Business Week: China's export machinery to the high-end

Source: Business Week

Sany Group, a construction machinery manufacturer based in Hunan, plans to conquer the world. Workers in blue overalls and yellow hard work caps on giant mobile hydraulic cranes and concreteMixer trucksIn a nearby office, President Tang Xiuguo was talking about the Sany plant in Brazil, India and the United States, as well as the imminent completion of the acquisition of Germany's Putzmeister Maschinenbau Co., Ltd., which will cost $475 million. Don, one of the four founders of the 22-year-old company, intends to increase the company's overseas sales from about 5% of the company's current revenue to 20% within five years. The company is on track to reach $16 billion in sales this year.

■The share of heavy industry exports has risen sharply

The phrase "Made in China" conjures up images of cheap shoes, plastic toys and electronics assembled in Foxconn's huge factories. China has built a strong export industry based on light industry and electronic assembly, with an annual growth rate of 17% over the past 30 years, but this is rapidly changing. Rising labor costs (which have increased by 15% annually since 2005) and currency appreciation have put new pressure on cheap manufacturing patterns across China, leading to the closure or relocation of textile, footwear and apparel factories to Vietnam, Cambodia and Bangladesh. "China's share of the world's low-end exports is starting to decline," the UK-based firm Capital Economics' March 28 research paper wrote. This reflects the fact that Chinese manufacturers are turning to more profitable industries rather than losing out on the competition. ”
For example, Chinese-made vessels dominate the global market, with a market share of 41 percent last year, far outpacing South Korea and Japan, according to Clarkson Shipping, a London-based shipping services company. Data from the United Nations and the World Trade Organization's Joint International Trade Center for Machinery also shows that China's global market share in railway locomotives and trains, machinery and industrial boilers has also increased significantly. In terms of construction machinery owned by Sany Group, three Chinese companies, including Sany, have ranked among the top 10 in the world. Many new exporters produce in the Chinese mainland rather than along the coast.
Overall, heavy industry — machinery accounts for about two-thirds of it — has risen from 29 percent in 2001 to 38.7 percent last year, surpassing light industry and electronics, according to Beijing-based Longzhou Economic Consulting. Andrew Batson, the company's head of research, said: "They're making different products that are more technical and can make more money. He estimates that by 2020, the new industry could help China increase its share of global exports from the current 10 percent to 15 percent. The typical Chinese exporter is now no longer a shoe factory in Guangdong, but a manufacturer of some kind of equipment or machinery. ”

■The main target is developing countries

While Europe, which remains a market for China's 5655 exports, struggles to cope with its debt crisis, Chinese machinery manufacturers are targeting India, South America and the Middle East. Last year, Europe, the United States and Japan accounted for 48 percent of China's total exports, down from 56.1 percent in 2003, while developing countries accounted for the majority, said Louis Ko, an economist at Hong Kong's Jinglun Institute of International Economics. Tang of Sany Group said: "We have an advantage because the level of our technology and products is more suitable for these countries. And our prices are slightly lower than other international brands. ”
While China's new manufacturers are not yet competing in the developed market, they are already challenging Caterpillar Inc., Siemens, General Electric and other established equipment makers in places like South America and Russia. China's construction machinery industry will soon overtake Japan and Germany to become the world's second-largest exporter after the United States.
With Sany's overseas expansion, it intends to improve the quality of its products in order to achieve the quality of its newly acquired Putzmeister Machinery Company.