Page 216 - 2017 White Paper
P. 216
7 White Paper on the Business Environment in China
Consultative Conference Jia Qinglin remarked that to clear evidence that the recovery for China is for the
the machinery industry ought to “raise the quality beginning of 2013” (Kubota and Xu 2012).
and efficiency of the industry, accelerate mergers and
acquisitions to forge conglomerates, and enhance the Roughly a week later, the National Development
industry’s ability to withstand risks” (Xinhua 2011b). and Reform Commission “announced approvals for
projects that analysts estimate total more than 1 trillion
Over the course of 2012 the Machinery business yuan ($157 billion), roughly a quarter of the total size
in China—both in terms of production as well as of the massive stimulus package unleashed in response
consumption—saw further (relative) hardship as, to the global financial crisis in 2008” (Sweeney and
according to analyst Zhang Cheng with Changjiang Chiang 2012).
Securities in Shanghai, “The Chinese machinery sector
[was] experiencing a bottoming-out period” (Kubota and Perhaps significant was the timing of the
Xu 2012). announcement, which was released “just before a deluge
of Chinese economic data due [two days later] that could
That year, for example, “Japanese excavator maker confirm investors’ worst fears that a downswing in the
Komatsu […] saw demand in China for construction world’s second-biggest economy has stretched into a
and mining equipment falling 40 per cent [over] three seventh straight quarter” and scant weeks before the
months,” while “[Komatsu’s] Chinese rival Sany Heavy official departure of Messrs. Hu and Wen that had been
Industry […] reported a near-60 per cent slump in third scheduled for November (Sweeney and Chiang 2012).
quarter profits” (Kubota and Xu 2012).
According to analysts speaking with Reuters, this likely
Similarly, by October of that year Caterpillar had signified a more pro-active approach to the economy
“slashed its 2012 forecast” twice due to sales in China that than had previously been taken by Central government
had “slowed in the third quarter and had yet to improve” authorities in the recent past (Sweeney and Chiang 2012).
(Kubota and Xu 2012).
Whatever the cause, many of the same companies who
Hitachi Executive Vice President Toyoaki Nakamura had suffered earlier in 2012 appeared to enjoy immediate
echoed seemingly worldwide pessimism about the near- gains in stock price, with “Shanghai-listed Sany Heavy
term market for machinery in China, opining that “we are Industry, Shenzhen-listed Zoomlion and Taiyuan Heavy
starting to see quite a (negative) impact from China, quite all surged 10 percent. Japanese construction equipment
suddenly on our earnings, especially on construction makers also got a boost, with shares of Komatsu Ltd rising
machinery and high functional materials, areas where 6.6 percent in Tokyo and Hitachi Construction Machinery
the immediate market conditions are quickly reflected Co., Ltd. up 4.7 percent”. Similarly “Caterpillar Inc, the
on results” (Kubota and Xu 2012). world’s largest heavy equipment maker, rose 4.1 percent”
(Sweeney and Chiang 2012).
Still, there appeared widespread optimism about the
Chinese government’s willingness and ability to enact Despite optimism riding on the back of the Central
further economic stimulus to aid the county’s sagging government’s announcement, the sector’s outlook is still
economy, and in China stimulus is usually heavy on somewhat less than bright.
fixed assets—just the thing to improve the outlook of
machinery manufacturers. According to Reuters, “foreign and local machinery
makers in China, the world’s largest construction market,
In October 2012 Sany Heavy Industry’s president are struggling as the slowdown saps investment growth
Xiang Wenbo predicted a “golden age” of development in to 10-year lows. Falling profits have spurred firms to
2013, while Caterpillar also predicted increased stimulus cut production or seek new clients” (Sweeney and
spending in China over the course of the coming year Chiang 2012).
and both Swiss oil and gas infrastructure supplier ABB
and French firm Schneider reported that orders from As a result, Caterpillar began to export Chinese-made
China for machinery had stabilized in late 2012. Notably, machinery to the Middle East and Africa, Hitachi “slashed
however, Schnieder’s finance chief cautioned that “We do production at its excavator-making plant in eastern China”
not know when it will come. I’m certainly not pointing and “Shares in China heavyweight Sany Heavy Industry,
216
Consultative Conference Jia Qinglin remarked that to clear evidence that the recovery for China is for the
the machinery industry ought to “raise the quality beginning of 2013” (Kubota and Xu 2012).
and efficiency of the industry, accelerate mergers and
acquisitions to forge conglomerates, and enhance the Roughly a week later, the National Development
industry’s ability to withstand risks” (Xinhua 2011b). and Reform Commission “announced approvals for
projects that analysts estimate total more than 1 trillion
Over the course of 2012 the Machinery business yuan ($157 billion), roughly a quarter of the total size
in China—both in terms of production as well as of the massive stimulus package unleashed in response
consumption—saw further (relative) hardship as, to the global financial crisis in 2008” (Sweeney and
according to analyst Zhang Cheng with Changjiang Chiang 2012).
Securities in Shanghai, “The Chinese machinery sector
[was] experiencing a bottoming-out period” (Kubota and Perhaps significant was the timing of the
Xu 2012). announcement, which was released “just before a deluge
of Chinese economic data due [two days later] that could
That year, for example, “Japanese excavator maker confirm investors’ worst fears that a downswing in the
Komatsu […] saw demand in China for construction world’s second-biggest economy has stretched into a
and mining equipment falling 40 per cent [over] three seventh straight quarter” and scant weeks before the
months,” while “[Komatsu’s] Chinese rival Sany Heavy official departure of Messrs. Hu and Wen that had been
Industry […] reported a near-60 per cent slump in third scheduled for November (Sweeney and Chiang 2012).
quarter profits” (Kubota and Xu 2012).
According to analysts speaking with Reuters, this likely
Similarly, by October of that year Caterpillar had signified a more pro-active approach to the economy
“slashed its 2012 forecast” twice due to sales in China that than had previously been taken by Central government
had “slowed in the third quarter and had yet to improve” authorities in the recent past (Sweeney and Chiang 2012).
(Kubota and Xu 2012).
Whatever the cause, many of the same companies who
Hitachi Executive Vice President Toyoaki Nakamura had suffered earlier in 2012 appeared to enjoy immediate
echoed seemingly worldwide pessimism about the near- gains in stock price, with “Shanghai-listed Sany Heavy
term market for machinery in China, opining that “we are Industry, Shenzhen-listed Zoomlion and Taiyuan Heavy
starting to see quite a (negative) impact from China, quite all surged 10 percent. Japanese construction equipment
suddenly on our earnings, especially on construction makers also got a boost, with shares of Komatsu Ltd rising
machinery and high functional materials, areas where 6.6 percent in Tokyo and Hitachi Construction Machinery
the immediate market conditions are quickly reflected Co., Ltd. up 4.7 percent”. Similarly “Caterpillar Inc, the
on results” (Kubota and Xu 2012). world’s largest heavy equipment maker, rose 4.1 percent”
(Sweeney and Chiang 2012).
Still, there appeared widespread optimism about the
Chinese government’s willingness and ability to enact Despite optimism riding on the back of the Central
further economic stimulus to aid the county’s sagging government’s announcement, the sector’s outlook is still
economy, and in China stimulus is usually heavy on somewhat less than bright.
fixed assets—just the thing to improve the outlook of
machinery manufacturers. According to Reuters, “foreign and local machinery
makers in China, the world’s largest construction market,
In October 2012 Sany Heavy Industry’s president are struggling as the slowdown saps investment growth
Xiang Wenbo predicted a “golden age” of development in to 10-year lows. Falling profits have spurred firms to
2013, while Caterpillar also predicted increased stimulus cut production or seek new clients” (Sweeney and
spending in China over the course of the coming year Chiang 2012).
and both Swiss oil and gas infrastructure supplier ABB
and French firm Schneider reported that orders from As a result, Caterpillar began to export Chinese-made
China for machinery had stabilized in late 2012. Notably, machinery to the Middle East and Africa, Hitachi “slashed
however, Schnieder’s finance chief cautioned that “We do production at its excavator-making plant in eastern China”
not know when it will come. I’m certainly not pointing and “Shares in China heavyweight Sany Heavy Industry,
216
