The general machinery industry has been an important pillar of China’s rise as a manufacturing powerhouse. These private machinery companies have numerous specializations, ranging from component and precision tool makers to producers of heat exchangers and gearboxes. Their products are used in a diverse array of sectors from agriculture to logistics.
The industry’s growth has outpaced China’s economic growth. In 2016, the industry’s value-added output grew by 9.6%, compared to 6.9% for the overall economy. However, the industry is still replete with low-end manufacturers—fewer than 40% of the core components and materials for general machinery products are made domestically.
As China still relies on imports for high-end machinery, it wants to climb the value-added ladder and find partners and technologies to bolster its domestic machinery industry.
As China’s factor costs, such as labor and raw materials, continue to rise, downstream manufacturers are being forced to acquire machinery with higher efficiency and technological sophistication. The changing environment will incentivize Chinese companies to further venture abroad and acquire know-how from advanced markets with best industry practices.
Zhejiang Kaishan Compressor primarily manufactures screw compressors. In recent years, the company started to expand into the geothermal electric power generation market overseas. In 2016, 17.8% of its revenue came from exports.
In 2016, the Zhejiang company invested $1 million to form a joint venture, Open Mountain Energy, with an undisclosed private investor. The new subsidiary company is based in Delaware and aims to scope and potentially participate in geothermal projects in the United States.
In 2015, Zhejiang Kaishan Compressor Co., Ltd. invested $2 million to form a joint venture in Singapore with Hugar Orka Ehf, in which the Zhejiang company holds a 70% stake. The newly established joint venture is called Orka Renewables.
In 2016, Zhejiang Kaishan Compressor invested over $45 million to acquire LMF Unternehmensbeteiligungs GmbH, an Austrian company that manufactures pressers used in petroleum mining and refining. In 2016, the Chinese company announced that it would acquire a 51% stake in Hungary’s Turawell geothermal company for €2 million.