Machinery makers urged to heed global industrial development

Taipei, Aug. 5, 2005 (CENS)--With mixed outlook for mainland China's machinery market and a recovery trend for the manufacturing sector in the U.S., Taiwan's machinery makers should adjust production and marketing strategies by paying more attention to the global industrial development, said the government-backed Industrial Technology Research Institute (ITRI).

ITRI recently released the statement at a time when domestic machinery industry is anticipated to grow at a slow pace for the rest of this year.

According to Eric Liu, an industry analyst with the ITRI¡¦s Mechanical Industry Research Laboratories (MIRL), mainland China imported US$30.2 billion worth of machinery in the first four months of this year, representing an annual growth of 5.7%. On the other hand, Taiwan exported NT$52.7 billion (US$1.65 billion at US$1:NT$31.9) worth of machinery to the mainland in the first quarter of this year, down 11.1% year-on-year.

Hung ascribed the decline in exports of Taiwan-made machinery to the mainland to the implementation of a macro-economic control policy imposed by the mainland since the second quarter of last year. With the execution of the stringent policy, mainland authority has recalled several thousands of licenses for developing industrial zones nation-wide, which has caused a reduction in demand for engineering machinery, automobile and internal combustion machines.

Nevertheless, demand for imported mining machinery, tools, instrument equipment, machine tools, office equipment and electric machinery and home appliances is still on the rise. For instance, the mainland imported US$3.15 billion worth of machine tools in the first four months of this year, up 22.3% from the same period of last year.

Hung said the recent revaluation of mainland currency, renminbi, against the U.S. greenback ahs also caused mainland machinery importers to take a wait-and-see attitude toward securing import contracts because they fear another wave of appreciation for renminbi.

Another factor affecting the growth of machine tool imports by China is a special measure implemented since April 1, which calls for a levy of 30% tariff on imported components and parts ready for assembling automobile, compared with only 12.27% in the past. The measure is expected to motivate automobile makers to raise the ratio of self-made parts by installing such production equipment as machine tools.

On the other side, the U.S. manufacturing sector has seen an upward trend in equipment utilization ratio since the fourth quarter of last years. Production index for U.S. manufacturing sector hit 138.96 points in May, hitting the highest record in a decade.

The U.S. imported US$70.85 billion worth of machinery in the first four months of this year, up 12.2% annually. Imports of machine tools came to US$800 million, up 39.7% annually. Of this, machining centers grew 53%, lathes advanced 40% and pressing machines jumped 67%.

Liu said Taiwan exported US$60 million worth of machine tools to the U.S. in the first quarter of this year, up 64% year-on-year. He said the recovery of the U.S. economy would play an important role in the growth of Taiwan¡¦s machinery industry for the rest of this year.