The development speed of China’s valve industry has slowed down

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After more than 10 years of rapid growth, China’s valve industry has risen to the top of the world in terms of valve manufacturing output. However, with the aftermath of the global financial crisis and the slowdown in China’s macroeconomic growth, this pattern of continuous rapid development is set to change. Affected by the slowdown in China’s economic growth and the aftermath of the international financial crisis, demand for valves both domestically and internationally has generally declined, with an increase in various uncertainties. Companies have encountered numerous new challenges, which has hindered investment and development in the valve industry; as a result, orders for valve products have decreased, and the growth rate of China’s valve industry has clearly slowed down. 　　To this end, a brief analysis is provided from the following aspects regarding the operational status of China’s valve industry, the main factors behind its slowdown, and ways to create new drivers for its development; although it is not comprehensive, it is intended solely as a reference. 　　I. Overall industry performance in 2014: According to statistics, in 2014, the production and sales of valves across the country experienced moderate growth. There were 1,750 enterprises above a certain scale (those with annual sales revenue of 20 million yuan), with a total asset value of 191.5 billion yuan, representing a year-on-year increase of 8.01%. A total of 10.31 million tons of valves were produced, showing a year-on-year increase of 0.05%. The growth rate declined significantly compared to the previous year, while annual production maintained a steady upward trend. The main business revenue reached 257.7 billion yuan, a year-on-year increase of 5.66%, with the growth rate dropping by 7 percentage points compared to the same period last year. The total profit amounted to 18.3 billion yuan, representing a year-on-year increase of 4.57%, again with a decline in the growth rate of 8.33 percentage points relative to the previous year. Accounts receivable totaled 42.2 billion yuan, showing a year-on-year increase of 6.84%. The value of exports delivered was 37.1 billion yuan, with a year-on-year increase of 5.4%. 　　According to statistics from the Valve Branch of the China General Machinery Industry Association, in 2014 there were 127 key valve-related member enterprises included in the statistics, and 25 of these enterprises achieved an overall industrial output value of over 500 million yuan. 　　In 2014, the 127 key member companies in the Valve Sub-sector generated a total main business revenue of 33.761 billion yuan, a decrease of 0.75% compared to the same period the previous year. Their total profit amounted to 3.082 billion yuan, representing an increase of 0.40% over the same period last year. The value of exports delivered was 4.481 billion yuan, an increase of 0.79% compared to the previous year. 　　II. Main factors behind the current slowdown in the valve industry 　　After more than 60 years of development, although there are around 8,000 valve manufacturers in China, their products tend to be homogeneous and of low quality. On the one hand. In China, investment and commissioning of many oil and chemical projects have slowed down, with fewer new projects being launched, which has led to a reduced demand for valve products. On the other hand, the world economy is in a downturn, resulting in insufficient orders for exported valves. It turns out that CNPC, Sinopec, and CNOOC previously adopted network-based procurement methods; now they have switched to framework-based centralized procurement. A large number of petroleum and petrochemical valve products are under the control and monopoly of dozens of companies, which makes it difficult for other companies to enter this framework and thus reduces the sales of valve products. 　　**The sharp drop in oil prices directly led to low utilization rates of oil equipment. The supply and demand relationship is a key factor influencing fluctuations in the oil market; it has also contributed to a downturn in the valve equipment sector, with global crude oil prices remaining at low levels. The decline in international oil prices has also led to a significant reduction in profits for the petrochemical industry. These factors have affected the sales of valve products, and they are one of the reasons for the slowdown in the development of the valve industry. 　　If oil prices cannot rise back above $60 per barrel and remain stable, the global oil equipment market is likely to stay sluggish, which will have an impact on and contribute to the downturn in energy-related valve equipment. 　　Driven by profit motives, some companies have failed to pay attention to technology; as a result, their R&D capabilities are weakening, the skills of technical workers are not improving rapidly, there is a sense of impatience among employees, and there is a lack of continuity in terms of corporate culture, management practices, and skills. Some companies appear to be very busy, but they produce low-quality products, resulting in unsatisfactory profits. At the same time, the deepening of **contraction** led to the suspension of production in some projects, overcapacity in many enterprises, and a decline in the consumer sector – all of which are external factors contributing to this economic downturn. This situation has also kept the valve industry trapped in a vicious cycle of homogenization and low-price competition; there is no focus on quality or excellence, and technological innovation is lacking. As a result, the valve industry has experienced slow growth over the past couple of years. 　　III. Creating a new engine for the development of the valve industry At present, the valve industry still faces significant economic pressures; valve manufacturers encounter numerous difficulties in their operations. With increasingly fierce market competition and rising labor costs, and given the severe overcapacity in this industry, accelerating the transformation of the economic development model is the only way to achieve sustainable growth. The upgrading of the industrial structure is an urgent task for Chinese valve enterprises. To implement this strategy of technological innovation and development, create a new driving force for the growth of the valve industry, stimulate innovation and entrepreneurship, advance structural adjustments, and accelerate transformation and development, enterprises must increase investment in research and development, enhance their innovation capabilities, focus on developing high-end valve products, and raise the proportion of domestically produced valve equipment. 　　It is obvious that China’s valve industry has shifted from high-speed development to medium-to-low speed development, entering a phase of steady growth at such speeds, along with improvements in quality and efficiency. The key task in the coming period is to develop valve products for emerging industries. Examples include: coal chemical industry valves, LNG ultra-low temperature valves, nuclear power valves, and valves for long-distance pipelines. 　　At the same time, by actively reducing excess production capacity, increasing the technological content of products, focusing on the development of new products to enable a gradual shift from low-value-added to high-value-added products, identifying the appropriate position for the enterprise, keeping pace with the **Belt and Road Initiative**, expanding into both domestic and international markets, and paying attention to product quality and service, it is possible to achieve successful transformation for the enterprise as well as healthy development for the industry.