China already leads the world in its demand for machine tools, and a new study forecasts demand will rise 14.2% annually to nearly 389 billion yuan (or almost $61 billion) by 2014. This rate of growth also will boost China’s standing as a producer of machine tools, The Fredonia Group predicts. Its report, Machine Tools in China (published in August 2011, 246 pages) is available for purchase.

Several policies in China’s 12th Five-Year Plan are seen as likely to promote both supply and demand for machine tools. The plan, put into action this year and proceeding through 2015, aims to grow China’s GDP by about 8% in 2011, and annual per-capita income by 7% this year. The plan also calls for a more careful monetary policy, broader anti-corruption efforts, and greater R&D investments, among numerous other objectives.

Freedonia identifies the Plan’s emphasis on Strategic Emerging Industries (SEIs) that will receive beneficial government treatment, and its push for “Indigenous Innovation,” as factors promoting the machine-tool sector in China.

High-end equipment manufacturing is one of the SEIs due to benefit from government promotion. Advanced machine tool manufacturing is an important part of high-end equipment manufacturing, and those manufacturers will benefit from R&D subsidies provided by central and local governments. Sales of high-end machine tools will also benefit from favorable tariff policies that will promote the sales of domestic products, according to Freedonia.

Furthermore, the Chinese plan emphasizes domestic innovation, and it has prioritized development of CNC machine tools to support manufacturing of aviation equipment, ships, motor vehicles, and power generating equipment.

The major markets for machine tools in China are industrial machinery and equipment, transportation equipment, primary and fabricated metals, and electrical and electronic equipment. Among these, industrial machinery is the largest market for machine tools, followed by transportation equipment manufacturing. The latter continues to benefit from efforts to expand China’s domestic automotive industry.

Chinese demand is greatest for metal cutting machines tools, which according to Freedonia is already three times the level as the demand for metal forming machines. But, the growth in demand for machine tool accessories is projected to increase even faster than either metal cutting or metal forming machine machinery.