VDMA China Report – Construction machinery industry

In November 2008 the Construction Equipment and Building Material Machinery Association of VDMA, the German Engineering Federation, in a survey from the VDMA China Liaison Office covered the financial situation on ongoing projects and future developments in China. In the following, selected contents of this report are presented.
 
1   Financial situation 2008
Statistics published by the National Bureau of Statistics of ­China on November 14th, 2008 show that China’s investment in fixed assets in the urban area was 1131.89 billion Euro in the first ten months. This is equivalent to a year-on-year rise of 27.2  % and up 0.3  % over the same period last year. As a main impetus for economic growth, the nominal investment range of increase this year is the same as last year, even showing a slight rise. In consideration of the increasing range of investment goods in the same period, the actual investment growth rate in this year is less than last year. Since the Producer Price Index in October fell substantially, however, the impact of future prices of investment goods on the actual investment growth rate will be alleviated.
 
Recently, China has announced new policies to expand domestic demand and thus, this large-scale investment plan will boost the increase in investment. Statistics show that, in the first ten months, the investment in state-owned and state-controlled enterprises will show a year-on-year rise of 21.3  %, the investment of real estate enterprises is up 24.6  %. The investment by the central government will increase by 28.7 % and that of local projects by 27.1 %. The investments in primary industry, secondary industry and tertiary industry respectively will rise by 61.8  %, 30.0  % and 24.3  %.
 
From the point of view of the industrial sectors, the investment in the coal mining- and washing industry shows a year-on-year rise of 41 %, that of power and thermal production and supply industry is up 16.0  %, that of the petroleum and natural gas exploitation industry is up 34.4  %, that of railway transport is up 39.8  %, that of the non-metallic mineral mining and manufactured goods industry is up 48.6  %, that of the ferrous metal mining, refining and extrusion industry is up 31.4  %, that of non-ferrous metal mining, refining and extrusion is up 43.0  %. According to official registration, the investments by domestic-funded enterprises show a year-on-year rise of 28.3  %, investments by Hong Kong, Macao and Taiwan enterprises and ­foreign enterprises respectively show a rise by 19.7 % and 17.2  %.
 
From the point of view of the construction industry and newly-commenced projects, projects under construction show a rise of 24 257 units and the planned gross investment in these projects is up 19.2  % year on year. Newly-commenced projects increased by 16997 units year on year and the gross investment in these projects is up 3.2  %. Viewed from situations of available capital, the available capital for urban investments shows a year-on-year rise of 22.3  %. The domestic loan rose by 14.5  %, the use of foreign capital rose by 5.8  % and the self-raised fund rose by 33.2  %.

2    China’s new policies to strengthen
infrastructure construction
2.1 Expansion of the domestic demand
Wen Jiabao, Premier of the State Council, chaired the executive meeting of the State Council and confirmed ten measures for expanding domestic demand and promoting economic recovery on 05.11. 2008. Measures concerning investment in the fixed assets include speeding up the construction of indemnificatory comfortable housing projects, speeding up the construction of rural infrastructure, speeding up the construction of railways, highways and airports, speeding up the development of medical hygiene and cultural education, strengthening the development of an ecological environment, speeding up independent ­innovation and structural adjustment and speeding up the reconstruction of earthquake-stricken areas. Other measures include increasing the incomes of urban and rural residents, a complete reform of VAT transformation in all industries and reinforcing financial support for economic growth. Preliminary estimates state that China is to make an investment of about 452.5 billion € for the engineering construction mentioned by 2010.
 
2.2 Investment in the transportation sector
The national investment in highway construction (including expressway) is estimated to reach 237.6 billion € in accordance with original Planning of Highway and Waterway Transportation during the National 11th Five Year Plan and medium and long-term plan of the transportation industry. The average annual investment is about 15.8 billion € up to 2010, reaching about 11.3 billion € from 2010 to 2020. A 565.8 billion € plan is formed by adding more than 237.6 billion € based on ensuring that the original investment could be made on schedule or ahead of schedule. This means that not only the original plan could be implemented ahead of schedule, but also domestic demand could be stimulated quickly by means of additional investment.
 
In principle, these infrastructure investments could take effect immediately. At a National Transport Meeting, Li Shenglin, Minister of Transport, indicated that the Ministry of Transport will make efforts to fulfil the mission of “11.3 billion € in five years” during the period of “The 11th Five Year Plan”. Basically this should ensure that there are highways in all villages and towns, as well as designated villages, all over the country and that there are asphalt (cement) roads in 95  % of the villages and towns and 80  % of the designated villages, basically forming the skeleton of a national expressway network, completely finalizing the construction of five vertical and seven horizontal national trunk roads and inter-provincial highways in the western region.
 
According to schedule by 2010, the highway mileage all over the country will total 2 300 000 km, traffic mileage of expressways all over the country will reach 65 000 km, secondary highway mileage and that over the secondary level will reach 450 000 km, and highway mileage in counties and villages will reach 1 800 000 km. Insiders disclose that these goals will be achieved ahead of schedule.
 
2.3 Investment in the construction of railways
According to the Ministry of Railways, China plans to invest 69.65 billion € in railway construction in 2009. Before the State Council’s decision of investing 452.6 billion € in expanding domestic demand, the predictable construction investment scale of the Shanghai Railway Administration up to 2012 was at least 24 billion € with an average annual investment of
4.8 billion €. The Ministry of Railways noted that the construction investment scale of the eastern China railway in 2009 will be higher than estimated. As one of the important projects of eastern China railway construction, the Shanghai-Hangzhou passenger railway line has been officially approved, and construction is expected to start in 2009.
 
2.4 Construction of six subway lines in Beijing
The Beijing Track Transportation Construction Corp. has disclosed that the program schedule and layout design of each of the subway lines in Beijing will again be carried out according to opinions on accelerating track transportation construction of the Beijing Municipal People’s Government. According to the new scheme, the total Beijing subway transport mileage will
be extended to 300 km in 2010, to 400 km in 2012, and to
561 km in 2015.
 
3    Selected company News
Terex Changzhou production base is being constructed
On September 20, 2008, the commencement of the construction ceremony of the US Terex Corporation Changzhou production base was held in Changzhou. The Changzhou plant is located to the northwest of Shanghai. The Changzhou National High-Tech District was chosen as its site due to its capacity for further expansion. In the future, the site will become a Terex Group Manufacturing Park manufacturing a series of products of the Genie brand.
 
Caterpillar headquarter for the western region
of China set up in Chengdu
Caterpillar (China) Investment Co., Ltd. formally sets up its headquarter for the western region of China in Chengdu. The choice of Chengdu is attributed to the consideration of Chengdu from the aspect of stategic economic development.
 
Sany Group has established a manufacturing base in Zhejiang
After the Sany Group Co., Ltd. had signed an agreement with the  Wuxing District Government in Huzhou the construction machinery manufacturing base of the Sany Group has been formally established in the new zone to the east of Wuxing. The first-stage project of the Wuxing construction machinery manufacturing base of Sany Heavy Industry Co., Ltd. covers an area of 1.33 million m2. The main products are an SCC series crawler crane, and a mining auto-unloading vehicle and the gross investment will reach 860 million €.
 
Establishment of TCM (Anhui) Machinery Co., Ltd.
The works of TCM (Anhui) Machinery Co., Ltd. was completed and put into production in the Hefei Economic and Technological Development Zone. The TCM (Anhui) Machinery Co., Ltd. was established by the joint contribution of four Japanese companies, i. e. TCM Co., Ltd., Hitachi Construction Machinery Co., Ltd., New Casting Co., Ltd. and Western Japan Trading Co., Ltd. Its registered capital is about 23 million € and the gross investment is about 40 million €.
 
Hyundai Heavy Industries plans to invest 1.48 billion €
in China
On 2.7.2008, Jong-Jin Kim, President of Hyundai Heavy Industries (China) stated that Hyundai Heavy Industries will continue its investment in China for the next five years in order that the investment will be able to reach 1.48 billion €. While vigorously developing the market and realizing plural management, Hyundai Heavy Industries will continue the expansion of the existing construction equipment business and plans to establish a new construction equipment enterprise in East China to develop new construction equipment and seek an appropriate location in China’s western region.
 
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