Lack of orders remains the main problem for many mechanical engineering companies in China
A 9.8 per cent drop in Chinese property investment and a slowdown in consumption hurt the economy in April.
In particular, China’s automotive and consumer electronics sectors lack new investment, the German association said.
These industries invested “heavily” in robotics and automation technologies during the pandemic and the equipment is just now starting to be used, the association’s Shanghai-based office manager Daniel Yoo said in a statement on Thursday on the survey results.
“The lack of orders remains the main problem for many mechanical engineering companies in China,” the statement read, with 35 per cent of respondents seeing this issue as a factor slowing growth.
Chinese manufacturers owned by local governments often lack money to install new equipment, especially in “old sectors” such as cement, said Alicia Garcia-Herrero, chief economist for the Asia-Pacific at the investment bank Natixis.
Overcapacity was also cited by survey respondents as a source of frustration. Among those polled, 46 per cent described “capacity utilisation” as below normal.
The survey found that 57 per cent of companies see signs of “overcapacity” in the Chinese mechanical engineering sector. But when respondents explained their reasoning in more detail, most said this trend was caused more by weak demand, “fluctuations” in demand and “excessive investment in new technologies” than by government subsidies.
“Due to the ongoing weakness in the property market, we are currently observing a shift of capital to the manufacturing industry and mechanical engineering, but this is not accompanied by a corresponding increase in demand at a national or global level,” the association’s chief representative Claudia Barkowsky said in the statement.
Association members expect muted improvement in their “business situation” this year after recording zero growth last year. Forty-eight per cent described their situations as “at least satisfactory” and 40 per cent called it “poor”.
Forty per cent of companies said they foresee improvement in their business and 10 per cent reported they “fear a deterioration”. In the fall, 20 per cent of companies had expressed that sentiment.
German companies expect improvement in their China business this year based on “positive signals from their customers and product inquiries from their customers”, Barkowsky told the Post.
“There have been good discussions and many interested visitors at recent trade fairs,” she said. “There are indications from the government regarding supportive policies, including an initiative for equipment replacement.”
Among the German industrial giants active in China are manufacturing technology firm Siemens, factory equipment producer ThyssenKrupp and culinary equipment maker GEA Group.