China's machinery industry, a barometer of the economy, looks set for a moderate recovery.

China's machinery makers grew by 10% in April, outpacing the industrial sector's growth. Sales for the first four months are up nearly 13 percent and profits are 10 percent higher.

Wang Ruixiang, President of China Machinery Industry Federation, said, "Profit has risen moderately from the same period last year, it's on its way of recovery steadily and slowly."

The recovery stems from structural changes to get rid of excess capacity. Right now, there's still considerable overcapacity at the lower-end of manufacturing. While in high-end equipment making, there's not enough capacity.

Ding Hongxiang, Deputy Manager of China National Machinery Industry Corp, said, "We are undergoing a deep structural overhaul, to some extent, even the rules of the game are changing. We are pursuing quality growth, and continuous innovation, moving up the value chain is the only way. "

Smaller and weaker machinery firms are fighting to survive in the increasingly competitive domestic market. Many factories are producing more for export and scaling down operations at home.