China Announces Industrial Equipment Upgrading Action Plan

April 19, 2024 Posted by China Briefing Written by Giulia Interesse Reading Time: 5 minutes

China announced an ambitious action plan for industrial equipment upgrading, which aims to drive technological innovation and economic growth through extensive investment and regulatory support.

On April 9, 2024, China’s Ministry of Industry and Information Technology (MIIT) and six other departments jointly released a notice introducing the Implementation Plan for Promoting Equipment Renewal in the Industrial Sector (hereafter referred to as the “action plan”).

Finalized earlier on March 23, 2024, this comprehensive action plan addresses critical issues related to technological innovation and economic development. It reflects China’s proactive stance in enhancing competitiveness and sustainability within its manufacturing sector. The initiative underscores the recognition of industrial equipment upgrading as a top policy priority.

In this article, we delve into the specifics of China’s industrial equipment upgrade initiative, exploring its objectives, scope, key components, challenges, and future expectations in detail.

China’s industrial equipment upgrading action plan: Overview

The scope of China’s action plan to upgrade industrial equipment in manufacturing, is extensive, covering various aspects such as:

Replacement of outdated equipment, particularly machine tools that have been in use for over a decade;
Upgrading equipment in key sectors like aerospace, solar energy, and battery manufacturing;
Integration of industrial robots and the industrial internet; and
Adoption of green technology to promote environmental sustainability.

Key objectives

In line with China’s ambitious goals for industrial modernization and sustainable development, the action plan outlines several key objectives aimed at driving substantial advancements in the industrial sector by 2027.

These objectives encompass a wide range of areas, from increasing investment to enhancing digitalization and promoting innovation, including:

Investment growth: The action plan aims to significantly boost investment in the industrial sector by over 25 percent compared to 2023.
Digital transformation: A crucial aspect of the action plan involves the widespread adoption of digital research, development, and design tools in large-scale industrial enterprises. By achieving a penetration rate of over 90 percent for these tools, China seeks to streamline processes, enhance efficiency, and stay at the forefront of digital innovation.
Numerical Control (NC) technology: According to the action plan, with a targeted NC rate exceeding 75 percent, industries can improve precision, optimize workflows, and elevate production standards.
Nationwide digitization: To ensure comprehensive modernization, the action plan aims for full coverage of digitization across industrial provinces, cities, and key parks.
Enhanced energy efficiency and safety: Improving energy efficiency and safety standards is paramount for sustainable development. The plan seeks to phase out outdated production capacity, achieve basic energy-saving levels for major equipment, and elevate safety standards across industries.

The objectives and key actions proposed in the action plan are summarized below.

Key Objectives and Actions Proposed in the Action Plan
Objectives	Actions
Accelerate equipment renewal and modernization across industries	Replace outdated equipment swiftly, focusing on various sectors Promote energy efficiency and emissions reduction Facilitate digital transformation and smart enhancements in key sectors Encourage the adoption of high-efficiency equipment in key light industries
Promote the adoption of smart manufacturing equipment	Encourage widespread use of smart manufacturing tools in production and logistics Drive deployment of tailored smart manufacturing solutions for specific industries
Expand the application of intelligent manufacturing equipment	Encourage adoption of cutting-edge technologies like AI, 5G, and edge computing Develop robust digital infrastructure to support manufacturing enterprises Strengthen the implementation of digital infrastructure, including industrial internet, IoT, 5G, and gigabit networks
Accelerate the green transformation of production equipment	Promote the application of energy-saving and environmentally friendly equipment in key industries Upgrade equipment and technologies in industries with high energy consumption and pollution Improve resource utilization and waste recycling through equipment upgrades
Upgrade the energy efficiency of key energy-consuming equipment	Upgrade key energy-consuming equipment, focusing on improving energy efficiency Promote the use of energy-efficient equipment rated at Level 2 or higher according to energy efficiency standards
Accelerate the application of solid waste treatment and water-saving equipment	Upgrade solid waste treatment processes in industries with high solid waste generation Implement water-saving measures and promote water recycling in water-intensive industries
Improve the intrinsic safety level of industrial equipment	Promote the adoption of continuous process, microreaction, and supergravity reaction technologies Implement digital technologies for reactor optimization control and predictive maintenance of machinery and pumps Upgrade equipment such as coal gasifiers, reactors, distillation columns, pumps, heat exchangers, and storage tanks
Enhance the intrinsic safety level of the civil explosives industry	Upgrade production lines for industrial explosives and industrial electronic detonators Implement projects to mechanize hazardous operations and reduce manual labor Focus on upgrading fixed production lines for industrial explosives and assembly lines for detonators
Promote the application of advanced and suitable safety equipment	Promote the application of advanced safety equipment in key areas such as emergency monitoring and warning Upgrade fire protection systems and equipment, emergency intelligent equipment, and personal protective equipment Promote the application of advanced and reliable safety equipment in key scenarios such as industrial accidents, earthquakes, floods, urban flooding, urban fires, forest fires, emergency medical rescue, and community and household safety emergencies

Support measures

In facilitating technological advancement across industries, the action plan outlines several key support measures aimed at bolstering financial, regulatory, and resource-related aspects to create an enabling environment for enterprises to embrace innovation and upgrade their equipment and technologies. These are:

Fiscal and taxation support: This includes allocating funds from the central budget to finance essential equipment renewal and technological transformation projects in industries. Additionally, the action plan proposes enhanced tax incentives for specialized equipment promoting energy and water conservation, environmental protection, and production safety. It also extends these incentives to cover digitalization and intelligent transformation initiatives, incentivizing enterprises to adopt cutting-edge technologies.
Strengthened guidance: These standards focus on energy conservation, carbon reduction, environmental protection, safety, and recycling, tailored to specific industries and key areas. By implementing industrial energy conservation and green standardization actions, the plan aims to create a conducive regulatory framework encouraging enterprises to align their equipment updates and technological transformations with advanced standards.
Financial support: The action plan proposes establishing special re-loans dedicated to technological innovation and transformation. Financial institutions are encouraged to bolster their support for equipment renewal and technological transformation projects.
Local governments support: Local governments are encouraged to prioritize protecting essential resources required for enterprise projects, including land use and energy consumption.

Why is China promoting industrial equipment upgrading?

China’s Machine Tool Industry: Market Trends and Opportunities

The action plan aligns with the broader vision of the Chinese government to promote large-scale equipment renewal and consumer goods trade-ins, unlocking a vast market worth trillions of yuan. As reiterated in the action plan, China aims to increase investment in equipment upgrades across sectors like industry and agriculture by 25 percent in 2027.

This initiative targets energy efficiency, emissions reduction, and the facilitation of digital transformation and smart enhancements in key industries.

Last year, China allocated approximately RMB4.9 trillion (approx. US$682 billion) to new equipment in critical sectors. According to the Bank of China Research Institute, these upgrades are expected to significantly boost China’s fixed asset investment, driving overall economic growth by about 0.4 percent.

During a press conference, Zheng Shanjie, chairman of the National Development and Reform Commission (NDRC), highlighted that with the ongoing emphasis on high-quality development, demand for new equipment is projected to rise, aiming for an annual spending target of at least RMB5 trillion (approx. US$695.3 billion) by 2027.

As part of the plan, consumers will be incentivized to exchange their old goods, with significant increases expected in the recycling of scrapped vehicles, used car transactions, and recycled home appliances within this time frame. As noted by Zheng, with China’s civilian-use cars numbering 336 million and home appliances exceeding 3 billion by the end of last year, the replacement of old goods could potentially reach RMB1 trillion (US$138.1 billion).

How to read the action plan?

How Dezan Shira and Associates can help companies succeed within the manufacturing industry

The action plan outlines China’s significant effort to upgrade industrial equipment in the manufacturing sector, reflecting its recent focus on this area. Policymakers are hopeful that this initiative will drive technological advancement and fuel economic growth. Although the plan offers substantial incentives and lending programs to support equipment purchases and upgrades, it also presents challenges.

Specifically, the requirement for compliance with updated safety and carbon emissions standards may necessitate unexpected upgrades for some companies.

For foreign manufacturers, this initiative is noteworthy, with further details on policy incentives anticipated in the coming months.

Looking ahead, while the action plan is expected to boost short-term industrial investment, its effectiveness depends on ensuring that investments are channeled into appropriate upgrades.

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