China's machinery sector picks up

China's machinery industry continued to recover with rising profitability in the first half of 2014 following moderate growth last year, according to a report released on Tuesday.

The report, issued by the China Machinery Industry Federation (CMIF), said aggregate profits across the sector increased 19.6 percent to 715.3 billion yuan (115.9 billion U.S. dollars) for the first six months of 2014 compared with an average 15.6-percent growth in the whole of 2013.

Following the increased growth rate, the federation raised its profit growth forecast for 2014 to 15 percent from a 12 percent forecast made in February.

The CMIF's vice president Chen Bin attributed the increased performance to lower energy and raw material prices and increased added value, thanks to the innovations made by China's machine makers.

According to the report, technology breakthroughs put Chinese enterprises in a favorable position when doing business with foreign partners.

From January to June, trade surplus in the machinery sector rose to 35.8 billion U.S. dollars as more high-end machines were sold to overseas markets.

Despite these improvements, the CMIF report cautioned that difficulties still linger.

Sluggish domestic demand is pushing lower prices and stockpiling of products. High financing costs and account receivables are also burdening China's machine makers.

The development of the machinery industry is crucial to a country's manufacturing sector. China's machine makers had a strong decade from 2001 with rapidly expanding revenues. But the development then decelerated due to an economic slowdown, overcapacity and uncompetitive products. h "Generally speaking, the machinery sector is improving. But enterprises should brace themselves for future uncertainties as prospects are not solid enough," said Chen.