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Total Chinese Generator Set Market
M a r k e t O v e r v i e w
Market Introduction
The total generator set market experienced rapid growth as China has been witness to a national blowout since the end of 2003. The total Chinese generator set market witnessed an unusual market increase in 2004, while the growth rate in 2005 and 2006 were both nega-tive. The Chinese government enhanced grid construction and increased the installed capacity of power plants in 2005, which led to ease of power shortage in the same year. As a result, the gen-set sales fell in 2005 and the trend continued in 2006. Driven by the development of real estate in 2007 and the snow disaster, earthquake, and the Olympic Games in 2008, the total gen-set market in 2008 once again experienced a higher growth rate of 80.8 percent in terms of revenues.
Presently, the Chinese high-end gen-set market is dominated by foreign companies, whose products account for more than xx.x percent of the market share in terms of unit shipment. Similarly, the low-end gen-set market is controlled by domestic companies, whose products account for approximately xx.x percent of the market share in terms of unit shipment. The gas-fired gen-set market develops much faster than that of the diesel-fired gen-set because of the Chinese government's support for clean energy. In addition, the increased price of fuel also made the diesel-fired gen-set less competitive. Hence, gas-fired gen-sets are anticipated to gain market share from the diesel-fired gen-sets.
Gen-sets fueled by diesel control the market compared to gen-sets fired by gas. Based on the values of unit shipment in 2008, the total Chinese gen-set market is dominated by the diesel-fired gen-sets, which account for xx.x percent of the market share in unit shipment and xx.x percent in revenues. Hence, the status of the total Chinese gen-set market is largely based on the outlook for the diesel-fired gen-set market.
Presently, the adverse influence of the worldwide economic crisis has spread to the real economic body. The increasingly volatile economic environment has led to the deterioration of China's economic and industrial entities. Hence, 2009 is expected to be a most difficult period for China's total gen-set market.
2008 Worldwide Economic Crisis
In 2008, the U.S. subprime mortgage crisis has slowed down the worldwide economic growth. The momentum of domestic economic development in China has been affected by this economic crisis significantly as it is heavily dependent on foreign trade.
In China, more than 60 percent of the domestic economic growth is facilitated by exports. The Chinese economic growth slowed to x percent in the third quarter of 2008, the lowest level in five years and a sharp decline from the previous year, when it was xx.x percent. Impacts of the economic crisis were reflected in exports initially, then in the industrial production, and finally in consumption.The dominant reason for the economic downturn in developing countries is the decreasing demand from developed countries, which has directly led to the first contraction in global trade in the past 25 years. Moreover, from November 2008, there has been negative growth in export in China compared to the same period the previous year. Due to the fact that China's production planning is determined by sales, decreasing exports have led to the decline in export delivery value, which has slowed down the overall growth rate of industries. Additionally, the declining growth rate of industries has weakened the demand for power.
Currently, the international economic crisis is still deteriorating. The adverse influence is spreading from the virtual economic system to the real economy and from developed coun-tries to emerging economic bodies. At present, the Chinese government has taken various measures to relieve increasingly declining demand for exports. However, in the final analysis, growth of the Chinese export is determined by the economic recovery of Europe and America. Therefore, China's economic development is at a crossroad and the domestic economic growth is forced to increasingly depend on the domestic demand, which is expected to replace the situation of high dependence on foreign trade gradually.
China has adopted a series of corresponding measures to relieve the impacts of the global economic recession; for example, the Chinese government has announced a program of massive spending on infrastructure as part of a new fiscal stimulus plan aimed at boosting the country's rapidly slowing economy. The State Council, China's cabinet, authorized RMB
x,xxx billion ($xxx billion) of investment on infrastructure and social welfare over the next two years. The investment is likely to focus on low-income housing, water, electricity, disaster relief, and transport, and an expected big increase in railways. Among these, the energy sectors and energy-related infrastructure construction are planned to account for about xx percent of investment. The government reiterated that the spending plan reflected a decision to adopt a positive fiscal policy to deal with the global financial crisis, while mone-tary policy is expected to be moderately positive.
Moreover, the government has introduced a long-awaited reform of value-added tax (VAT), which is likely to cut costs for Chinese companies by xx.x billion. The newly implemented VAT policy is expected to facilitate the progress of equipment replacement and further accel-erate the growth in equipment manufacturing industries, and raw materials departments from 2009. Industrialization and urbanization are the two basic momentums for the Chinese economic growth. It is expected that the power of these two basic trends will still be strong and positive in the coming years.
