Although brands like Haier and TCL have been thoroughly "localized," they still rely on foreign components. For instance, when you buy an air conditioner, the guide will tell you that the compressor comes from Japan. When purchasing a refrigerator, the shopping guide will again point out that the compressor is of Japanese origin. Industry insiders argue that China's machinery manufacturing lags behind Europe and the United States by nearly 30 years. In April 2006, Xugong Group and Carlyle’s merger plans for China’s engineering machinery industry were finalized. Carlyle Asia Investment Corporation acquired an 85% stake in Xuzhou Construction Machinery Group Co., Ltd., a subsidiary of Xugong Group, for $375 million. Although Sany's intervention caused some twists and turns, it ultimately prevented Caterpillar’s long-anticipated plan to take over China’s mechanical engineering industry, which many Chinese economists had feared. In March 2005, Caterpillar Inc., the world's largest machinery and equipment manufacturer, acquired 40% of Shandong Heavy Industry at a surprisingly low price. Soon after, reports emerged that Caterpillar was planning a large-scale acquisition strategy aimed at "capturing China’s construction machinery market." XCMG, a long-standing leader in the sector, was one of its main targets. Had Carlyle successfully acquired Xugong, it would have dealt a significant blow to Caterpillar. However, for Carlyle, the ultimate goal was to sell Xugong at a higher price later. Therefore, the future development of XCMG remains uncertain. Since the 1990s, multinational corporations have entered China’s machinery industry market, focusing on sectors such as automobiles, electrical appliances, office equipment, instrumentation, general machinery, and construction machinery. These industries make up about half of the machinery sector and account for 80% of direct foreign investment. Yu Zhen, Chairman of the Federation of Machinery Industry, highlighted changes in foreign investment: “The basic premise is maintaining control over investment activities in China. It’s worth noting that today’s multinational companies are particularly interested in merging with China’s high-growth industries.” Examples include Germany’s Bosch acquiring a leading Chinese oil pump company, and China’s Northwest Bearing Company forming a joint venture with German FAG, which later became fully owned by the German firm. Beyond external challenges, China’s machinery industry also faces internal issues. Many companies used imported equipment as a marketing tool. A Guangdong-based food company proudly advertised its use of Japanese and Taiwanese automated production lines, claiming superior craftsmanship and product quality. This mindset has led many Chinese consumers to believe that only foreign-made production lines and equipment are reliable. While China has developed well-known brands like Haier and TCL, their core components are often imported. This dependency on foreign technology is a major concern. Industry insiders describe a "technical black hole" in China’s machinery sector, where reliance on foreign technology is extremely high. Over 60% of fixed asset investments are based on foreign technology. Even in high-tech zones, more than half of the technology is imported. Liu Yanren, an engineer specializing in metallurgical machinery, shared his observations: “China has built numerous strip production lines, but all the equipment and systems come from Germany, Japan, and Italy.” At a steel plant in Hebei, he saw condensing equipment from Germany and zinc equipment from Italy. According to the Federation of Machinery Industries, the contribution rate of new products in developed countries is currently 52%, while in China, it is only 5.9%. Many products lack core intellectual property rights, leading to accusations of infringement. Even self-developed technologies can be labeled as "plagiarism." The "CM1 Dolphin" maglev train, recently developed in China, faced accusations of copying German technology. Zhong Dajun, director of the Beijing Armed Forces Economic Observer Research Center, stated that China’s industrial equipment is largely dependent on foreign products, revealing a critical weakness in its industrialization. Machinery manufacturing is the backbone of any nation. Without strong domestic capabilities, the economy and national defense remain vulnerable. Over the past 30 years, discussions online have debated how many years China’s machinery industry lags behind the West. Many believe the gap is at least 30 years, especially in engine technology. As the "heart" of machinery, engines are crucial, especially for China’s automotive industry, which has struggled to develop its own engines. Despite this, some companies are now focusing on engine design. Chery, for example, developed the ACTECO engine, earning recognition with the "2005 China Creation Award." However, Liu Yanren noted that the factory producing the ACTECO engine uses German and Italian technology, highlighting the continued reliance on foreign expertise. This reality leaves many engineers concerned about China’s long-term technological independence.

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