Subscribe to our 

Pumps & Systems, January 2008

With its seemingly limitless supply of lower factory costs, more determined discipline in their factories and rapid acquisition of technological prowess, the Chinese pumps market appears to be unstoppable.

In emerging Asia markets, with growth rates of more than 20.0 percent a year in 2006, the Chinese market offers huge potential. Transport and other infrastructure in China is also in better shape than many other Asian countries and the quality and availability of suppliers is improving all the time, enabling highly integrated supply chains to develop within the country.

The Chinese industrial pumps market (including centrifugal and positive displacement pumps) is currently witnessing a positive trend, which is driven by infrastructure development in related processing industries and mega project launches like the South-to-North Water Diversion Project and West-to-East Natural Gas Transmission Project. Both of these initiatives provide considerable opportunities for revenue growth.

In 2006, the focus was on key end-user applications like water and wastewater treatment, the chemicals and petrochemicals industry, power generation industry, and oil and gas industry. These important industries each account for between 15 percent and 25 percent of the overall market (see Figure 1). This trend is expected to remain for the next 7 years.

Overview

The total Chinese industrial pumps market is considerably large, but a fragmented market. The revenue generated by this market reached $5.06 billion in 2006, with an annual growth rate of 24.9 percent. Between 2003 and 2006, this market witnessed rapid growth driven by the huge demand from industries such as water and wastewater treatment, power generation, oil and gas, and chemicals and petrochemicals.

This market is expected to witness continuous growth, with a decline in growth rates, which is mostly due to the tightened control on investment in many industries and successive completion of relative projects. By the end of the forecast period in 2013, the revenue from this market is forecasted to be $14.96 billion, and it is anticipated to grow at a relatively high compound annual growth rate (CAGR) of 16.7 percent.

Competition

There are more than 3,500 participants in the total Chinese pumps market. According to the characteristics, the companies can be roughly divided into three segments: multinational companies, state-owned enterprises, and private-owned enterprises.

Although multinational companies, including joint-venture companies, occupied a share of less than 15.0 percent in terms of number, this group of participants contributed more than 20.0 percent toward the revenue of this market in 2006 by providing high value-added, high-tech products of advanced international standards and value-added services.

For domestic companies, most are privately-owned in the form of shareholding enterprises, which experienced rapid development. These enterprises are noted for their flexible managerial mechanisms and stable sales networks.

Competition is expected to intensify, which is represented by price wars among medium-small companies in the mid-range and low-end market. After witnessing the rapid growth in China, more multinational companies are expected to enhance their penetration of products and brand name in the region by local manufacturing through acquisitions and mergers, which are expected to result in increasing market consolidation.

Investment Policy - Impact on Energy Industry

China has been the world's largest recipient of foreign direct investments (FDI) among the developing countries since the early 1990s. Since 2001, the Chinese energy industry has been one of the promising industries, which has attracted considerable inflow of foreign direct investments.

The massive inflow of foreign investments into the Chinese economy could also be attributed to the country's WTO accession, which has opened the huge Chinese market for leading countries such as Japan, the United States, South Korea, and Taiwan, and the countries of the European Union.