Manufacturers who had pinned sales growth hopes on this year's economic recovery in China's construction equipment are now in trouble.
In recent years, China has attracted a Caterpillar and Komatsu and other foreign construction equipment manufacturer to invest in, but now China has started to reduce the infrastructure projects, leading to weak demand in the Chinese market for new equipment. Under the combined effect of the economic slowdown, government construction spending and lower interest rates and other factors, sales of construction equipment receives a hit.
Monthly sales of hydraulic excavators (the widely watched barometer reflecting the Chinese machinery and equipment market) decline for a 15 consecutive month. In July of this year, the number of excavators sold in the Chinese market fell 23 percent to 5,886 units, the lowest sales since January this year (the commercial activities of the month by the Chinese Lunar New Year effects). According to the statistics of certain machinery and equipment industry associations in China excavator sales in the first half of 2012, its sales fell by 38%.
Equipment manufacturers (ore beneficiation) believe that China will achieve recovery before the end of the fourth quarter of this year, but this idea has recently been dispelled. Cummins, chief executive of Rambo Wen said last month, we do not expect any change in the second half of this year, China's domestic demand, we now consider to recovery until next year appeared.
A year ago, the speculation held that the Chinese economy appears little probability of such a hard landing. China impressive record of success to get rid of the shadow of the 2008 recession caused considerable over the world envy. When the Chinese government invested heavily in highways, airports and power plants and other infrastructure projects that promote the construction machinery and other capital equipment needs, the Chinese gross domestic product (GDP) followed by a strong growth.
From 2008 to 2010, Chinese investment in machinery, construction projects and other field of fixed assets increased to 27.8 trillion yuan (4.36 trillion U.S. dollars), an increase of up to 61%. Transnational machinery and equipment manufacturers have invested billions of dollars of business in China. At the same time China Sany Heavy Industry Co. and Zoomlion Co., Ltd., has developed into a strong local brand, and plans to expand overseas.
A popular view of the construction equipment industry is, as China continues to lower interest rates and government to restore the expenditure in the construction industry, which the depressed situation of the industry will vanish. China's population growth, population continues to move from rural to urban, middle-class population has increased rapidly, which will continue to boost the growth of construction activity. Managing Director of consulting firm Arrow platinum Baluo Xi insisted that China still expand the infrastructure, the Chinese government is still in the increase in construction spending.
However, some analysts insist that the view of China's economic growth slows and government spending in infrastructure arrangements increasingly cautious about the size of the construction equipment industry has been too large relative to market demand.
Analysts say the manufacturer of construction equipment are firmly convinced that the Chinese construction equipment market will recover soon, this may be extend the depressed situation in this market, because this attitude is not conducive to the integration of weaker manufacturers in the industry and large-scale to reduce inventory.
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