It’s been tumultuous few years, but the Chinese manufacturing industry is now recovering. Once an industry characterized by low-end manufacturing and labor intensive, it has transformed into a high-end manufacturing hub, aided by technology.
Automation and robotics have the potential to modernize Chinese manufacturing while improving labor efficiency and reducing labor shortages. It is predictable that companies and investors will want to capitalize on this trend.
Robotics has been a hot sector for a while, but its popularity has skyrocketed in recent years. The sector registered investments and financing of $6 billion in 2021, according to statistics from market research firms, and is expected to double in size in five years.
However, it is not known when these investments will yield an appropriate return. Robotics is experiencing the biggest bubble in the Chinese venture capital industry and is full of speculation and overvalued companies. Compared to comparable investment bubbles of the past 10 years, this one is bigger in size, longer in duration and could be more devastating than ever before.
The price-earnings ratio no longer applies to many listed companies and the market-turnover ratio has also disappeared from the window. he Huang
However, the “bust” is completely avoidable. Investors and companies need to get back to basics and resist the industry’s typical impatience to get off on both sides of the negotiating table.
Understanding the Market
With the inflow of capital investment, we see a partial and cyclical overheating of the market in China. Many investors trapped in this investment tide are replicating the software investment model as many institutions that have invested in internet startups are also aggressively entering this field.
So what’s behind this wave? Everything from China’s government policy to the launch of the Science and Technology Innovation Board, which opened a convenient exit channel. The rise is compounded by the push to upgrade China’s industrial fabric.
However, it is critical that investors do not apply software investment rules to industrial technology investments. First, the period from investment to exit is different. Investments in robotics and other industrial technologies are relatively lengthy compared to internet companies. Internet companies can go public within three to five years of investment, but industrial technology companies are likely to take twice as long or longer to go public.