Market Trends of China Agricultural Machinery Industry
Decreasing Employment Opportunities in Agriculture is Expected to Boost the Market
Farm labor costs are influenced by the proportion of a country's population engaged in agriculture, rooted in basic demand-supply economics. This dynamic is currently impacting the Chinese agricultural machine market. Developing nations, including China, have a significant portion of their population reliant on agriculture. This dependency has waned over the years due to a steady migration toward urban centers. The aging of farmers is a major limitation for labor-intensive farming, and the rapid migration of youth to cities to work in manufacturing industries and service sectors is fueling the country's adoption of agricultural machinery. For instance, as reported by the State Council Information Office, China's urbanization rate hit 66.16% in 2023, based on its permanent urban population.
World Bank statistics highlight this trend: China's agricultural employment dropped from 24.7% in 2019 to 22.5% in 2022. As agricultural labor diminishes, its costs are on the rise. Concurrently, inadequate rural reforms are shrinking the rural labor force, pushing farmers toward greater mechanization of their operations. Given the tightening labor availability, it is poised to be a primary catalyst for the growth of the Chinese agricultural machine market in the coming years, suggesting a surge in demand for such machinery during the forecast period.
The Tractor Segment is Expected to Dominate the Market
According to the CEIC data, in 2022, China reported a total of 5,253,595 units of large and medium (LM) tractors. This marks an increase from the 4,980,682 units recorded in 2021. Large and medium-sized tractors gradually replaced small tractors. In northern China, high horsepower tractors are used on a large scale, as farm sizes are generally large, unlike in southern China, where farm sizes are pretty small. Large farm tractors are expensive, so many farmers outsource their cropping work to third-party contractors who value the performance and profitability of their investment.
The Chinese government has a farm machinery subsidy policy launched by the Ministry of Agriculture and Rural Affairs and the Ministry of Finance to provide financial assistance for purchasing heavy agricultural machinery, including agricultural tractors, to boost domestic production of farm machinery. Farmers utilized this subsidy to acquire 195,700 tractors, 484,300 farmland preparation machines, 87,200 seeders, 47,300 paddy transplanters, and 33,900 combine harvesters in 2020. China also introduced the 'Made in China 2025' scheme, which aims to produce 90% of the country's agricultural equipment with high-end machines, such as agricultural tractors, holding a one-third share of the market segment in 2020. This, in turn, boosts indigenously produced tractors and propels the country's agricultural tractor market. Thus, with the introduction of advanced models by market players, clubbed with supportive government initiatives, the domestic market for agricultural tractors in China is anticipated to grow during the forecast period.
