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Demand Drivers

As more domestic companies look to deliver better quality at lower costs, the demand for PHE products is expected to continue to grow at a rate of 30% through 20101. In our markets we find customers' demands for PHEs are directly influenced by the following:

Macro Factors

  • Increasing urbanization and related residential construction
  • PRC government measures to improve sub-standard housing and install indoor heating and plumbing for low income citizens in Northern and Western China;
  • PRC 11th Five-Year Plan aiming to reduce energy consumption per unit GDP by 20% and reduce pollutants by 10% by 2010;
  • Enterprises located in China are required to significantly reduce or eliminate energy inefficient machinery and processes and adopt energy saving policies as. Policy enforcement began on April 1, 2008 in accordance with the China's National Congress resolution;
  • Growing international pressure on China to reduce CO2 emissions on an annual basis;
  • Increasing strain on demand for a limited quantity of fossil fuels as developed nations continue to use energy at increasing rates.

Micro Factors

  • Existing and future legislation on local and national levels to reduce energy use and waste output;
  • Increasing production and surging demand for consumer goods requiring precise control of temperatures in pasteurization and fermentation processes such as milk and yogurt;
  • PRC government's recent investments and industry support for alternative energy due to their pledge to become energy independent by 2020 and more importantly, to reduce energy consumption by 20% for each GDP unit produced by 2010. Recent developments to this effect in China include:
    • Inclusion of nuclear energy in national energy grid with plans to build 30 nuclear power stations by 20202;
    • Emergence of solar energy manufacturers such as US NYSE listed LDK, a customer of Smartheat, TrinaSun, Suntech Power, and NASDAQ listed China Sunenergy, Solar Fun;
  • Continuous pressure on industry to adopt cost-cutting measures while simultaneously improving performance;
  • Ongoing relocation of international manufacturers shifting production to mainland China;
  • Replacement of shell and tube heat exchangers with plate heat exchangers.

The above factors will continue to propel the demand for PHE products in China during the next 5-10 years.

1. China Heating Association
2. Physics Today.Org, February 2006.


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