China’s Machine Tool Market: Growth vs. Challenges

China’s Machine Tool Industry: Challenges, Trends, and Valuation Considerations

Over the past decade, China has solidified its position as a dominant force in global machinery production. However, despite its rapid advances in artificial intelligence, semiconductors, and renewable energy, China continues to face significant hurdles in developing high-precision machine tools, an industry critical to aerospace, medical, and electronics manufacturing.

A recent Financial Times article explores the complexities of this sector, shedding light on why foreign manufacturers like Siemens and Fanuc continue to lead in high-end CNC (computer numerical control) machine tools. While China’s manufacturing industry has made substantial progress, the country’s reliance on foreign machine tool technology presents both opportunities and risks, especially when it comes to asset valuations and resale potential in the secondary market.

China’s Machine Tool Market: Growth vs. Challenges

Machine tools are essential in manufacturing, enabling the production of everything from jet engine components to circuit board parts. Yet, despite its industrial strength, China has struggled to produce high-end machine tools that rival those of European, Japanese, and U.S. manufacturers.

One of the key challenges is software and hardware integration. While China has developed its own CNC controllers, many manufacturers still prefer to use Siemens or Fanuc systems due to their reliability, industry-wide adoption, and strong brand positioning. This “network effect” makes it difficult for new players to compete, as switching costs and performance risks are high for manufacturers investing in machine tools.

Additionally, China’s machine tool industry has suffered from an over-reliance on price competition rather than innovation. Domestic companies have focused on gaining market share by lowering prices rather than investing in long-term research and development. This has led to thinner profit margins and, in some cases, business failures. Major state-owned manufacturers like Dalian Machine Tool and Shenyang Machine Tool have faced bankruptcy, highlighting the volatility in this sector.

While Chinese firms now dominate the low-to-mid range of the market, high-end CNC machine tools remain largely dependent on foreign imports. This reliance raises concerns over long-term supply chain stability and valuation risks for companies looking to purchase or resell Chinese-made assets.

Valuation Challenges for Chinese-Made Machinery

James Fox, Director at Hickman Shearer, highlights key valuation considerations when assessing Chinese-manufactured assets. While Chinese-made machinery is often more competitively priced than Western OEMs (Original Equipment Manufacturers), there are important factors that impact its long-term value:

1. Aftersales Support & Spare Parts Availability – One of the biggest challenges with Chinese-made machinery is access to reliable aftersales support and spare parts. Without robust service networks, businesses may struggle to maintain these assets efficiently.

2. Build Quality & Durability – The perception of lower build quality remains a concern for buyers in the secondary market. While China has made advancements, inconsistencies in manufacturing standards can affect resale value.

3. Demand in the Secondary Market – Many buyers still prefer Western or Japanese machine tools due to their reliability and proven track record. This makes reselling Chinese-made machinery more challenging, particularly in industries requiring high precision, such as aerospace and medical manufacturing.

Despite these challenges, China is making strides toward developing competitive high-end CNC machine tools. Experts believe that with continued investment, China will eventually close the gap. However, in the short term, businesses should carefully assess the valuation risks before investing in Chinese-made machinery.

How Hickman Shearer Can Help

At Hickman Shearer, we specialise in asset valuation, helping businesses navigate the complexities of machinery and equipment investments. Our team continuously analyzes market trends to provide accurate, real-time data that supports strategic decision-making.

Whether you’re considering purchasing, selling, or valuing manufacturing assets, understanding the evolving machine tool landscape is essential. If you’d like to discuss how these trends impact your business, get in touch with our industry experts today >> Get In Touch

About Hickman Shearer

At Hickman Shearer, we specialise in delivering exceptional RICS and ASA certified capital asset valuation, management, and sales services. Our expertise span a wide range of global industries, ensuring that we provide tailored and insightful commercial valuations and equipment valuation services to meet your unique needs. With a strong track record of delivering robust and independent advice, Hickman Shearer is committed to supporting businesses in achieving their strategic objectives. Find out more here >> About Us

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