issue: July 2004 APPLIANCE Magazine
On Location: Shanghai, China
China Refrigeration 2004
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by Sean Zhang, China correspondent
APPLIANCE magazine traveled to Shanghai, China to report on China Refrigeration 2004.
addition to the buzz surrounding China’s booming market, products
with energy-saving, environmentally sound, and health-related features
were the focus of China Refrigeration 2004, held April 8-10 in Pudong,
Known as one of the three most important
HVAC/R exhibitions in the world (together with AHR and IKK), more than
630 exhibitors from 22
displayed their latest products and technologies at this year’s
China Refrigeration. Shanghai and Beijing, the largest two cities of China,
have hosted China Refrigeration intermittently since 1994. After a successful
show last year in Beijing, it was back to Shanghai again in 2004. And
the success of this year’s show was even greater: the exhibition
area of the Shanghai New International Expo Center, which occupies
floor space area of 34,500 sq m, was 6,000 sq m larger compared to
2 years ago.
This year’s exhibitors included several global leading players such
as Carrier, Fedders, Rheem, and Ciat of France, as well as the well-known
local manufacturers such as Dalian Bingshan, Broad, Yantai Moon, Midea,
and Hitachi-Hisense. Leading compressor manufacturers such as Bitzer,
Copeland, Danfoss, and RefComp were also present.
Most of this year’s exhibitors were commercial and industrial HVAC/R
manufacturers with large and well-decorated booths. The large domestic
residential air-conditioning and refrigeration OEMs—Haier, Gree,
Kelon, and Galanz—were absent.
HVAC appliances with energy-saving, environmentally sound, and health-related
features are increasingly becoming the market trends. This was easily
seen from the products on display, which reflected the newest improvements
in the industry.
HVAC/R players exhibiting at China Refrigeration tried
their best to attract the attention of show attendees with
large booths and unique displays.
By virtue of China’s relatively low production costs and a huge
market potential, as well as the Chinese government’s increasingly
posipositive attitude towards environmentally friendly HVAC/R products,
the world’s leading HVAC/R players are accelerating their industry
development in China by OEM production. LG Electronics, considered the
number-two electronic products maker in Korea, has set an ambitious goal
for the Chinese air-conditioning market with plans to reach a turnover
of U.S. $700 million by 2006.
Danfoss, a Danish air-conditioning giant, announced the move of its Asia
Pacific headquarters from Singapore to Shanghai, effective May 1. Noel
Ryan, sales executive of Danfoss Refrigeration & Air-conditioning,
commented that while China is a huge market with great potential, nowadays
the largest air-conditioning market is North America. Even so, he noted
that China is already considered the biggest marketplace for residential
air-conditioners and that he believes China might become the largest commercial
air-conditioner market in the world by 2010.
The promising future of the Chinese market is definitely irresistible
to HVAC/R players around the world. According to Mr. Kim Yung-Jae from
the Korean Refrigeration and Air-conditioning Industry Association (KRAIA),
China is a thriving market with a rapid growth rate. Because Beijing will
hold the 2008 Olympic Games and Shanghai will host World Expo in 2010,
China’s HVAC/R industry will be largely promoted by these great
events, he said. “Korean companies have attached great importance
to the Chinese market,” Mr. Kim noted. “By impressing Chinese
consumers with the Korean brands, as well as Korean technology on the
platform provided by China Refrigeration, we can set a foundation for
Korean HVAC/R players’ further expansion in China.”
LG Electronics took part in the “health” trend at this year’s
China Refrigeration by exhibiting its Plasma air purification system, an
air-conditioner that is also a purifier.
According to a WTO report, the volume of world trade will grow by 7.5
percent this year, a 3-percent increase from last year, and the world
GDP growth rate is also estimated to be 3.7 percent compared with last
year’s 2.5 percent. Li Rongcan, deputy director of Planning and
Finance Department of the Ministry of Commerce, said this positive momentum
of the world economy would increase overseas demand, which may create
a relatively good environment and a continuing upward trend for exports
of HVAC/R products.
Other statistics from the Customs General Administration of China indicated
that the monthly export of HVAC/R products nearly tripled at the beginning
of this year. During the first quarter, China’s foreign trade continued
to grow fast, with the total volume of exports reaching $115.7 billion,
a 34-percent increase year on year.
The international market has already become Chinese HVAC/R players’
foundation of survival. However, to meet the ever-improving requirements
of global HVAC/R markets, Chinese OEMs still have a lot of work to do
on improving the technology and the quality of their products.
More and more Chinese HVAC/R manufactures have realized that self-owned
brands can bring them much more in the long run. Midea (MD), a leading
Chinese air-conditioner manufacturer with a large proportion of OEM export,
saw an upward trend in its overseas market sales. According to Fang Hong
Bo, general manager of MD group, the profit per unit the company gets
from the overseas market is 20 percent higher than it receives from the
domestic market. Therefore, MD will put more emphasis on exports, and
the group is now trying to establish a new image for its in-house products
by exporting under its own brand rather than by another OEM brand. Mr.
Fang also expects MD’s export turnover to jump 60 percent to $800
million from last year’s $500 million, and to reach a total value
of $1.5 billion in 2005. The group also plans to boost its overall sales
by acquiring foreign brands or cooperating with foreign makers.
However, Chinese HVAC/R makers’ efforts on expanding their space
in the international market can not always be smooth; the dumping accusation
and strict recycling law on HVAC/R products will undoubtedly have a negative
impact on Chinese HVAC/R export in the future.
In 2003, China’s air-conditioner exports amounted to 14.8 million
units, and a report from industry officials indicates that 60 percent
of China’s air-conditioner sales in 2005 will be exported units.
Due to the SARS epidemic that hit China in 2003, today’s
consumers are more aware of indoor air quality. It’s no surprise
that at China Refrigeration 2004, HVAC/R appliances with health-related
functions were everywhere. Many exhibitors launched new products
designed for better air quality, including new types of chillers,
high-efficiency filters, anti-virus systems, as well as improved
fresh-air fan engine units.
“As a result of the SARS epidemic last year, people have come
to see the importance of air quality conditions in a new light,”
Mr. Pan Qiusheng, deputy director of The Chinese Association of
Refrigeration (CAR), told APPLIANCE. “HVAC/R products with
anti-viral functions or other related features are highly needed.
This demand will greatly push the refrigeration technology forward
into a new direction.”
Tsinghua Tongfang, a 10-year-old artificial environment player owned
by China’s prestigious Tsinghua University, displayed its
TFS-KZ300 anti-viral air processing units at its pavilion together
with other air cleaning products. Employing air-purified and anti-bacterial
parts, an ultra-violet lamp, photo catalysis oxidation filtration,
as well as a HEPA (High Efficiency Particulate Air) filter, the
system is said to remove the majority of harmful particles, including
mold spores, dust, dust mites, pet dander, and other irritating
allergens from the air.
LG Electronics also presented a commercial air-conditioner with
health features. Based on the company’s patented “Plasma
air purification” technology, LG’s air-conditioning
system can also act as a highly efficient air purifier that reportedly
eliminates dust, pollen, bacteria, and viruses.
China is now facing a power shortage as the economy remains on
the fast track, according to Wang Yonggan, the general secretary
of China Electricity Council. About 22 provinces, autonomous regions,
and municipalities had to cut off electricity at peak times in 2003.
China is expected to have a shortfall of more than 20 million kilowatts
in electricity supply this year.
While the development of the refrigeration industry is largely depending
on energy and environmental conditions, Mr. Pan Qiusheng told APPLIANCE
that energy-saving and environmentally sound products have also
become first choice for consumers.
Addressing this trend, Dalian Sanyo introduced its new ice-storage
air-conditioning system, which saves energy by making ice after
midnight, avoiding peak times. The ice supplements mechanical cooling
during the day when utility rates are at their highest level and
can result in significant operating cost savings.
Moreover, if the chiller is unable to operate normally for some
reason, the ice stored in advance can provide cooling for up to
2 days. Some are claiming that this unique feature of producing
and storing energy during off-peak hours has made Dalian Sanyo’s
system one of the most efficient in the Chinese market, making it
ideal for commercial AC applications in office building and hotels.
Alfa Laval, a Sweden-based provider of specialized products and
engineered solutions, displayed its new NH3 refrigeration plate
heat exchanger. The refrigerant NH3 (R717) has been widely recognized
as one of the most highly efficient and economical refrigerants.
Though this refrigerant is ozone-friendly, there is still a chance
for ammonia leakage, which can be fatal. To address this issue,
Alfa Laval used a LBBW (laser beam braze welding) application on
the refrigerant sealing and a stainless steel shell. This, the company
says, has improved the structural reliability and has almost completely
reduced the possibility of leakage.
Hitachi-Hisense (HH), a joint venture co-established by Japanese
air-conditioning giant Hitachi and leading domestic player Hisense,
exhibited its household products for the first time at CR 2004.
An official delegate from HH told Appliance that the company’s
new SET-FREE mini residential central air-conditioning system, which
was scheduled to be launched in May 2004, represents “the
latest technical achievement of Hitachi.”
Utilizing d.c. inverter driven scroll compressor technology and
R407C refrigerant, the company says its SET-FREE mini units provide
not only the ultimate in flexibility, efficiency, and comfort, but
also a professional air-conditioning system solution to residential
users. With the ability to cool/heat up to seven rooms from one
condensing unit, the units are ideal for large homes and small offices.
Sanyo focused on the environment with its R410A-based
The rapid growth of real estate has had a significant influence
on R&D of central air-conditioning systems, which are now being
widely used in high-rise apartments and villas.
The commercial AC market is now undergoing a rapid growth of more
than 10 percent, and manufacturers believe that the ever-expanding
needs for energy-saving and environmentally sound equipment will
further expand the market for commercial air-conditioners.
With the astonishing development of China’s construction industry,
the value of the Chinese commercial air-conditioner market is estimated
to reach more than 20 billion RMB (approx. U.S. $2.4 billion) by
2005. In cities such as Beijing and Shanghai, the demand for commercial
air-conditioners is growing at a speed of 70 percent to 80 percent
annually, according to market research. Up-to-date sales on commercial
ACs have already seen a 50-percent growth versus the same period
Therefore, commercial air-conditioning products were another hot
topic at China Refrigeration 2004. For instance, Carrier’s
light-commercial air-conditioning system, “Aqua snap Junior,”
made its debut at the show. The environmentally safe system uses
refrigerant R407C and is said to provide excellent stability, low
toxicity, and non-combustibility. In addition, the unit uses a specially
modified fan, and the scroll compressor and pump are housed in a
single compact compartment. This design, Carrier says, has greatly
reduced noise and vibration levels.
Some manufacturers are planning their strategies around the growth
of the commercial segment. Tsinghua Tongfang announced that a central
air-conditioner production base would be under construction in Wuxi,
Jiangsu Province. With an annual output up to 100,000 units, the
company says the base will become an important fortress in its strategy
for the South China market.
MDV exhibited what is said to be the world’s first
AC unit with a 30-hp digital compressor.
As a result of the intensified competition and China’s WTO entry,
sweeping changes have taken place in the Chinese HVAC/R industry. As domestic
companies continue to adopt new technologies and applications to meet
foreign demand, the Chinese HVAC/R industry will continue to see further
developments in the near future. This tech-oriented trend will also improve
brand image and the operating strategies of Chinese domestic players.
During China Refrigeration 2004, domestic exhibitors fully showed their
strength. Dalian Bingshan, one of the largest Chinese industrial air-conditioning
appliance producers, demonstrated its power with a 1,100-sq-m booth, which
attracted a lot of attention in the show venue. Other domestic HVAC/R
players such as Broad, Yantai Moon, also boasted large area pavilions.
However, as more and more international HVAC/R players have come to China
and try to get a piece of this rapidly growing market, intensified competition
will be inevitable to domestic players. The localization policy has always
been considered a market penetration strategy and a cost-cut alternative
in the Chinese market.
Taking China as their production base, many multinational players have
already established their R&D centers in the country to sharpen their
own competitive advantages for the intensive competition on global market.
For example, Fedders moved its international headquarters to China from
the U.S. last year. Trane moved its Asia-Pacific headquarters to Shanghai
and will invest $1.5 million in its Shanghai-based Asian R&D center,
which will mainly focus on developing commercial air-conditioning products
LG is taking similar actions. According to Mr. Jing Chengdong, chief director
for LG Air-Conditioning (Tianjing) Company, “To become more price-competitive
in China’s market, the production of commercial air-conditioning
system will be fully localized in Tianjing by the end of this year.”
In the wake of the WTO era, it is clear that as more and more Chinese
HVAC/R makers seek to develop their overseas business, there will be intensified
competition for the HVAC/R industry—both domestically and overseas.