Advanced Ambition: Opportunities in China’s Advanced Engineering Sector

The advanced engineering sector in China is dominated by two areas: automotive and aerospace. China is both the world’s largest producer of motor cars and the world’s largest automobile market. Production in 2010 topped 18 million units, while domestic sales have grown rapidly thanks to the up-and-coming urban middle class’s ambition to enjoy the freedom of car ownership. This freedom, however, is curtailed by traffic problems in the major cities, which have led to new policies such as the Beijing licence lottery, which restricts the issue of new car licenses to 240,000 annually. The rapid development of wealth has also led to very high prices for luxury cars: for example, a Range Rover which retails at £70,000 in the UK can fetch up to £270,000 in China.

As restrictions in major cities bite, manufacturers are looking increasingly at the markets in China’s rapidly developing regional cities and abroad. Traditionally, China’s automotive export markets have been Asia, Africa and the Middle East, and the product has been low end/utility. Chinese manufacturers
are now looking at the more established markets of Europe and North America, often in partnership with major industry names. China is also looking to acquire brands, plus marketing and technical knowledge.

Some years ago, the assets and branding of MG Rover were bought by SAIC and Nanjing Automobile: this
will eventually lead to the assembly of MGs in the West Midlands again, but this time the components will come from China. Chinese manufacturer Geely has demonstrated Chinese determination to penetrate the European market with their purchase of Volvo and announcement that they will begin to export their “Emgrand EC7” mid-size saloon by the end of 2012, while Chang’an is setting up an R&D centre for automotive transmission in cooperation with Romax Technology in Nottingham.

In such a large market dominated by major international and Chinese players, can smaller UK companies make headway? The answer is yes, if they “know their onions” and are prepared to stand behind their products. Manchester’s Icona Solutions, a producer of specialist automotive design software, is succeeding and generating significant sales, but only after a very determined effort to make contacts with distributors and end users and then prove they are there for the long run by offering a high level of product support.

Aside from the space shots, China’s flagship aerospace programmes are the regional and medium jet programmes: the 90-seat ARJ21 and the 156-seat C919. COMAC, the umbrella organisation responsible, plans to gain both CAAC and FAA approval for these aircraft, which would enable them to enter export markets. This path has not been easy, with the lead programme for the ARJ21 running into snags and delays with
icing and stall testing. This has led the FAA to insist this programme is completed before they cooperate with the C919. It is easy to criticise, but it must be recognised that these jet aircraft
programmes are very new in China and are trying to catch up on 50 years of technology in a decade.

Many foreign companies are involved in these programmes and their Chinese partners make it clear that they expect them to be there for the long run. Manchester-based EDM, manufacturers of simulators and mock-ups for airshows, understand this. They have worked on several programmes with Chinese partners,
demonstrating a willingness to understand their clients’ needs and requirements that has built their reputation and acceptance within the industry, leading to further sales. Rolls-Royce have a long-term commitment to China with offices in four cities (Beijing, Shanghai, Dalian and Hong Kong) and JVs in both Hong Kong and Xi’an. The company has worked with many Chinese suppliers to bring them up to the necessary industry supply standards.

China’s civil aircraft programme extends beyond passenger jets. Executive jet sales are booming
and China also has a variety of turboprop, small/utility aircraft and helicopter programmes. Despite
a number of existing JVs and foreign partnerships, there is still room for involvement: for example a
deputation from the MA700 (70-seat turboprop) programme visited the UK in early 2011 to seek potential partners.

This article is taken from a special CBBC publication commemorating the 40th anniversary of UK-China diplomatic relations. View the full publication here.

Visit www.cbbc.org to find out how CBBC can help UK companies from all sectors do business with China.

Sectors: Aerospace, Automotive, and Manufacturing
Countries: China and Far East
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