China stimulates demand
China stimulates demand
As we have already reported in CONTROL UNLIMITED in October 2008, the Chinese construction machinery sector showed a growth rate of 25% in the first six months of 2008 alone, compared with the same period in the previous year. However, since the end of the Olympics, the financial crisis has become a hot topic in China, too. In parallel with bauma 2008 in Shanghai, the Chinese government announced a package of measures to stimulate the economy, amounting to 400 billion Euros over two years. Besides this, from the 01.01.2009, companies in China can drop VAT which will lead to a reduction in prices of approximately 20% and should also enhance the public’s buying power. The aim is clear: further growth. The sector asks itself the question: in which directions should the Chinese construction machinery market grow?
Trends for the Chinese construction machinery market
1. Growth, even for 2009
The high levels of governmental investment pressure in the Chinese infrastructure encourage further construction machinery sales. And: as a result of the global crisis, particularly in the USA, Chinese construction machinery will be in demand, not least because of the attractive cost/benefit ratio.
2. Investment abroad
The UK in 2002, Malaysia in 2004 and Australia in 2005 represented the beginning. Hong Kong, India and the USA in 2007 were further locations for successful Chinese investment, take-overs and strategic joint-ventures abroad.
3. Global Player
Due to the rapid growth in the Chinese construction machinery market, the leading construction machinery manufacturers who were previously active on a purely national level, are now aiming at increasingly high levels of international participation. The goals which have been achieved to date: in the global league table of the most important construction machinery manufacturers you will now find 7 representatives from China – with further pressure to achieve higher positions.
4. Market concentration in mobile cranes
As far as mobile cranes are concerned there are only two large manufacturers in China, with one as clear market leader: XCMG with a market share of over 50%, rising rapidly. The number 2, Zoomlion, has about 20% of the market. This constellation mirrors the trend in the whole Chinese construction machinery market: a growing trend to a concentration on a few large manufacturers.
5. Leasing makes inroads
Since 2007 the Chinese construction machinery market has become familiar with financing/leasing. The first financing/leasing companies were founded in China in 2008. This allows for attractive financial conditions both for Chinese and foreign construction machinery manufacturers.
6. Going to the Stock Exchange
At the end of 1993 the first Chinese construction machinery manufacturer was listed on the stock exchange. At the moment there are 22 Chinese construction machinery manufacturers listed.
CONTROL unlimited
December 2008