**Editor's Note:**
(1) This paper is the result of research conducted by the China Machinery Manufacturing Industry Development Report team at the Institute of Strategy and Planning, Machinery Industry Information Research Institute. The research group includes: Shi Yong, Yan Enmin, Qian Tao, Zhao Fengjie, Zhang Yan, Chen Yu, Cheng Du, Kong Yanyan, and Wang Zhenlin. The author of this report is Zhang Yan.
(2) Unless otherwise specified, the term "equipment manufacturing industry" refers to the full-scale equipment manufacturing sector, encompassing nine categories: metal products, general machinery, special-purpose machinery, automotive manufacturing, railway, shipbuilding, aerospace, electrical machinery, computer and communication equipment, instruments, and machinery repair.
**I. Overview**
In 2013, China’s equipment manufacturing industry continued its slow recovery, with a stable foundation for growth. However, internal drivers remained weak, and there were still risks of further downturns.
The added value of large-scale equipment manufacturing enterprises grew by 11.03% year-on-year, exceeding the national industrial growth rate by 1.33 percentage points. Among 88 key monitored equipment types, 53 saw growth in output (60.2%). Export delivery value reached 648.45 billion yuan, up 4.04%. Main business revenue totaled 28,438.64 billion yuan, rising 12.35%, while profits reached 175.25 billion yuan, an increase of 16.07%. Profit margin on main business income was 6.17%, up 0.2 percentage points.
Within the computer, communications, and other electronic equipment manufacturing sector, the added value rose 10.9% year-on-year, outpacing the national average by 1.2 percentage points. Of the 70 monitored products, 41 showed growth (58.57%). Export value reached 1,989.89 billion yuan, up 0.61%. Revenue climbed 13.17%, and profit increased 15.25%, with a profit margin of 6.87%, up 0.13 percentage points.
**II. Key Industry Conditions**
**(1) Automobile Production and Sales Reach New Heights**
In 2013, automobile production and sales hit 22.16 million and 21.9841 million units respectively, growing by 14.76% and 13.87%. Passenger car production and sales increased by 16.5% and 15.71%, while commercial vehicle sales rose by 7.56% and 6.4%. Sales of 1.6L and below passenger cars grew 14.73%, accounting for 66.51% of total passenger car sales. Chinese brand passenger car sales rose 11.4%, making up 40.3% of the market.
**(2) Growth in Electrical Machinery Industry Accelerates**
The added value of the electrical machinery industry grew 10.9% year-on-year, up 1.2 percentage points from the previous year. Wind turbine output turned positive in November, increasing by 9.6%. Hydroelectric generator output fell by 4.8% in December, and steam turbine output dropped 8.3%. Transformer and power cable output rose 6.6% and 4.8% respectively.
**(3) Computer, Communications, and Electronic Equipment Industries Grow Steadily**
The added value of this sector rose 11.3% year-on-year. Monthly growth rates remained between 11.1% and 11.5%. Output of computers, program-controlled switches, mobile base stations, mobile phones, and integrated circuits all grew significantly, with mobile phone output up 25.8% and optoelectronic devices up 28.8%.
**(4) Machine Tool Industry Sees Reduced Decline**
Machine tool output declined 2% year-on-year, but the decline narrowed by 11.4 percentage points. CNC machine tools rose 2%, while forming machine tools fell 1.3%, a reduction of 3.4 percentage points.
**(5) Construction Machinery Output Grows**
Loader, compaction machinery, cement, and concrete machinery outputs increased by 1.8%, 6.9%, 2.6%, and 6.3% respectively. Excavator output turned positive in December, rising 1.4%.
**(6) Agricultural Machinery Output Varies**
Medium and small tractors, as well as harvesting machinery, saw increases of 13.9%, 4.9%, and 0.9% respectively. However, feed equipment and large tractors declined by 6.1% and 1.7%.
**(7) Instrumentation Industry Continues Rapid Growth**
Instrumentation added value rose 11.8% year-on-year. Automotive instrumentation output increased 13.9%, while electrical instrumentation declined 2.1%.
**(8) Shipbuilding Industry Shows Positive Trends**
Shipbuilding completion volume dropped 24.7% year-on-year, but new orders surged 242.2%. By year-end, hand-held orders increased 22.5%. China maintained leading shares in global shipbuilding. New orders accounted for 47.9% of the world total, up 4.3 percentage points from 2012. High-tech vessel orders also rose, including LNG and VLGC vessels. Offshore engineering equipment orders exceeded $18 billion, surpassing Singapore in global rankings.
**III. Main Features of Economic Operations**
**(1) Growth Rate Fluctuates**
Growth in the equipment manufacturing industry rebounded slightly throughout the year. Added value in Q1, H1, Q3, and the full year rose 9.7%, 9.73%, 10.2%, and 11.03% respectively. From January to August, growth matched overall industrial growth, reversing 19 months of underperformance.
**(2) Economic Benefits Recover Faster Than Production**
Main business revenue and profit in the equipment manufacturing sector rebounded rapidly. Revenue increased 12.35%, and profit rose 16.07%, both faster than production and sales growth. In the computer, communications, and other electronic equipment sector, revenue and profit grew 13.17% and 15.25% respectively.
**(3) Management and Financial Costs Ease**
Companies reduced costs and financial expenses due to slower investment. Management costs for large enterprises rose 12.43%, down 1% from the previous year. Financial expenses increased 4.55%, with interest costs rising 4.26%, a decrease of 30.12 and 25.03 percentage points respectively.
**IV. Major Issues in Economic Operations**
**(1) Market Demand Remains Weak**
Although orders reversed a long-term decline, demand remained a major challenge. Key machinery companies saw order growth of 10.19%, but growth was still slow, especially for metallurgical and mining equipment.
**(2) Equipment Prices Remain Low**
Due to overproduction, price competition intensified. Equipment prices stayed below 100% for 25 months, with an annual index of 98.6. Falling prices led to shrinking profit margins.
**(3) Export Outlook Remains Uncertain**
Despite some export growth, trade frictions increased. Exports of equipment manufacturing rose 4.04%, but computer and communications sectors lagged behind the national average. Mechanical and electrical exports grew 7.31%, lower than the national average.
**(4) Domestic High-End Equipment Faces Foreign Competition**
Foreign firms dominate high-end markets. When domestic alternatives emerge, foreign companies cut prices drastically, undermining local efforts. For example, a U.S. nuclear cable priced at 10 million yuan/ton was later reduced to 2.8 million yuan/ton after a domestic alternative appeared.
**V. Situation Analysis and Forecast**
Globally, economic growth is expected to remain low, with limited recovery. China faces challenges from slowing growth and structural reforms. Domestically, the government is implementing policies to promote growth through infrastructure, consumption, and innovation.
The equipment manufacturing industry is expected to grow steadily in 2014, with added value increasing by around 12%. In the computer, communications, and other electronic equipment sector, growth is projected at 11%.
**VI. Policy Recommendations**
**(1) Reform Industry Management Methods**
Streamline regulations, create demand platforms, and explore subsidies and venture capital support.
**(2) Strengthen Economic Monitoring**
Conduct regular analyses, publish monthly indices, and monitor key areas and enterprises.
**(3) Accelerate Major Science and Technology Projects**
Continue funding for high-end CNC machines, aircraft, and semiconductors.
**(4) Establish Industrial Automation Projects**
Promote automation through joint research and development.
**(5) Enhance Development Strategies and Policies**
Formulate green manufacturing policies, improve standards, and eliminate outdated production.
**(6) Accelerate Implementation of First (Set) Equipment Policies**
Support domestic technological advancements through insurance mechanisms and demonstration projects.
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