Chinas machine tool manufacturers going global

China became a net exporter of machine tools in June, 2008. The industry’s total output in 2007 was $39.87 billion, up 35.5 percent from 2006, and is attributed to aggressively expanding overseas markets through acquisitions in addition to increased spending on research and development. China’s machine tool exports totaled more than $726 million in 2007, an increase of 36.2 percent over 2006 according to The China Daily (www.chinadaily.com.cn).

Dalian Machine Tool Group Corp was the first to make overseas acquisitions. It has purchased two American machine tool factories and bought total property rights for them, underlying Chinese companies' global ambitions.

"We use the overseas factories as a base to expand our products in the global market," Jiang Huaisheng, the company's vice-president said, adding the company's products are being exported to more than 100 countries. The company has also formed five joint ventures with world-leading machine tool makers.

Besides mergers and acquisitions, domestic companies are spending heavily on research and development, trying to improve their competitiveness in the global market.

"Ninety-nine percent of our products are independently developed machine tools," Jiang said. "Our output value was about $1.6 billion in 2007 and computerized numerically controlled (CNC) machine tool products accounted for approximately 45 percent of it. We put about $58 million into researching CNC machine tools. The investment will increase next year."

China's machine tool output value ranked third in the world and first in terms of consumption over the last four years. In 2007, the country manufactured 600,000 machine tools but only around 20 percent of them were CNC machine tools, according to Liang Xunxuan, founder and honorary chairman of China Machine Tool &Tool Builders Association.

The number of CNC machine tool companies, with an annual production capacity of more than 1,000 machine tools, has reached 28, and those with an annual capacity of more than 100 machine tools reached 130 in China by the end of last year.

Many Chinese machine tool manufactures are vigorously developing the medium- and high-grade CNC machine tools to make their products more competitive in the global market.

According to Liang, State-owned enterprises represent 30 percent of China's machine tool and manufacturing industry, while the private sector has a 60 percent share.

"There are numerous Chinese machine tool companies that have good products and could do well in the international market. But they do not know how to market them. I think our enterprises should enhance their marketing and international market analysis capabilities, and create their own methods of putting their products in the global market," Liang said.