Tech-savvy Chinese firms ride global boom in construction equipment
Laypersons may not be aware, but construction machinery, an industry where China has a significant presence, is used not just for basic construction but in advanced projects such as wind power farms, housing for industry workers, development of smart cities and medical equipment factories these days.
There is increasing demand for excavators, bulldozers, pipe-layers, road rollers and wheel loaders in the countries and regions participating in the Belt and Road, or B&R, Initiative.
Besides, demand for such machinery is also growing in China itself due to nationwide urbanization, new infrastructure projects, the booming industrial upgrading and steady economic growth overall, experts and business leaders said in the run-up to the 19th CPC National Congress.
"The industry is blossoming, even thriving, thanks to sound economic fundamentals, various key projects and national urbanization campaigns," said Zhang Yongjun, a researcher at the China Center for International Economic Exchanges in Beijing.
New railroad and mining projects; a surging number of works related to environmental protection, agriculture and public service; and public-private partnerships are all using a variety of machines, according to Zhang.
Jim Umpleby, chief executive officer of Caterpillar, the world' largest construction machinery maker, said, "China has vast infrastructure and housing needs.
"And we believe it will remain an important construction equipment market for Caterpillar for the foreseeable future."
In the second quarter of this year, the Illinois, US-based Caterpillar Inc saw sales revenue of .3 billion, compared with .3 billion in the second quarter of 2016, thanks to an increase in construction equipment sales in China, where new infrastructure projects and investments in residential realty boosted sales.
The key industrial segment is expected to see an overall 50 percent year-on-year jump in sales in China to 120,000 units this year.
Sales surge will be helped also by the fact that the sector has entered a fresh replacement cycle after its last peak year in 2011.
The country's ongoing effort to promote the "Made in China 2025" strategy is stimulating sales of high-end products, especially those related to projects of informatics industries, in both home and B&R markets.
This, in turn, is helping the construction machinery sector overcome the quiet market of the last five years, which has kept the available stocks at a low level now, said business leaders.
The incipient market rebound in China has, however, helped brighten the mood.
For long, machinery manufacturers had to deal with problems like production overcapacity, credit-availing buyers who delayed final payments, and stiff environmental standards.
Now, industry discussions focus on rising sales and future prospects.
The excavator branch of the China Construction Machinery Association reported that the country's major construction machinery makers sold 91,400 units in both domestic and overseas markets between January and August, up over 100 percent year-on-year.
The eight-month sales surpassed the full-year figure of 70,320 units of 2016. Qi Jun, president of the Beijing-based CCMA, said the excavator segment will likely continue to grow robustly in the second half of this year, given China's ongoing railroad, highway and airport projects in lower-tier cities, as well as urbanization.
Excavator sales have surged since the second half of 2016. The monthly growth rate topped 70 percent year-on-year from September to November 2016.
Most companies in the global sector have seen their sales rise robustly, especially major ones such as Sany Heavy Industry Co of China, Liebherr Group of Germany and Hitachi Construction Machinery Co of Japan.
Umpleby of Caterpillar said: "Sales in our construction and mining segments are doing well. In fact, we have seen a noticeable uplift in sales of excavators."
The company celebrated the sale of 20,000 mini hydraulic excavators in China in August.
Several factors are responsible for the industry's expectations of a bright future.