- China’s construction equipment market is the total market value is USD $45.71 billion in 2017.
- Construction equipment sector forecasted to grow 10% per annum over a period of 2016-25.
- Construction equipment future demand remains strong with more large-scale projects are rolled-out in Western China
Figure 1: Machinery Sales Highest In China
After having endured several difficult years after the global economic downturn in 2007. China’s construction equipment (CE) manufacturers have had a turnaround as sales of machinery in China has been growing at annual rate of 10% over the period of 2010-17 (refer Figure 1 above).
The resurgence of China’s heavy machine industry has created new challenges from the construction sector. The concern among large-scale project developers was how best to cope with transformation of the business environment that’s rather sensitive to external volatility.
China had cemented their global dominance within the industry by first establishing itself a market leader for the manufacturing of construction machinery in the world and recording the largest volume of machinery sales in the world (refer Figure 1).
- Impact of “One Road One Belt’
China s mega projects under the Belt Road Initiative (BRI) has further driven-up the demand for heavy machinery and they possess one of the world’s best construction machinery supply chain, with all parts of the supply-chain being located within China.
Figure 2: China Market Leader in Construction Machinery
Source: Global Market Insight
 China Construction Machinery Business Online
 Buchanan, Mary Jo (2 February 2017) Goodman,
 Asia Business Review
The CE market in China in 2017 was estimated to be around US $69.2 billion, the largest in the world (refer Figure 2 above). Meanwhile, the global equipment market was estimated at a staggering US $143.6 billion. Industry experts justified the value of the entire market down to the “game changers” primarily the “Go West” policy and the Belt Road Initiative (BRI).
Figure 3: China Records Highest Investment
The economic spill-over of these large-scale projects have had a profound impact on the economic and social development China’s western provinces. These policies were instrumental for total increase in market size of China fixed asset investment and surpassing even the US (refer Figure 3 above).
With this massive investment, Chinawas able to truly “open” the remote western provinces* with a wide array of infrastructure projects. Currently, 52 major projects had already been completed with the remaining 100 set to be finished by 2023. The projects include 12 new airports at a total cost of USD 23.5 Billion (162.4 billion Yuan), as well as roads and railways, water diversion facilities and hydroelectric power stations.
- Prevailing Risk Factors
The industry as a whole can be volatile in nature but the common risk factors faced by most local firm the combination of dwindling capacity and the shortage of skilled workforce. This left many firms with hardly ant opportunity to keep pace with the sudden surge in demand for machineries that’s needed complement large-scale projects.
The consequence of this shortage forced domestic firms to make a difficult decision to either invest in building new and cost-intensive facilities or to capitalize on today’s opportunities by squeezing more out of their existing assets Suffice to say that the choice in their decision varied between various local firms.
Figure 4: Tops the Earth Moving Equipment Market
Source::China News Channel
As for the local firms, it had taken massive amounts of capital injection to compete with its Western-based rivals in the industry. With Beijing’s financial assistance and tax breaks, domestic firms were encouraged to compete alongside more established Western-based manufactures.
With funding obtained from ICBC and Bank of China, local manufacturers have begun investing heavily in product innovation. This enables these firms to leverage on breakthrough technology such as AI, digital-technology and robotics that common in modern machinery manufacturing plants across US and Europe.
Figure 5: World’s Largest Machinery Manufactures
Source: Construction Market Review
An interesting development within the heavy machinery market is the rapid progress made by Domestic run-firms on the global stage. For example, China’s domestic manufacturers, Sany and Zoomlion have transformed the competitive landscape of the industry (refer figure 5 above).
Future Market Strategies
The CE manufacturing industry constantly evolves with technological innovation, domestic firms need to constantly adopt innovative strategies just to be ahead of the game. To retain its prominence firms need to focus on future strategies as follows:
- Acquisitions: Synergistic benefits can be realized that local CE manufacturers from existing facilities and assets by leveraging the capability and capacity of acquisitions.
- Automation and technologies: Domestic manufacturers must exploit any opportunity to enhance automation by applying emerging digital and other technology solutions to their plant operations and assets to make them more efficient and productive.
- Flexibility: An increasingly volatile and unpredictable global economy will require that a domestic manufacturer must have a flexible operating model. Infusing greater flexibility across current manufacturing networks can make it easier to align supply with demand.
- Operational excellence: Surging demand is placing greater pressure on companies to keep their cost-per-unit steady. Maintaining or improving profitability is key to addressing this challenge.
- Skills: Critical skills are in short supply. Exacerbating this challenge is the growing use of automation and technology across manufacturing operations that will require skills with far greater technological proficiency.
- Visibility: Domestic firms can further enhance their ability to meet changing demand by improving visibility in their operations across the enterprise.
 Global Market Insight, 208
 Global Construction Review, 2917
 Asia Business Review, October 2017
 Western China covers one municipality: Chongqing and six provinces
 The Economist, October 30
 China National Development Policy Review, 2015
 Asia Business Review, 2017
 Asian Business Review, 2017
 Global Market Insight
To conclude, long-tern infrastructure development plan to follow through on its highly ambitious One Belt One Road initiative, linking the country’s infrastructure with economic centres in Europe, the Middle East will give rise to demand for CE. With various projects to be unveiled soon, China’s market can offer interesting opportunities to investo0rs.
With opportunities remain abundant within the industry, there has been a rising trend that the world’s major construction machinery makers have been setting up production bases and joint ventures in China. China was the lifting of restrictions on foreign investment in land development, high-end hotels, office buildings, international exhibition centres, and the construction and operation of large theme parks that enticed foreign construction firms to initiate projects in