By Joanne Goh, Analyst, IHS Markit
The Chinese fan and blower market is expected to decline 0.3% in 2017 from 2016, to $8 billion. Residential heating, ventilation and air conditioning (HVAC) applications will remain the largest sector, accounting for 67% of the total Chinese market, followed by commercial HVAC (25%) and industrial HVAC (8%). Because of excess capacity in the industrial sector and the tightening of the new house-ownership policy, fans and blowers sold into industrial applications and residential HVAC in China are forecast to underperform in 2017, according to the IHS Markit Fans & Blowers Database.
Industrial HVAC sector to be constrained with slow industrial production
With the slow industrial production and the debt bubble across the Chinese economy, shipments for industrial HVAC continued to decline in 2016 by an estimate of 2.3% year on year (y/y), after a 6.3% drop in 2015 y/y. IHS Markit predicts China’s industrial fan and blower market growth remain weak in 2017, with an expected decline of 0.9% in unit shipments. A modest recovery in the industrial sector will be the main driver for a slight rebound in 2018.
Although heavy industries are not good areas for industrial fan and blower market growth, there are still several industries that will outperform the market average in the short-term, which will also help the recovery in 2018 and forward. IHS Markit predicts robust growth in the light manufacturing sector as well as in applications closer to consumer markets, for example, water and wastewater, and telecommunications.
Residential HVAC sector to contract due to new housing purchase restrictions
Demand for fans and blowers in residential HVAC are closely tied to the housing demand in China. In China, construction appears to be a considerable drag on the economy. As the housing bubble continues to be an issue, many of Chinese cities continued to roll out new house-purchase restrictions. With this, China's housing market started experiencing a cyclical downturn in the second half of 2016 that will further deepen in 2017. The tightening of new house-ownership policy, which affects mortgage down-payments and the use of provident-fund mortgages, will eventually restrict new housing demand and therefore, inhibit the growth of the fan market in the Chinese residential HVAC sector.
Because construction is one of the important drivers of China’s economy, the government may divert investment into infrastructure and commercial construction to stabilize economic growth. Therefore, the performance of the residential and commercial HVAC sectors will counteract each other. According to the IHS Markit forecast for global construction spending, offices and institutional buildings are among the fastest-growing sectors in China. In order to mitigate the decline in the residential HVAC sector, fan and blower manufacturers that are actively involved in this sector should take advantage of market growth in the commercial HVAC sector in order to remain competitive in the market.