NEWS RELEASE                                   FEBRUARY 2007

China Will Become The Center Of Process Equipment Development

The newest improvements in pumps, valves, filters, driers, fans, grinding and conveying equipment will be accepted and utilized in China before they are embraced by the more conservative developed countries.  This is the prediction by the McIlvaine Company in each of its online market reports on flow control, energy, and environmental subjects. McIlvaine further predicts that this will have major impacts on the world’s process equipment industry.

The bases for these predictions are, first, that it is already happening.  There are numerous instances where the new designs are being first used in China. 

Another reason is that China is the largest market for various types of process equipment. When a new development is ready for market, chances are that there will be more opportunities to sell it to a Chinese customer than one in any other country.

An important additional reason is the lower cost of hardware and services.  The financial exposure for an untried device may be only one third as much as it would be in the U.S. or Europe.

The rapid construction of new plants and systems is another reason.  Operational experience for a new product can be achieved often in half the time that would be required elsewhere.

The most important reason is the mindset of the Chinese as contrasted to purchasers in the slow growth high GDP countries.  The Chinese are in a hurry to change and upgrade their industries.  This is in stark contrast to the attitude in Europe and to a lesser extent the U.S.

A final reason will be the availability of trained and knowledgeable engineers.  English is now the language that coveys the world’s technical knowledge.  However, there is a rapidly developing library of knowledge in Chinese.  Those engineers who are bilingual will have greater access to information than those who are not.

The fact that new developments will be tried and proven in China does not necessarily mean that the research will be done there.  In fact, many Western companies will do the research elsewhere, obtain the patents, and then proceed with the first commercial applications in China.

The centering of development will create profound changes in the process equipment industry.  Companies such as SPX, ITT, Pall, GE Water, Siemens, USFilter, and Howden will be increasingly reliant on their Chinese employees for the success of their worldwide business.

On the other hand, those offshore companies who do not leverage the Chinese base are going to create a competitive vacuum.  They are going to find themselves competing with Chinese companies who seize the opportunity to move on to the world stage.

These predictions are based on the assumption that the political environment will be relatively stable.  This risk will raise the stakes for the offshore companies who will be compelled to invest heavily in China.