Since the beginning of 2002, the general performance of China’s farm machinery industry has been not satisfactory and the outlook is not optimistic. The total sale of the farm machinery corporation sector reached 6.13 billion yuan in the first half of this year, dropping 39.9% over the same period last year; the sale from other sectors was 5.83 billion yuan, down 39.1%, and the year-end inventory was 1.96 billion yuan, down 35.9%. The sale of four major farm machinery products recorded an across-the-board decline in sales, showing no sign of recovery.

The sale of mechanized farm tools, which have played a key role in promoting sales growth, dropped 35.7% to only 3.73 billion yuan in the first half of 2002. Due to the saturation of ownership of anti-flood machines and decline in sale of supporting power systems, power, and drainage and irrigation machinery decreased 37% to 550 million yuan. Sale of processing machinery for farm sideline products was about 80 million yuan, down 48.5%. The fast change in the market has hit sales of fittings and spare parts for repair and maintenance, bringing about increases in inventory. The sale of fittings and spare parts was 530 million yuan, down 41.2%. The market for small tractors was flat, with ownership reaching a saturation. There was a sign of rebound in the sale of combine harvester with sales reaching 1,404 units in June, rising 0.2% year on year. The total sale of combine harvesters was 6,826 units in the first half, down 21.9%. Sales of farm transport vehicles and three-wheel farm vehicles have been high in recent years, but the situation has begun to turn worse with competition becoming fierce, and market approaching saturation.

However, the sluggish sale of farm machinery did not start 2002. In 2001, the total sale of farm machinery commodities was 17.48 billion yuan, a decrease of 25.5% from the previous year. Of this, sales by farm machinery corporation sector were 16.49 billion yuan, down 24%, and the inventory was 3.09 billion yuan, down 17.1%. Sales of the four major farm machinery products dropped. The sale of mechanized farm tools was 9.74 billion yuan, down 27.9%; power and drainage and1.50 billion yuan, down 25.8%; processing machinery for farm sideline products, 200 million yuan, down 24.8%; and fittings and parts for repair, 1.58 billion yuan, down 33.9%. The figures show that the slump for farm machinery industry is an extension from 2001. This is attributed to the following factors: firstly, changes have taken place in the market demand structure, while state-owned enterprises have not been well prepared for the changes. Secondly, the rise of non-governmental and private-owned enterprises has reduced the market share of state-owned enterprises. The non-public sector has snatched 50% of the market share of farm machines. Last, farm machinery corporations are in a period of restructuring and mergers, with one third of them finding it difficult to conduct normal operation and send reports and accounts to the higher-level leadership. The old system doesn’t work well while the new one is not established enough to play a proper role. This is described as a pain in the process of reform.

But there is a sharp contrast in farm machinery and engineering machinery. The profits of engineering machinery industry have increased by a big margin in 2002. This is attributed to the state’s implementation of the proactive financial policy and big influx of funds into the construction of infrastructure facilities. On the contrary, agriculture has not gained any benefits from proactive financial policy, and farm machinery sector has not achieved effective demand. This may be one of the factors affecting the sale of farm machinery. Under such a situation, it is difficult for farm machinery industry to make a recovery soon.