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Metal Casting Technologies : September 2006
CHINA The changing face of the Chinese foundry Industry Economic rewards, concerns on natural resources and the challenges ahead. By Gopal Padki The foundry industry is the mother of all industrialized economies driven by motor, rail ship, air or engineered components for life inputs such as food, medicine, leisure, sports and so on. The Chinese economic miracle witnessed by the world today is also driven by the same factors. The past two decades of transformation of the mindset from the planned economy to the current WTO ruled market economy with an unprecedented GDP growth per year in excess of 8 + % and the FDI investment of US$40-60 billion of which nearly 70% consumed by the manufacturing sector has resulted in a robust economic performance similar to what Japan witnessed during the initial phase of the 80s. Foreign capital apart the benefits of western technologies, training and management concepts also have quickened the pace of efficient and improved business skills and capabilities. Free trade zones, Special Economic zones, excellent infrastructure facility in express toll roads, airports, container ports in Yangtze river delta, Pearl river delta and Bohai gulf areas have transformed the face of the Chinese industry for successful global commerce. Hence is the result that has enabled the Chinese industry to become a powerful global source for various manufactured goods, Needless to stress that the local foundry industry has played a significant role as we all know that no manufacturing industry can flourish sensibly without the simultaneous inputs from engineered, sound, lighter, machine- friendly, quality consistent and cost effective castings, whether be it ferrous or nonferrous. More so since the early 90s when the landscape of the foundry industry changed from increased direct investments from several leading foundry groups from Taiwan, Japan, Korea, Hong Kong, Europe, Australia, USA and Asean countries for stand alone foundries as opposed to the Chinese State Owned, SoE captive ones. Nevertheless, this rapid industrialization and economic growth priorities at every micro and macro government levels have also resulted in faster depletion of natural resources and severe and questionable degradation of water, air quality standards. The rewards also have come with a cost of growing concerns of sanitation and municipal amenities burden in urban cities and the growing unrest due to rural unemployment. Nearly 400 million people are jobless at rural China, of which only 150 million people or so are adequate to till the land, the challenge is to create industrial and service jobs far away from cities for the rest. This may offer a continued cheaper labour force but the change ahead is for creation of sustainable economic transformation away from traditional coastal strong growth centers that have been over burdened. In 2005, the total export value of automotive products and export volume of vehicles from China exceeded the corresponding imports into China for the first time. This achievement was not only a milestone for the Chinese automotive industry, it also demonstrated China's ambition to become a leader in the global automotive market. Overseas demand for Chinese vehicles has been growing, especially for light weight trucks. Domestically produced luxury vehicles are gradually replacing certain imported ones. Furthermore, domestic brands that were formerly considered lacking competitiveness have gradually entered the international market. Ambitious Chinese automotive companies are proactively planning to expand overseas by exporting to mainstream automotive markets in Europe and North America. The increasing number of international parts and component manufacturers entering or expanding in China fueled the growth of both the domestic market size and export volume. And, these international manufacturers have enhanced and improved the industry's structural capability allowing for gradual integration into the global market. Only a few years ago, there was a general concern that China's accession to the World Trade Organisation would have a grave impact on the domestic automotive industry, but market developments have proved otherwise. Was it luck? Or are there risks that have yet to surface? A recent survey of senior executives in the Chinese automotive industry provides a better understanding of the current state of the development of the Chinese automotive industry, the export related challenges Chinese automotive companies face, and future trends for exports of automotive products.