China Pollution Crackdown Affects Tool Market

Most home woodworking machinery, and a good portion of everything else in your shop, originates in China. So when the Chinese government got serious about enforcing pollution regulations last summer, closing down thousands of factories and requiring others to upgrade equipment, shockwaves rippled through the woodworking-tool business. Blast furnaces went cold, metal-treating shops closed their doors, and many workers found themselves unemployed.

Chinese officials who, in a rush to grow the economy, once turned a blind eye to polluters, now face a prospering populace demanding a healthier environment. "Twenty-five years ago, streets were clogged with bicycles," one tool manufacturer told us. "Those days are over. Now it's cars everywhere. Chinese want the same quality of life that all of us do, and politicians have gotten the message."

"The crackdown started along the northern coast, because that's where a lot of the 'dirty' manufacturing, such as iron casting and metal plating, takes place," another manufacturer said. "And while I don't like the disruption it's caused to business, the environmental cleanup is long overdue—on some days you can now actually see blue skies in the coastal manufacturing areas."

Hardest hit have been small factories that supply parts to larger manufacturers. The "little guys" simply can't afford new environmental controls. As a result, big factories have had to bring more small-parts production in-house.

Although China's economic growth has dipped in recent years, its near 7 percent annual growth rate is still the envy of other nations. And experts generally agree China's economy is strong enough to weather further disruptions from factory closures.

From electronics, to clothes, appliances, and a million other gizmos and knickknacks, China dominates the manufacturing world. And all those products will be affected by the wave of environmental inspections sweeping the world's most populous country. "Any industry that uses chemicals or belches smoke is under scrutiny," one manufacturer told us.
While some industries, particularly textiles, may be able to shift production to other countries to rein in prices, that's not easily done with woodworking machinery. "Getting the machinery business going in another country, such as Vietnam, would be like starting from scratch—like China 25 years ago," the same manufacturer told us. "And nobody wants to go through that again. Switching to Taiwan would instantly raise prices 20–30 percent, and our customers won't tolerate that. Other countries, such as India, just haven't shown us they can make a quality product. China's still the best game in town."

Some U.S.-based retailers and machinery suppliers report the crackdown has had little impact on business because their larger scale gives them priority in the supply chain, or because their Chinese sources were already compliant with regulations. But others told us they haven't been able to keep certain products in inventory, have had to order products farther ahead, or maintain larger inventories than they would like. Most say tighter supplies have raised the price they pay. "It varies greatly from product to product," one supplier told us. "We've seen increases of 5–10 percent, and many times we can absorb those. In some cases we've seen 15–20 percent increases that force us to raise retail prices."

Besides being grateful that China is taking steps to clean up its air and water, there's at least one thing you can do to benefit your pocketbook. As one supplier told us candidly: "If you find a good deal, don't wait to buy; the price probably won't get better."

And be flexible with goods available only from smaller sellers. "We see the supply chain settling down by this fall," another supplier told us. "So the same products will still be available, but you might have to be patient in getting what you want."