In this article, Omdia highlights the differences between the 13th and 14th Five-Year Plans and analyzes what benefits these new initiatives could bring to the Chinese industrial market in the next five years.

Omdia view

According to the National Bureau of Statistics, China’s GDP grew 2.3% from 2019 to 2020. Rapid and effective containment of the COVID-19 pandemic in 1H20 enabled production and consumption activities to quickly return to pre-pandemic levels in 2H20, stabilizing the recovery of China’s market. The 14th Five-Year Plan was put forward under this background and started taking effect in March 2021.

In this article, Omdia highlights the differences between the 13th and 14th Five-Year Plans and analyzes what benefits these new initiatives could bring to the Chinese industrial market in the next five years.

Manufacturing: Transformation and upgrades

Comparing manufacturing-related content between the 13th and 14th Five-Year Plans (as shown in Table 1), the overall goal of developing China’s manufacturing has not changed too much.

The 14th Five-Year Plan does not mention “Made in China 2025.” It pays more attention to enhancing the competitive advantage of China’s manufacturing industry and maintaining a stable GDP share for the manufacturing industry. Emphasizing the improvement of the industrial chain’s independent controllability, the plan points out that it is necessary to accelerate the removal of bottlenecks in many fields, including basic parts and components, integrated circuits, sensors, and operating systems. This will guide investment flow toward local manufacturers, facilitate the pace of local product import substitution, and provide more market space and opportunities to local manufacturers and products.

  • China will continue to focus on upgrading its manufacturing over the next five years. The government aims to shift focus from existing low-end machinery to the high-value chain and provide room for growth in demand for mid-to-high-end machinery.
  • Improving the industrial chain, especially in key areas—such as high-speed rail, power equipment, new energy, ships, and semiconductors—will attract investment in China’s weaker industries, especially in the fields of semiconductors, electronic information, key parts and components, and high-end machinery. This will help local manufacturers in related industries invest in R&D to improve at the product level and gradually reduce reliance on imported products in key areas.

This upgrade in manufacturing will continue to support the growth of the Chinese machinery and automation product market. In the short term, an improvement at the industrial level for local Chinese manufacturers cannot immediately shake the positions of high-end machinery and automation products from European and US manufacturers. However, in the long term, the trend of local products replacing imported products will continue, and Chinese local manufacturers’ competitiveness and market shares will continuously increase.

Manufacturing: Sustainability

 

Compared with the 13th Five-Year Plan, the 14th Five-Year Plan puts forward more specific environmental protection and sustainable development goals, especially promoting the formulation of an action plan for peak carbon emissions by 2030. This, in turn, will increase the proportion of total energy consumption for non-fossil energy from 15.9% in 2020 to 20% in 2025, further reducing energy consumption per unit of GDP and carbon dioxide emissions. This will guide the development of the manufacturing industry. The increase in investments in related industries and the growth in demand for green manufacturing will provide market space for efficient and environmentally friendly machinery equipment and automation products.

  • From a manufacturing perspective, the focus on emission reduction, sustainability, and energy saving in the steel, petrochemical, chemical, non-ferrous, building materials, textile, paper, and leather industries will drive demand for high-end energy-saving machinery equipment in related sectors.
  • Automation equipment suppliers’ development of automation products will be guided in the direction of high efficiency and energy saving. For example, in the low-voltage motor market, new European and Chinese legislation started taking effect in June 2021. Their legislation requires motor manufacturers to meet IE3 minimum energy efficiency standards for single-phase and three-phase asynchronous motors. This promotes and guides changes in the automation product matrix, creating market opportunities for new automation equipment.
  • On the industry side, investment and utilization of clean energy will occupy an increasingly important position in the future. This will drive growth in demand for related machinery and equipment and automation products, especially in the fields of photovoltaics and wind power. According to Omdia’s Machinery Production Market Tracker – 2Q21 Data, the Chinese photovoltaic equipment market will grow at a CAGR of 12.7% from 2021 to 2024. On the other hand, the oil industry will pay more attention to cost reduction and efficiency improvement, shifting to a more sustainable business model. Manufacturers will be more willing to adopt efficient, energy-saving, and environmentally friendly automation equipment to cope with fierce market conditions.

Manufacturing: Investment in key sectors

Compared with the 13th Five-Year Plan, the 14th Five-Year Plan’s investment focus has shifted from supporting the development of strategic industries to developing and expanding strategic industries. At the same time, demand for intelligent transformation of the manufacturing industry during the 14th Five-Year Plan period will further increase demand for related equipment and automation equipment.

The 14th Five-Year Plan continues to focus on high-end equipment, such as high-end medical equipment; agricultural machinery; advanced machine tools; and new energy industries like photovoltaic, wind power, and new energy vehicles. Omdia expects such focus and initiatives will bring more investment and market expansion. As a result, demand for related machinery in these industry sectors will continue to grow strongly. According to Omdia’s Machinery Production Market Tracker – 2Q21 Data, industries such as semiconductor machinery, industrial robotics, material handling equipment, machine tools, and agriculture machinery are expected to grow substantially. The robotics machinery market will spearhead growth in the machinery market, which semiconductor machinery will follow in the next five years.

Figure 1: Forecast of Chinese machinery production Figure 1: Forecast of Chinese machinery production Source: Omdia

Manufacturing: Intelligent and digital

Compared with the 13th Five-Year Plan, the 14th Five-Year Plan proposes for the first time the construction of a digital China. For the digitalization of the manufacturing industry, the 14th Five-Year Plan proposes more specific key industry demonstration projects, which provide a guarantee for digitalization to be fully replicated throughout the entire manufacturing industry.

The 14th Five-Year Plan emphasizes digitalization. Intelligent manufacturing and the Internet of Everything will encourage machine builders and automation vendors to enhance the design of machinery and automation components to be more competitive in the market. An increasing focus on technical functionality, such as connectivity and communication, will further support the growth of related automation products like sensors, network infrastructure equipment, and machine vision. Omdia’s Industrial Automation Equipment Market Tracker – 2Q21 Data predicts that the CAGR of networking infrastructure devices and machine vision hardware in the Chinese market will reach more than 9% from 2021 to 2024.

Figure 2: Forecast of Chinese industrial automation equipment Figure 2: Forecast of Chinese industrial automation equipment Source: Omdia

In summary, the 14th Five-Year Plan shows that the Chinese government places great importance on the development of its manufacturing industry and is guiding and planning the development of the industry at a policy level. Transformation and upgrades, continuous investment, sustainable development, and digitalization will continue to promote the development of the entire manufacturing industry as well as drive growth in demand for related mechanical equipment and automation products. Based on second-quarter results for China’s machinery production and automation equipment, Omdia predicts that the CAGR of both services will reach 5.0% and 5.9%, respectively, from 2021 to 2024.

Table 1: Comparison between the 13th and 14th Five-Year Plans for manufacturing

 

The 14th Five-Year plan

The 13th Five-Year Plan

Timeline

2021–25

2016–20

Economic policy

-A dual circulation economy model with domestic demand as the mainstay and external demand as the supplement.

-An economic model supported by domestic consumption, domestic investment, and exports.

Manufacturing goals

-Supplement and strengthen the industrial base

-Create stronger innovation, higher added value, and a safer and more reliable industrial chain

-Promote manufacturing optimization and upgrading

-Implement manufacturing cost and burden reduction

-Promote the digital transformation of the industry

-Strengthen the industrial base

-Implement intelligent manufacturing and digitalization in manufacturing

-Promote the upgrading of the manufacturing industry to a mid-to-high-end level and improve the level of technology, equipment, energy efficiency, and environmental protection

-Resolve excess capacity

-Reduce manufacturing costs

Enhancement of manufacturing core competitiveness

-High-end new materials, such as rare earths, special steel, and photoresist, etc.

-Major technical equipment*

-Intelligent manufacturing and robotics

-Aero engine and gas turbine

-BeiDou navigation satellite system industrialization application

-New energy vehicles and smart (connected) vehicles

-High-end medical equipment and innovative drugs

-Agricultural machinery and equipment

-Aerospace equipment

-Marine engineering equipment and high-tech ships

-Advanced rail transit equipment

-High-end CNC machine tools

-Robot equipment

-Modern agricultural equipment

-High-performance medical equipment

-Advanced chemical equipment

Development of new industry sectors *

-New-generation information technology

-Biotechnology

-New energy

-New materials

-High-end equipment

-New energy vehicles

-Green environmental protection

-Aerospace

-Maritime equipment

-New-generation information technology

-New energy vehicles

-Biotechnology

-Green, low-carbon, and high-end equipment and materials

-Advanced semiconductors

-Robotics

-Aerospace

Digital industry

-Cloud computing

-Big data

-IoT

-Industrial IoT

-Blockchain

-Artificial intelligence

-Virtual reality and augmented reality

-Broadband deployment

-Industrial IoT

-Cloud computing

-“Internet + “action*

-Big data

-E-commerce

Key environmental governance projects

-Air pollution reduction: Implement the clean production transformation of cement clinkers, coking capacity and non-ferrous industry furnaces and kilns, and complete the ultra-low emission transformation of steel production capacity

-Water pollution prevention and water ecological restoration

-Soil pollution prevention and safe use: Focus on the chemical and non-ferrous metal industries and implement soil pollution source control projects

-Urban sewage and garbage treatment facilities

-Disposal of medical waste and hazardous waste and comprehensive utilization of solid waste

-Resource saving and utilization: Promote major project demonstrations such as near-zero energy-consumption buildings, near-zero carbon emissions, and carbon capture, utilization, and storage (CCUS)

-Industrial pollution emission control: Transform manufacturers with unstable emissions in the steel, horizontal, glass, paper, printing, and dyeing industries

-Atmospheric environmental governance: Control total coal consumption, promote the “coal-to-gas” project, implement National IV emission standards, etc.

-Water environment governance

-Soil environmental governance

-Hazardous waste pollution prevention: Chromium, lead, mercury, other heavy metal waste treatment, etc.

-Nuclear and radiation safety guarantees improved

Source: Xinhua News Agency

The following are some notes for Table 1:

  • New industry sectors: Refers to the fields that emerged in recent years and are not included in traditional industries
  • Major technical equipment*: EMUs, trains, advanced engineering machinery, key components of nuclear power plants, ships, deep-sea oil and gas production platforms, large passenger planes, etc.
  • “Internet + “action*: Promote Internet-based business models, service models, management models, supply chain, logistics chain, and other innovations

Appendix

Further reading

“Opinions on accelerating the promotion of high-quality development of the manufacturing service industry,” National Development and Reform Commission, https://www.ndrc.gov.cn/xxgk/zcfb/tz/202103/t20210323_1270129.html

“Outline of the 13th Five-Year Plan for the National Economic and Social Development of the People’s Republic of China,” Xinhua News Agency, http://www.xinhuanet.com/politics/2016lh/2016-03/17/c_1118366322.htm

“Research on China’s Energy and Power Development Plan in 2030 and Prospects in 2060,” Global Energy Interconnection Development and Cooperation Organization, https://www.geidco.org.cn/html/qqnyhlw/zt20210120_1/index.html

“The 14th Five-Year Plan for the National Economic and Social Development of the People’s Republic of China and the Outline of the Long-term Goals for 2035,” The State Council of the People’s Republic of China, http://www.gov.cn/xinwen/2021-03/13/content_5592681.htm

Industrial Automation Equipment Market Tracker – 2Q21 Data (June 2021)

Machinery Production Market Tracker – 2Q21 Data (June 2021)

The impact of Chinese Efficiency Legislation on the APAC low-voltage motor market (May 2021)

Author

Lisa Wang, Analyst, Manufacturing Technology Hardware

askananalyst@omdia.com