equipment industries through various mergers and acquisitions in the past decade. Segmentation: In 2003, Shenyang Rock Drilling Machinery Co., Ltd. signed a joint venture agreement with Atlas, Sweden, the world's largest manufacturer of rock drilling machinery, to divide Shenyang Rock Drilling Machinery Company into three, making the original Shenyang Rock Drilling Machinery Company basically empty. shell. In April 2005, Caterpillar Inc. of the United States officially acquired a 40% stake in Shandong Shangong Machinery Co., Ltd., and incorporated it into its own production and operation system, and transformed the company.

The layout of foreign machine tool companies has also begun to deepen. Foreign famous machine tool companies such as DMG, GFAC, Mazak, Makino, HAAS have not met the model of joint venture and cooperative production. They have set up factories in China to produce machine tools suitable for the Chinese market. With the opening of Yamazaki Mazak Machine Tool (Liaoning) Co., Ltd. in Dalian, Jinzhou on October 18, 2011, Yamazaki Mazak has two factories in China including Ningxia Little Giant Machine Tool Co., Ltd., and also in Shanghai. Guangzhou, Dalian and Dalian have also established technical centers.

Eastern coastal cities are the first choice for foreign equipment companies

Similar to the situation in which the domestic processing and manufacturing industry has concentrated on the development of the eastern coastal areas since the reform and opening up, the investment focus of foreign equipment manufacturing industry in China is also concentrated in the eastern coastal areas of China. By sorting out the geographical distribution of the top 50 global construction machinery industry and machine tool industry in China, it can be seen that more than 87% of the foreign-invested enterprises in the above-mentioned fields have set up offices, set up branches and build factories, and other investment initiatives are concentrated in the eastern provinces and cities. in. Among them, Shanghai, Jiangsu, Beijing, Tianjin, Liaoning, and Shandong are the preferred investment destinations for foreign-funded equipment companies. In the central and western regions, Sichuan, Henan, Anhui and other small provinces have undertaken the establishment and construction projects of foreign-funded equipment leaders.

Industrial supporting environment and market radiation capacity are the key to investment choice of foreign equipment enterprises

In the context of rising labor costs in China, especially in coastal areas, it is not difficult to see from the case of Chongqing and Sichuan, which have attracted more prominent foreign investment in recent years. As China’s labor costs rise irreversibly, foreign countries Investors will pay more attention to factors such as China's market demand and industrial supporting environment. Market radiation capacity and comprehensive investment and construction costs have become key conditions.

In general, the use of foreign capital and technology introduction in China's equipment manufacturing industry has played a positive role in the development of the industry in the past three decades, not only increasing the total investment and expanding the scale of the industry, but also the foreign-invested enterprises or joint ventures in the same industry. The demonstration effect brought about by foreign advanced technology, management experience and the introduction of outstanding entrepreneurs also forced domestic enterprises to improve their research and development capabilities and market development capabilities in order to adapt to competition, and finally greatly enhanced the competitiveness of domestic enterprises. Therefore, the rational and effective use of foreign capital, continue to expand the external development of the equipment manufacturing industry in an orderly manner is conducive to the upgrading of the industry, and will also be a long-term direction of industrial encouragement in China.

The trajectory of investment and development of foreign-funded equipment manufacturing enterprises in China is a process of gradual expansion and order-by-step, which also reflects the law of continuous deepening of China's industrialization process in various periods after the reform and opening up. At present, the expansion of investment in China by foreign equipment industry investors in the field of advanced large-scale construction machinery, industrial robots, CNC machine tools and other intelligent manufacturing equipment is also reminding domestic equipment companies that the current competitive landscape of China's domestic equipment market is accelerating evolution and transformation, and competition. Coexist with opportunities. In fact, after 30 years of industrialization, the market for China’s equipment manufacturing industry has just begun. Equipment companies like Sany Heavy Industry and Zoomlion, which have grown dozens of times in the past decade or so, are only the first to gain Benefits. In the future, who can better grasp the process and characteristics of China's manufacturing transformation and upgrading, and grasp the characteristics of China's industrialization and urbanization, is more likely to become an industry leader.

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