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Industry crossroad

BICES show 2013 comes at a crossroads for the industry

Industry crossroad
Industry crossroad

For better or worse, the Beijing International Construction Machinery (BICES) show 2013 comes at a crossroads for the industry – as well as for the Chinese economy more generally.

It may be wishful thinking to suppose that the decline that hit China’s construction industry in 2011 – following the stimulus-fuelled boom years of 2008-2010 – is over as we head into 2013.

There is still much talk about a Chinese slowdown, as growth dips to 7.5% from a 10% high following the government’s US$586 billion post-financial crisis stimulus package in 2008.

Five years ago, domestic banks were mandated to lend money to anyone who wanted it, sparking a construction boom that tapered off when the same banks were instructed by Beijing to tighten the purse strings.

Indeed, sales of machinery were down 40% in 2012 and, even this year, there are reports that domestic PMV companies have seen sales falling.

Globally, meanwhile, few will have greeted Caterpillar’s latest financial figures with much cheer; the topline news had the company’s revenue dropping 16% in the second quarter, with a 43% decline in earnings per share.

But there are tentative signs that the industry in China, at least, is now bouncing back. The country’s industrial power usage rose to a one-year high in July, and according to data, power use by companies in construction, manufacturing and mining sectors rose 8.1% year on year.

At the same time, Chinese premier Xi Jinping’s pledge in July that economic reforms would be forthcoming and an earlier report that growth would not be allowed to sink below 7% saw shares rally in Hong Kong. Construction equipment giant Zoomlion Heavy Industries saw a very welcome 9.2% rally.

Either way, the organisers of BICES are bullish that 2013 finds the industry in a good position. Even if the events of the last few months do not mark the beginning of resurgence in the industry, they at least show one that has finally bottomed out.

“It is doubtless that industry downturn and adjustment that started in 2011, difficulties through 2012, and the stabilization expected by everyone in 2013 have brought about important opportunities,” a BICES spokeswoman said.

This year’s show has been expanded to 1,500 exhibitors; spread over 200,000m2 and covering sectors including engineering and construction machinery and mining.

It will be held at Beijing Jiuhua International Exhibition Centre from 15 to 18 October, featuring not only Chinese giants such as XCMG, Sany, Zoomlion and LiuGong, but international brands such as Caterpillar, Hitachi and Komatsu.

The show also includes a new focus on technology, particularly in the realm of sustainability.

“We want quality improvement, innovation development and value (to be) a foundation of industry development,” the spokeswoman added.

“This means everything from price, to scale, to brand competition. It means innovation instead of imitation, transformation from extensive growth to intensive growth. (We need) a path of sustainable development for the construction machinery industry in the future.”

Chinese firms looking to expand into Europe and the US are being forced to comply with strict new emissions standards, presenting opportunities for partnerships between the traditional machinery construction giants in China and smaller clean-tech companies in Europe and the US.

This trend was most recently evidenced by LiuGong’s tie-up with US engine-maker Cummins in 2011, which sees the latter developing diesel engines for the former from a new factory in Liuzhou – with the first completed machines coming online this year.

This allows the ambitious LiuGong to meet emissions requirements using Cummins’ clean-diesel technology, following Shantui – which became the first Chinese company to meet European standards this year.

The last two years has not only seen important joint ventures in the realm of clean energy, but Chinese companies expanding into Europe. XCMG’s 8 million Euros ($11.19 million) investment in McCormack France sees the firm tap into the French agriculture market, while Sany’s continued expansion in Germany continues for bear fruit, with the firm seeking US$129 million in European sales by 2015.

As a result, many remain bullish on the industry more generally. Su Zimeng, secretary general of the China Construction Machinery Association, said exports were picking up as activity globally begins to increase.

“The market demand for construction machinery sees an increasing trend,” he said, adding that China expect export growth of 20% next year.

“But the uncertainty in international economics is still high and protectionism in international trade (has) become more serious than before.”

This eludes to one of the key gripes within China’s government and industry over its export trade, a situation that currently sees construction machinery giant Sany fighting US President Barack Obama and the United States International Trade Commission over claims of patent infringement.

Within China, this is seen as an effort to restrict Chinese access to global markets, particularly in light of the fact that similar hurdles do not face other Asian exporters.

“In this situation, Chinese construction machinery exports (accounts for) a small proportion of the global (income), much lower than that of the US, Europe, Japan and Korea.”

China’s latest purchasing managers’ index (PMI) suggested that infrastructure spending is increasing in the country, even as the reluctance of local banks to lend as widely as in 2008 and 2009 continues to stifle the country’s real estate industry.

This is good news for machinery manufacturers in the country, which could benefit from road, rail and general infrastructure projects that, by virtue of China’s size, tend to be on a vast scale.

More generally, the BICES spokeswomen said that tough times have required show organisers to think more carefully about what participants need.

“The construction machinery industry (has) faced huge pressure of short-term adjustment, and BICES will face the challenges together with all its industry partners,” she said.

“Actually, the challenges and pressure has been the motivation for us to build a better exhibition.”

BICES 2013 Features
– More than 1,000 exhibitors
– Over 120,000 visitors from the industry expected
– Approximately 200,000m2 show area
– Top SOEs (state-owned-enterprises), COEs (central-government-Owned-enterprises) and the General Equipment Department of the State Army will be present
– Visitor groups from more than 30 industry associations home and abroad
– Forum, conference and lecturers
– Strong support by all levels of governments, public institutions and relevant associations