COUNTRY REPORT
China
Mark Wang
If a product is made in the West, there is a perception that the high cost is owing to labour and material [expenses]. What China is trying to do differently is using technical investment and innovation to help provide people with more affordable products of the same quality
Moan Abraham
Wang says that in addition to the government increasing EER standards of products, there has been an uptake of high-end apartment projects, featuring inverter-based systems from real-estate developers, further driving demand for such systems, and that there has been palpable improvements in the mind-set of end-users in the local market. “In the China market, inverter systems are dominating,” Liao says, “especially in the residential sector. More than 80% of the residential split air conditioning sold in the last two years were inverter-based. Most of the main suppliers, including Midea, already have a plan to stop producing non-inverter systems within a couple of years.”
THE PUSH FROM OUTSIDE
Wang says that with more and more HVAC brands entering the China market, local manufacturers are being forced to improve and innovate to maintain market share and stand out among the competition. Jie seconds this: “The conventional rule for new products’ research and development,” he says, “[is the] need to acquire the requests of the local market by means of interaction with local customers as well as installers to develop the products that solve users’ complaints, especially to iterate and lead in the industry.” Abraham adds: “In China, growth rates are pretty much driven by real estate.
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The population needs housing, and the demand is still there. However, what the government wants now is for Chinese brands to offer global products.” This, he says, has driven companies to invest in technology and market themselves as a brand of choice, owing to the equipment’s technical advantages and ability to comply with international standards, and not merely as a low-cost solution. Abraham also emphasises that affordability, which everyone is looking for, need not be associated with inferior quality, noting that many leading Chinese companies invest heavily in technology to reduce cost and increase efficiency through innovation and not by lowering standards. “If a product is made in the West,” he says, “there is a perception that the high cost is owing to labour and material [expenses]. What China is trying to do differently is using technical investment and innovation to help provide people with more affordable products of the same quality. Particularly a better engineering product [that is] technologically more advanced, by being lighter in weight, through new methods of heat transfer, or through the reduction of coil sizes.” This, he says, reflects growing emphasis on R&D, which Hisense is investing five per cent of its revenues on. “We are a technology-oriented company,” Abraham says. “We innovate to make it more affordable; it’s not just about labour cost. There is just a lot of automation and big-scale manufacturing in China, which brings the cost down.”
THE FORAY OF VRF SYSTEMS
China is also known for the strong penetration of VRF systems. Wang says the explosive growth of real state set the stage for the technology. Jie seconds Wang’s view, saying that the continuous implementation of environmental-protection and energyconservation regulations, combined with the energy-saving features of VRF technology, has also promoted its rapid development in the local market. “Within this decade, the market capacity of VRF has tripled,” Wang says. “The mini-VRF market also [has been able to] keep high-growth speed. With the