In what Marco Polo called “The Cathay Country”, modernisation still represents an opportunity for advanced economies, but in new ways. The shift from an economy based on cheap labor to one focused on innovation and sustainability opens up collaborations not only in areas such as artificial intelligence, green energy and biotechnology but also in automation and advanced and non-advanced mechanics.
The still expanding domestic market offers ample space, although local competition is growing. Geopolitical tensions, especially with the US, limit partnerships in strategic sectors, and increased state control can hamper foreign companies in some sectors.
Yet, sectors such as renewables, mechanics, automation and health remain open and full of opportunities.
The mechanical and automation sector, which I have been dealing with for decades in China, still represents a great opportunity for Italian companies, as it is at the heart of the country’s industrial transformation. China aims to become a global leader in key sectors through development programs such as the “Made in China 2025” plan, which promotes innovation and modernization of production. In this context, Italian companies can find numerous supports for internationalization, such as the tools offered by the ICE (Institute for Foreign Trade), the European calls for internationalization and the Italian Chamber of Commerce in China, which provides a network of services dedicated to Italian companies expanding in the Chinese market. The aim of this analysis is to bring attention to the main opportunities and challenges for companies interested in investing in the mechanical and automation sector in China.
Opportunity
- Industrial modernization and government initiatives: China is transforming its manufacturing industries through programs such as “Made in China 2025,” which aims to develop advanced technologies in areas such as robotics, automation, and precision mechanics. (at the bottom of the page an excerpt) This plan represents an opportunity for Italian companies to offer innovative technological solutions to support the modernization of Chinese industry. Companies can get support through ICE’s programs, which offer personalized advice, market studies and assistance to participate in international trade fairs and trade missions.
2. Expanding domestic demand: Rising labor costs in China are pushing local companies to automate production processes. This trend favors the demand for advanced mechanics and automation solutions, offering opportunities to Italian companies that can provide high-quality technologies. The Italian Chamber of Commerce in China can support these companies with a network of local contacts and services that facilitate entry into the Chinese market, such as tax assistance, legal advice and networking.
3. Impact of Covid-19 and new trends: The pandemic has accelerated the digital transformation of Chinese companies, increasing the demand for technologies related to sustainability, artificial intelligence and 5G. Italian companies can seize these opportunities, especially in the green technology sector, in which China is particularly engaged. European calls for internationalization also offer funding to support the growth of companies in strategic foreign markets such as China, with a focus on innovation and sustainability.
Challenges
1 . Internal competition: The Chinese government is strongly supporting local companies in the mechanical and automation sector, creating a competitive environment. Italian companies must therefore stand out through innovation and the added value of their products, to avoid being overtaken by Chinese manufacturers, who are rapidly improving their mid-range and low-end technologies. It won’t be long to see them appear at the high end of the market.
2 . Localization policies: China favors local companies and often imposes restrictions on foreign businesses, especially in strategic sectors. Localization policies, which push for more on-site production, require foreign companies to adapt. However, the Italian Chamber of Commerce in China offers support to overcome these regulatory barriers and find strategic local partners.
3 . Regulations and technological barriers: Access to sensitive technologies, such as those related to advanced automation and robotics, may be restricted by government regulations that aim to protect the development of China’s strategic industries. However, the tools offered by ICE and the support of the European network of calls and funding can help Italian companies navigate these complexities.
Case Study
- Successful examples: Companies such as ABB and Comau have managed to establish a strong presence in China thanks to their ability to adapt to local needs, investing in R&D in China and building strategic partnerships with Chinese companies. The support of Italian institutions, such as ICE and the Italian Chamber of Commerce in China, has played a crucial role in this success.
- Examples of failure: Some European companies, unable to adapt to localization needs and compete with Chinese manufacturers, have seen their market share shrink, as in the case of Kuka, which has faced difficulties in maintaining a long-term competitive advantage.
Recommendations
A) Strategies for companies looking to enter or expand in China: Italian companies need to focus on high-end technologies and niche sectors where they can offer a competitive advantage over Chinese companies. ICE provides numerous tools to support companies, such as market studies, personalized advice and participation in international trade fairs.
B) Collaborations with local partners: Joint ventures and partnerships with local companies are crucial for navigating China’s complex regulations and adapting to localization policies. The Italian Chamber of Commerce in China is a key player in facilitating these collaborations and connecting Italian companies with potential Chinese partners.
C) Investment in R&D and training: Foreign companies should invest in R&D in China to create customized products for the local market, and offer advanced training programs to develop local talent, while maintaining a competitive advantage. European calls can be a valuable source of funding to support these investment.
Conclusions
How to say?
the mechanical and automation sector in China offers numerous opportunities for Italian and foreign companies, especially thanks to the support of Chinese development programs such as “Made in China 2025” and new post-Covid trends related to digitization and sustainability. With energy costs on the prospect of falling, labor still contained and the acceleration of automation, the framework for production investments appears favorable, especially for those who know how to orient themselves not only towards the local market, but also towards the global supply chain.
In case of clarification or request for information, it will be my pleasure to answer and support those who have interests or curiosity.
What is Made in china 2025
“Made in China 2025” is an industrial development program launched by China in 2015. The main goal is to promote technological innovation and the transformation and upgrading of China’s manufacturing industry.
The programme includes a number of measures, including:
- Technological innovation: increasing investment in research and development to improve the technological competitiveness of the manufacturing industry.
- Digital transformation: promoting the adoption of new digital technologies to improve production efficiency and quality.
- Development of key sectors: focus on the development of high-tech and strategic sectors, such as robotics, artificial intelligence and renewable energy.
- Chinese quality and brands: Improving the quality of Chinese products and strengthening the “Made in China” brand in the global market.
What does Made in China offer to companies?
To this end, the Chinese government offers several tools and opportunities for businesses to implement the Made in China 2025 program. These include:
- Grants and financing: Provides direct financing or credit guarantees to businesses to promote research and development, the purchase of advanced equipment, and production modernization.
- Tax policies: grants tax breaks and concessions to encourage innovation and investment in advanced technologies.
- Infrastructure and support services: Builds industrial parks, R&D centers, and logistics infrastructure to facilitate the development of the manufacturing industry.
- International collaborations: It supports Chinese companies in collaborating with foreign partners to access global technologies and markets.
- Training and development of human resources: invests in the training of skilled workers in technical and management fields to meet the needs of high-level industry.
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