Mechanical engineering in China is gradually regaining momentum

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According to the latest VDMA survey, the effects of the corona pandemic in China are less severe than was expected only recently. Nevertheless, the mechanical engineering industry is expecting a sharp drop in sales.

While the economy in Europe and the USA is still paralysed by the corona pandemic, production in China is slowly picking up again. A second recent survey by the VDMA offices in China, which was answered by 118 member companies, shows a noticeable improvement in the situation on the ground. At the beginning of March, 57 percent of those questioned judged the effects of the corona pandemic to be great, whereas this figure has now fallen to just 46 percent. On the other hand, the proportion of respondents who consider the effects to be rather minor rose from 3 percent to 13 percent.

Significant easing is evident in the local transport system. For 82 percent of the companies, the transport situation within China has improved. However, deliveries from outside to China as well as from there to other countries are still difficult and the costs for this have increased, especially for air freight. "Companies that produce for the local market and have a high degree of localization are now clearly at an advantage," says Claudia Barkowsky, Managing Director of VDMA in China. Four weeks ago, the severe transport restrictions and the delayed resumption of production after the Chinese New Year were still the greatest challenges for the companies.

Employee mobility still limited

There are currently considerable restrictions on the mobility of service and sales staff. 73 percent report serious or noticeable restrictions. And the situation also remains tense in terms of supply chains and incoming orders. "There continues to be a patchwork of measures for travel within China. Customers are not dealing with the situation consistently, allowing access today and refusing it the next day," reports Barkowsky.

The picture is mixed when it comes to information on sales losses. While 64 percent of those surveyed at the beginning of March were expecting losses in the first half of 2020, this figure has now risen to 73 percent. However, compared to the first survey, 18 percent (previously 2 percent) of respondents said that they would most likely not be affected by losses and 6 percent even reported increases in sales (March: 0 percent). "We hope this is a light at the end of the tunnel and not just a short-term effect triggered by a temporary boost from pent-up demand," says Barkowsky.

Entry stop brings new problems

However, the entry ban in China, which has been in force since March 28, 2020, poses new problems for machine manufacturers. The commissioning of new production lines is often not possible without support from the headquarters, service technicians are needed and in some cases the foreign managers have not yet returned to China. "The entry ban can put companies under increasing pressure. Customers in China are not waiting until the situation in the rest of the world has stabilized. The People's Republic wants to get its economy back on track as quickly as possible and local companies are pushing for business to resume," Barkowsky explained. A lifting of the entry ban is not in sight, however.