Analysis of the industry trends in the pump market

Currently, the dispersion degree of China’s pump industry is quite high, and the market remains in a decentralized state of free competition. Competition among enterprises in the industry is extremely fierce, and market share is increasingly concentrating in the hands of a few advantageous enterprises.

1. Traditional State-Owned Enterprises (SOEs) Gradually Decline, Facing a Worrisome Situation

At one time, SOEs, as representatives of the pump industry, made significant contributions to the national economy. However, the once-thriving SOEs are no longer in their prime. On the one hand, the output of their traditional products and general-purpose pumps has dropped drastically—many have fallen to less than 1/4 of their original production volume. On the other hand, the high-tech pumps and special-purpose pumps developed in recent years also face severe undercapacity due to insufficient orders. Only a handful of enterprises are barely sustaining operations by relying on their technological advantages in specific areas, and their product positioning and market positioning are in a state of confusion and awkwardness.

2. Emerging Private Enterprises Increasingly Become the Backbone of the Market

Benefiting from the new stage of China’s reform and opening-up, many private enterprises, which first emerged in the Jiangsu-Zhejiang region, have risen prominently with their scientific and flexible operating mechanisms and sound sales networks. These private enterprises feature a new institutional framework, no historical burdens, scale advantages in production and operation, and nationwide sales networks. They are gradually moving toward grouping or have successfully completed group restructuring, demonstrating strong development momentum.

In today’s pump market, the number of private enterprises far exceeds that of SOEs, and their output value also significantly surpasses that of SOEs. According to the latest statistics, the output value of SOEs and state-controlled enterprises accounts for only about 30%, while that of private enterprises accounts for more than 50%. The top pump enterprises in terms of annual output value are already private enterprises. It can be said that private enterprises have officially established their position as the main body of the industry and the backbone of the market, and they will undoubtedly play an increasingly important role in future development.

3. Foreign-Funded and Joint-Venture Enterprises Follow Closely

Mainland China is known as "the only global market yet to be fully tapped". With the deepening of reform and opening-up and China’s accession to the WTO, numerous multinational enterprises across various industries worldwide are rapidly capturing the Chinese market.

Foreign-funded and joint-venture enterprises boast strengths such as abundant capital, advanced technology, flexible talent mechanisms, and no historical burdens. Their shortcomings, however, include a short history of entering the mainland market—currently, they can only occupy a part of the high-end market, their marketing networks still need improvement, and they have not yet formed strong competitiveness in the overall market.

4. The Prospects of Numerous Small and Medium-Sized Enterprises (SMEs) in the Industry Are Uncertain

Since traditional pump products are labor-intensive and the industry entry threshold is low, thousands of SMEs have emerged across the country. Most of these small enterprises rely on a larger enterprise for survival; in some regions, a situation even arises where "one enterprise leads the pump business, and the whole area engages in pump production". Generally, they are "three-no" enterprises—without technological R&D capabilities, sales networks, or after-sales services. Driven by survival pressure and profit motives, they often have little time to focus on quality and services. Instead, they seek profits amid market chaos by leveraging their cost and price advantages.

This can be regarded as a normal phenomenon in market competition, or rather, an inevitable development stage that China’s pump industry must go through. The development trajectory of the global pump market also confirms the market law of evolution from decentralization to integration. The "Technical Exchange Conference between China General Machinery Industry Association and Chinese & Foreign Enterprises" held in Beijing in 2003 has already conveyed information about industrial restructuring and industry integration. The advancement of this process is bound to greatly compress the living space of numerous SMEs in the industry. It is conceivable that some of the "high-quality assets" among these SMEs will be gradually integrated; while the "non-performing assets" of "three-no" enterprises will be gradually eliminated by the market.

To summarize: Foreign-funded and joint-venture enterprises occupy the high-end market by virtue of their long-standing brand advantages; some struggling old SOEs hold onto certain regional markets relying on traditional strengths; SMEs in the industry struggle hard in the quagmire of low prices; and emerging private enterprises are rising steadily, representing the future hope of the industry.

Source: http://www.bengyechina.com/news_show-47664-1.html

Reprint Note: China Pump Industry Network