China Tightening Foreign Investment Restrictions
September 7, 2008
Under pressure from nationlists, China’s government is expected to continue blocking approval of foreign investments in key sectors. In particular, any involving “national strategic industries,” a definition which now specifically includes the bearing industry. And while rejecting more foreign investors outright, it is also consolidating many sectors under state control.
The China Industrial Security Center, part of the State Economic and Trade Commission, said its studies now show foreign merger and acquisition activity in China has reached the point where it has led to essential monopolies in some industries, threatening domestically owned and controlled businesses.
In addition, foreign investment is seen as potentially weakening China’s control over its own destiny in developing infrastructure and supplying defense-related needs.
CISC holds that foreign investments have not produced the often-promised results — access to new technology, international synergies, productivity gains — or delivered operating advantages, or any special improvement in the business at all.
Instead, CISC says allowing foreign direct investment has many risks :
• Market manipulation. It now claims foreign investors use the Chinese companies as tools to control specific domestic Chinese markets, earn outsized profits, then ship those profits out of China and overseas to the parent company.
• Impact on local economies. CISC said China’s economic safety is at risk in allowing foreign financing and ownership of raw materials supplied to domestic energy, transportation, and similar infrastructure dependencies. Similarly, autonomy is at risk when foreigners own key support businesses in the finance and publication sectors.
• Hindering local industry. When they come to relying on foreign funding, input and control, the Chinese businesses become too passive in developing their own skills, products and technologies. This threatens the future of business and may ultimately threaten China’s defense security.
The bearing manufacturing industry was specifically cited as an example of one where foreign involvement should be limited. In the bearing industry, foreign ownership should spark concern — because reliance on foreign resources hinders organic domestic development of skills and resources, and also because it creates the potential for China to rely on foreign-owned bearing manufacturers for the availability of key components needed for domestic security.
• Foreign ownership of large businesses in China, with no government controls, is a threat to the traditional economic system, which relies on many small-scale manufacturers. CISC said foreign-owned multinationals have unfair advantages over local businesses which can be short of technology savvy, and/or do not have much export sales built up.
In China, small and medium enterprises (SMEs) account for as much as 70% of domestic manufacturing output. Their access to capital has been hurt by recent government reforms aimed at tightening inflation and throttling back overheated growth.
Recent statistics issued by the State indicate manufacturing businesses are involved in nearly a quarter of all foreign-funded M&A activity in China. Overall, there were 169 M&A deals in China during second quarter 2008 — up 225% from first quarter.
Despite the central government’s stance on majority foreign ownership, locally-solicited foreign investment has been accelerating in manufacturing-heavy provinces. For example, FDI in Sichuan Province this year is up 108% to USD $1.8 billion, despite May’s devastating earthquake. Over 180 new foreign-funded businesses were given approval to begin operations in Sichuan, down 13 percent from 2007. But those businesses have agreed to invest more than $4.2 billion, up 208% from 2007.
Arcelor Mittal was recently rebuffed in its efforts to become more deeply involved in the highly fragmented Chinese steel industry. The Chinese government is consolidating steel producers; it wants the 10 largest, currently at 35% market share, to be at 50% by 2010, and 70% by 2020. Lakshmi Mittal said; “I do not see that in a year or so, the Chinese government will change their strategy where they do not want foreign companies to have a majority control.”
Source: bearings-china.com.cn
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China’s Wind Power Industry
July 20, 2008
Article by Lou Schwartz and Ryan Hodum
When 2007 ended, China’s installed base of wind power totaled just over 6 gigawatts (GW), earning the country fifth place among the world’s largest wind energy producers (after Germany, the U.S., Spain and India), up from sixth place in 2006. Wind power industry statistics show that by the end of 2008, China’s total installed base of wind power production will have reached 10 GW; some experts are estimating that by 2010, the total installed capacity for wind power generation in China will reach 20 GW and that by 2020 China’s installed base of wind power will total 100 GW (current global wind installation is 94 GW).
In 2007 an estimated 24 billion Yuan [approximately US $3.28 billion] was invested in China’s wind energy sector. Not surprisingly, this level of investment has spawned an industry — local manufacturers are responding by producing the equipment and components that the wind energy industry requires to sustain this growth.
It is conservatively estimated that between 2006 and 2015, 100 billion Yuan [US $14.5 billion] will be spent on equipment and component purchases to further develop China’s wind power industry. According to the Ministry of Commerce, by the end of 2006 there were more than 100 Chinese companies manufacturing equipment and components for the wind industry.
Foreign wind power equipment manufacturers, including the most significant international wind turbine manufacturers, Vestas, Suzlon, Gamesa, Nordex Corp., Honiton Energy Ltd. and GE Energy, have aggressively engaged this market. Though foreign wind turbine manufacturers’ share of the market has declined from nearly 75% a few years ago to 55% now, the foreign presence in China’s wind industry remains significant.
Foreign wind power equipment manufacturers have made strategic investments in China, allowing them to remain dominant even as indigenous Chinese wind equipment capabilities grow. At EU €60 million, Gamesa’s factory in Tianjin, which manufactures wind turbines, is the Spanish company’s second largest foreign investment (after the United States).
Also located in Tianjin is Vestas’ Wind Turbine Equipment (China) Co. Ltd., which manufactures blades and does wind turbine assembly.
Nordex has located two of its three manufacturing centers in China and has established the company’s Asia headquarters in Beijing. In the next three years, Nordex expects to invest an additional 500 million Yuan [approx. US $71 million ] to grow its business in China four-fold. GE Energy’s Shenyang wind turbine plant produces 1.5-MW-class wind turbines.
Localization of Equipment Manufacturing
To help spur the development of an indigenous wind power equipment and components industry, Beijing has mandated that all new wind power projects have at least a 70% Chinese component. Wind power equipment manufacturers also now enjoy a 50% discount on value added taxes (VAT) payable in China.
On April 23, 2008 the Ministry of Finance announced two changes to import tariff regulations with respect to the wind power industry, further spurring development of Chinese wind power equipment manufacturing. The first change, effective January 1, 2008, implemented a tariff and VAT rebate program for imports of parts and raw materials used in the manufacture of wind turbines. This change was significant because a large percentage of parts and raw materials used in the manufacture of wind turbines still must be sourced from outside of China.
The second tariff change, effective May 1, 2008, eliminated the tariff-free importation of wind turbines less than 2.5 MW. This tariff change is a strong indicator that the Chinese wind turbine industry is maturing rapidly; as recently as late 2007 Chinese wind power equipment was incapable of producing megawatt-class wind turbines.
Megawatt-class turbines are increasingly produced domestically and the elimination of tariff-free imports of wind turbines less than 2.5 MW in size will give added impetus to the domestic production of increasingly large wind turbines.
The economics of the wind power equipment industry are quite favorable. At present the cost of construction of wind power in China is approximately 8000-9000 Yuan/Kw [US $1170-1315 /kw] and 60% to 70% of those costs are equipment purchases. Because many of the most important Chinese wind power equipment and components companies have grown out of large industrial companies (including several public companies), there appears to be sufficient financial strength for these companies to grow.
Funds to finance new wind power equipment and component manufacturing in China have come primarily in the form of commercial bank loans, retained earnings and equity investments.
Turbines
According to Steve Sawyer, secretary general of the Global Wind Energy Council, by 2009 China will become the world’s largest producer of wind turbines. At present China has at least 40 wind-power turbine manufacturers: 17 are state-owned or state-controlled companies, 12 are private Chinese companies, 7 are joint-venture companies and 4 are wholly foreign-owned companies.
Though China has yet to export wind turbines, China’s two largest wind turbine manufacturers — Xinjiang Jinfeng (Goldwind, whose December 2007 initial public offering (IPO) was the first pure-play wind power equipment Chinese stock offering in the U.S.) and Sinovel — have plans to export in 2009 and 2010.
Many of the largest wind turbine and other equipment manufacturers have licensed technology from western companies, including from AMSC Windtec, REpower, Aerodyn, Vensys and Garrad Hassan. Most of the largest Chinese wind turbine manufacturers have begun to produce 1.5-MW wind turbines and gradually these Chinese wind turbine manufacturers, having purchased designs for 2-, 3- and 5-MW wind turbines, are developing prototypes of larger wind turbines.
Bearings
The Chinese wind power industry continues to depend on imports for its supply of bearings. However, this dependence may be short lived. On December 11, 2007, the Timken Company entered into a joint venture agreement with the Xiangtan Electric Manufacturing Co., Ltd. to manufacture ultra-large bore bearings for the main rotor shafts of megawatt-class wind turbines. The bearings will be manufactured in China with some of the bearing materials and components coming from the U.S. The new US $38 million plant, which will be located in Hunan Province, will begin construction in 2008. Timken will have an 80% interest in the new venture.
Blades
The largest wind turbine blades to be manufactured in China to date (measuring 40.25 meters long) are now being manufactured by the China Materials Science and Technology Wind Power Blades Joint Stock Co. Ltd., [Read more]
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Ten Reasons to Use Global Sourcing
July 2, 2008
“Made in America.”
The imprint means innovation, high quality, safety and reliability. So why should companies even consider exchanging that stamp for “Assembled in USA” and components manufactured in other nations?
Not so long ago, the main reason was to gain lower prices for labor-intensive goods. That’s still a good reason, but there are several other circumstances in which “Made in America” isn’t the best choice. [Read more]
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China’s Bearing Manufacturers Driving Record Speciality Steel Volume
June 25, 2008
In 2005, China’s officially constituted bearing and actuation surroundings manufacturers, it estimates, module spend a newborn achievement of more than 1.6 meg heaps of 52100 rod. It did not substance an judge of obligation for 52100 tube. The judge also does not bourgeois in obligation from the eld of second-tier and third-tier bearing manufacturers — who run to obtain poise finished summary channels and a vast clothing of unmonitored sources. The Peoples Republic of China is not still healthy to display sufficiency high-quality specialty poise to foregather its possess interior demand; husbandly creation has been convergent on high-volume structural poise and sheet/coils. According to the CASSE, the vast eld of 52100 poise utilised in China module move to be imported from aggregation and Asia. Increasing the country’s creation of high-quality, specialty alloy, stainless, and another specialty poise is a key pore of polity poise stock utilization efforts.
Source: China Daily
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Counterfeit bearings
June 23, 2008
Almost impossible to spot the fakes
It is no longer only fake hand bags, luxury watches and designer clothing that are flooding our markets, but increasingly also safety-relevant industrial products such as rolling bearings.
Spurious bearings may look the same regardless of who made them or where you bought them, but don’t be fooled: poorly made bearings can have dangerous consequences for end users. |
Fake bearings causing engineers major headache
The recent onslaught of bogus bearings is creating a major headache for engineers and businesses alike. We’re alerted to this problem now almost on a daily basis. One of the engineers who experienced this problem commented that the suspect bearings didn’t last more than one hour after fitting! Counterfeiters are getting so good at reproducing original markings and packaging of bearings that even INA, FAG and SKF say them selves it’s difficult to distinguish the counterfeit from the legitimate bearings. Practices being used include:
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Exact copies with “genuine” markings and brand imprints including INA, FAG and SKF
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Used bearings which are re-conditioned to look like new ones.
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Bearings polished and ground to remove the rust and pit marks or oil and grease stains.
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Bearings remarked tolerances (ordinary class bearings marked as P6, P5 or P4 class) or altered clearance (C3 clearance bearing remade as plain bearing or visa versa) etc.
Exact copies with “genuine” markings and brand imprints including INA, FAG and SKF
Used bearings which are re-conditioned to look like new ones.
Bearings polished and ground to remove the rust and pit marks or oil and grease stains.
Bearings remarked tolerances (ordinary class bearings marked as P6, P5 or P4 class) or altered clearance (C3 clearance bearing remade as plain bearing or visa versa) etc.
There is no specific type of bearing that is targeted by counterfeiters. The fakes enter the market with bearings typically used in automotive back street after market applications, where less sophisticated users where apt to be taken in by the scam.
Precision bearings with extensive lead times
When the fakes got better, they entered the (OEM) precision bearing market where they are suffering extensive lead times. Now the copies have filtered down the run of the mill industrial products, sold often mixed in among the originals. Spurious bearings that don’t meet your technical specs can be expected to fail very quickly. The result: Premature failure that creates problems and economical loss, serious implications in safety-critical applications or tarnish your reputation.
Impossible to spot the fakes?
It’s almost impossible to spot the fakes. Often, only a technical lab could confirm their lack of authenticity. And only authorised distributors guarantee genuine products. Therefore, its probably best to buy your bearings from an authorised distributor.
Source: South China Morning Post
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