Industrial plant manufacturers: China most important competitor

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While Corona plunged the global economy into a historic recession in 2020, China was the only major economy to experience growth.

Corona plunges world economy into historic recession

World GDP plunged in the wake of the 2020 Corona pandemic, the most since the end of World War 2. According to the International Monetary Fund (IMF), global economic output fell by 3.5% in relation to 2019. A comparison with 2009, a year marked by the disastrous financial crisis, makes clear just how sharp this decline was: then, global economic activity fell only marginally by 0.1%.

While China was able to quickly overcome the economic trough and was the only major economy to record growth in 2020 ( 2.3%), the decline in many developed economies was historic (e.g. eurozone: -7.2%, UK: -10.0%). While there is hope for a recovery in 2021 driven by the US and emerging Asia (IMF forecast: 5.5 %), considerable uncertainties remain about the further progress of the pandemic, the success of the vaccination campaign and thus about the exact course of the economic recovery. At the same time, the increasing bureaucracy involved in complying with laws, directives, voluntary corporate codes and national action plans - for example on the issues of human rights and supply chains - is placing high demands on large-scale plant engineering and tying up productive resources.

This environment is proving to be particularly challenging for large-scale plant engineering, which is more dependent on stability and planning than other industries due to long project completion times and complex supply chains. Above all, the continuing reluctance of many customers to invest is putting a strain on plant manufacturers. The fact that the members of the Arbeitsgemeinschaft Großanlagenbasu were able to hold their own in the market against all odds last year was due on the one hand to the high order backlogs from the economically more successful previous years. On the other hand, the companies reacted agilely and flexibly to the disruption triggered by Corona, for example by relocating entire departments to home offices within days. In this way, they ensured that important functions such as the procurement and construction site organizations and engineering remained operational in the interests of the customers.

China becomes the most important competitor in large-scale plant construction

The high level of competition and consolidation pressure in the market for large-scale plants has increased significantly in 2020, according to managers, and is expected to intensify further in the coming years. In this context, China is considered the most important international competitor and the profiteer of the Corona crisis, according to a recent VDMA survey conducted in February 2021. In the meantime, around 70 % of the European plant engineering experts surveyed already count companies from the People's Republic among their main competitors (2019: 70 %), more than at any time since this survey began in 2007. They are followed equally by suppliers from Germany and - at a considerable distance - plant engineers from Italy, France and the USA. This assessment applies equally to all sectors, company sizes and ownership structures.

A major reason for China's growing importance in international large-scale plant construction is the transfer of know-how that has taken place in recent years and the resulting process of catching up with the West. State export promotion has also made an important contribution. The industrial policy measures range from the offer of favourable financing conditions and special export subsidies to the politically controlled establishment of large corporations ("national champions"), which are to catch up with the level of the industrialised countries within a few years.

 

The financial participation of Chinese investors in European mechanical and plant engineering companies is another trend that has been increasingly observed in recent years. Through company acquisitions, joint ventures and strategic alliances, Chinese plant manufacturers are seeking to acquire industry-specific knowledge and gain better access to those European markets that have so far been closed to them.

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