Sichuan machinery industry features low industry concentration. Its total economic volume is lower than eastern coastal cities in China. For example, the sales revenue of Sichuan machinery industry is only 14.9% of that in Jiangsu Province, 19.6% of that in Shanghai City and 26.4% of that in Zhejiang Province.

Deyang, Chengdu, Mianyang, Ziyang, Zigong and Luzhou are industrial cities with relatively developed and concentrated machinery industry in Sichuan, however, there are only several large group enterprises whose sales revenue is more than 10 billion yuan. So, the industrial concentration in Sichuan is lower than that in other developed countries.

Sichuan boasts of a good many of research and development institutions. However, its technical level of key technical equipment, electromechanical integration equipment and other key products is largely lagged behind other foreign countries and it lacks a perfect high-level science and technology investment system due to lack of continuous investment in research and development, failure to take full advantage of its own research and development advantages, strong reliance on the technology of foreign machinery industry and weak independent development capability for long.

There are many noticeable problems in Sichuan machinery industry: many investment products but few civil products; many low-value-added products but few hi-tech products; many traditional products but few brand-name products; high product yield but few independently developed products with independent intellectual property rights. What’s more, some enterprises are only engaged in the processing of supplied materials and the original equipment manufacturing. Their products possess a manifestly unreasonable structure, and cannot meet the demand of domestic and overseas markets.

At present, there is a big fluctuation in the price of raw materials led by steels. The bottleneck constraints in coal, electricity, oil and gas, etc. have not been solved yet, while the energy source problem has become an important factor influencing the economic and social development of Sichuan. Since 2003, the electricity has become a bottleneck problem for the economic and social development of Sichuan. Sichuan’s structural, regional and periodic power shortage developed into general power shortage in 2004, which gave an influence on the production of some enterprises to a large degree. In order to solve this problem, the Sichuan Government is investing in three large hydropower stations. According to the Government’s estimate, the power shortage problem will be solved in 2006 on the whole.

The financial and capital market in western region is weaker than that in eastern coastal cities such as the Yangtze River Delta and the Pearl River Delta (PRD), etc. in China. The financial and capital market in west China is only dependent on the fund from the government and there is no risk investment mechanism. The development of newly reformed enterprises, and medium-and-small-sized enterprises are restrained owning to its single financing channels.

2.2.6 Contradiction between economic development and environmental protection

The total industrial production energy consumption in the whole industry was increased by 2.95% in 2004 as compared with 2003. There are many high energy-consuming enterprises, so the pollution discharge is still high. The Sichuan Government pays more attention to environmental protection industries and encourages the development of machinery industry among the environmental protection industry, which thus provides good investment opportunities for international investor(s) in the matter of improvement and upgrade of machinery industry.