China Tools Industry

An Expert's View about Sourcing in China

Posted on: 29 Mar 2010

China tool suppliers will continue to export heavily to the EU and North America in the year ahead.


In this regard, production will focus on DIY designs in line with companies’ efforts to strengthen their foothold in the repair and maintenance sector. Despite overall slowing demand, this segment remains lucrative as consumers divert funds away from new-home purchases, practically putting the construction industry at a standstill.


The bulk of shipments will target the EU as suppliers ramp up production of RoHS-compliant designs.


This trend applies particularlyto the power tools segment, which in recent months has seen there lease of numerous models that use environment-friendly battery chemistries such as NiMH and Li-ion.


The EU has actually overtaken North America as the leading export destination for China-made tools.

Based on customs statistics, the EU accounted for 33 percent of the country’s total exports last year, which reached nearly $9.2 billion.


North America was a close second at 30 percent. A YoY comparison of figures, however, shows a 7 percent drop in the region’s revenue as demand slowed considerably. Sales to the EU, in contrast, more than doubled in 2008 to almost $3 billion.


Nevertheless, suppliers still consider North America a key market, specifically the US, which is the single-largest country importer of China-made tools. The US procured nearly $2.5 billion worth of products in 2008, or 27 percent of total shipments.


In line with their aggressive export stance, suppliers are keeping a tight lid on prices, facilitated by falling material costs and the recent up turn in export tax rebates.


The series of VAT increases has yet to fully address and revive dwindling sales. It has, however, helped boost profits to levels where companies can now easily adjust to sudden fluctuation in the cost of materials.


The following are some of the key trends we see in China’s tools industry:

•Despite weak sales in 2007, projections for the year ahead are positive with some suppliers expecting overseas shipments to rise by as much as 20 percent.

• Suppliers will utilize product based differentiation and low prices to attract orders. R&D will focus on ergonomics, with upcoming releases featuring modified lightweight constructions.

• Although the EU and North America will continue to be the primary markets for China-made tools, suppliers will venture into nontraditional destinations such as South America and the Asia-Pacific region. Shipments to these markets will consist mostly of low-end products.



The above is extracted from the Executive Summary of China Sourcing Report: Tools


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Posted: 29 March 2010

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