česky  english  中文 

Advanced search
Photo: Shutterstock
Article notification Print Decrease font size Increase font size

Czech Machinery in China - The Current Situation

Last week, the traditional International Engineering Fair took place Brno, Czech Republic, this time focused on Industry 4.0. This year, the same as in the previous two years, without a large participation of Chinese companies. Due to the policy of zero tolerance for covid 19, China is practically closed to the world, which is understandably a problem not only for Chinese companies that would like to participate in European fairs, but also for Czech companies that would like to expand to the PRC.

Czech engineering has a good reputation in the world, and it is no different in China. The "Middle Kingdom" is one of the most important markets for Czech companies. Our Embassy has been monitoring the export volume of machinery tools (HS codes 8456 to 8466) for a long time. It amounted to CZK 1.33 billion from January to December 2021, compared to CZK 1.43 billion in the previous year. It thus recorded a decrease of 7.2%. The long-term closure of China and the gradual change in Chinese production are mainly reflected in these numbers. One example is the automotive industry. Electric cars, of which sales in the PRC now consistently account for more than 20% of all new car sales, are designed completely differently than cars with conventional combustion engines, which contain a number of components produced by machining or forming. By 2026, electric vehicles will account for 50% of total car sales in China, but many experts believe that this will happen even earlier.

If we look at the more detailed statistics of the export of machinery to the PRC, we will notice that the biggest increase was recorded by machine tools for grinding, lapping, polishing, etc. (HS code 8460). The value of their exports in 2020 was CZK 209 million, while in 2021 it was already CZK 613 million. In contrast, sales of two high-ranking categories fell last year. These are machine tools for drilling, milling, cutting, etc. (HS code 8459) and machine tools using lasers, ultrasound, etc. (HS code 8456). For the first named category, the drop was the sharpest, from CZK 439 million in 2020 to only CZK 38 million in 2021. For the second, from CZK 292 million to CZK 199 million. (source Czech Statistical Office)

Although Czech Machinery companies enjoy a good reputation, they face a number of problems in today’s China. Extensive anti-pandemic measures make it difficult for new, especially small and medium-sized businesses to enter the Chinese market. For a successful operation in China, it is important to establish and cultivate contacts with Chinese partners, but this is not really possible now. Currently, the Chinese engineering market is dominated by companies that were already established before the coronavirus crisis. The first half of this year was not favorable even for holding fairs. For example, the CCMT (China CNC Machine Tool Fair) in Shanghai, which was previously widely visited by the Czech companies, was first postponed and later completely canceled. In April 2023, the CIMT (China International Machine Show) is to be held in Beijing, alternating with the Shanghai CCMT every other year. Let's hope that next year will be a year full of relaxation and easier travel to China, not only for Czech engineering companies seeking to enter the Chinese market.

However, in order not to be only pessimistic in our article, we must state that Czech companies that are already active on the Chinese market and that have moved part of their production to China are mostly doing well. As one example for all, let's mention the company JULI, engaged in the production of engines for forklifts. Its branch is located in the southern Chinese province of Fujian, and it is here that it plans to open its second factory in November of this year. Company representatives confirmed to us that the construction work is going according to plan and they hope that despite the strict anti-pandemic measures in the PRC, they will be able to participate in the grand opening.

It should be added that for Czech (and not only) engineering companies, a personal presence in China is currently key. Energy prices in Europe are enormous, and fighting the "predatory" Asian competition, which is going up in quality, is becoming more and more difficult. That is why many European companies are resorting to joint ventures with a local partner. It produces its products at Asian prices, but with European quality and tradition. Of course, this route also has certain disadvantages, but the pros and cons of production in Europe and export to the PRC, or moving production directly to Asia, must be weighed for each company.

Adam Kupka, Economic Counsellor at the Czech Embassy in Beijing