Chinese construction machinery enterprises accelerate the layout of overseas markets

Recently, the 15th Russian International Construction Machinery Exhibition (CTT) took place in Moscow, drawing attention from major Chinese construction equipment manufacturers. Companies like Sany Heavy Industry, Zoomlion, Xugong, Liugong, and others showcased a wide range of products, generating significant interest from international buyers. According to preliminary data, Chinese firms attracted over 9,000 potential customers, with purchase intentions exceeding $100 million.

In recent years, as domestic costs have risen and profit margins have shrunk, many Chinese construction machinery companies have turned their focus toward overseas markets, seeking growth opportunities beyond China. This shift has helped them gain visibility on the global stage, showcasing what is now known as "China Power."

A major highlight at the CTT exhibition was the strong participation of Chinese firms, including over 150 companies such as Sany, Zoomlion, Xugong, and SINOMACH. These companies presented a diverse range of construction machinery, capturing the attention of industry professionals and investors alike.

Zoomlion, for instance, showcased its concrete machinery, cranes, and earthmoving equipment at this year’s event, marking its 10th consecutive participation in the exhibition. A company representative noted that compared to Western products, Chinese machinery offers high quality at competitive prices, backed by mature technology. This has made them popular in Russia, where they are widely used in infrastructure, energy, and transportation projects.

According to market analysis, the Russian construction sector has grown at an annual rate of 10% to 15% since 2000, significantly boosting demand for construction equipment. From 2013 to 2016, the market for construction machinery is expected to grow by around 12%, with 30% of imports coming from abroad. As a result, Chinese companies have been quick to capitalize on this opportunity.

In 2011, China exported $798 million worth of engineering machinery to Russia. By 2013, that figure had increased to $1.107 billion, reflecting the growing importance of the Russian market for Chinese firms.

Zhang Jianguo, a senior executive at Zoomlion, emphasized that the Russian market is highly receptive to Chinese products due to their cost-effectiveness and reliability. He also highlighted that these machines are primarily used for large-scale infrastructure projects across various sectors in Russia.

Su Zimeng, secretary general of the China Construction Machinery Industry Association, believes that the Russian market serves as a testing ground for Chinese companies. Successfully navigating this market could help them achieve even greater success in other international regions.

Beyond Russia, Chinese construction machinery firms are actively expanding into other global markets. With major players like Sany, Xugong, and Zoomlion making strategic acquisitions and partnerships, the industry is accelerating its integration into the global economy.

The domestic market has become increasingly challenging, with rising costs and shrinking profits pushing many companies to seek alternatives. According to the China Machinery Industry Federation, the annual profit growth of the machinery industry dropped from 55.6% in 2010 to 15.6% in 2013. This has led many firms to prioritize overseas expansion as a key strategy for long-term growth.

Leading companies like Sany Heavy Industry and Zoomlion have seen impressive results from their international efforts. In 2013, Sany's overseas sales reached 10.874 billion yuan, accounting for nearly 30% of total revenue. Zoomlion’s overseas sales also grew significantly, reaching 3.5 billion yuan, up 26.31% year-on-year.

These companies are targeting markets in North America, Southeast Asia, Africa, and South America. Zoomlion’s administrative head mentioned that 2014 would see strong demand from emerging economies like Russia, India, Vietnam, Brazil, and Africa. Companies with well-established international networks and strong innovation capabilities are likely to stand out in this competitive landscape.

Despite challenges, Chinese firms have made notable progress in the North American market. At the Las Vegas Construction Machinery Exhibition, Sany, Zoomlion, and Shanhe Intelligent made a strong return, with Zoomlion signing a $20 million contract with Global Cranes and Sany securing over $130 million in sales commitments.

During Premier Li Keqiang’s visit to four African countries, he emphasized the need for Chinese equipment to go global. His remarks on supporting Africa’s railway development were a big boost for Chinese construction machinery firms. For example, the China Civil Engineering Group signed a $13.122 billion contract for the Nigerian Coastal Railway Project, which will be built using Chinese standards.

Zhang Zongyan, president of China Railway Construction Co., Ltd., stated that this project would significantly boost the export of Chinese construction equipment, involving between $3 billion and $4 billion in machinery and equipment.

As competition intensifies in North America and Africa, Chinese firms are looking to expand further into South America, where there is substantial infrastructure demand. For instance, Shanghai Shibang Machinery recently secured an order of over 30 million yuan in the South American market.

South American countries like Brazil, the world’s sixth-largest economy, continue to invest heavily in infrastructure, driven by their rich natural resources and growing demand. A recent report estimated that four South American countries will invest $508 billion in infrastructure between 2012 and 2021, focusing on transportation, utilities, and urban development. This presents a valuable opportunity for Chinese construction machinery companies.

However, despite their progress, Chinese construction machinery still lags behind international competitors in some areas. Some products remain in the mid-to-lower end of the global market, and Chinese firms face challenges in competing with established multinational giants.

Cai Weici, a special adviser to the China Machinery Industry Federation, said that while entering the international market is difficult, Chinese companies must be well-prepared and take a steady approach. Although some still perceive Chinese products as low-cost and low-quality, this image is gradually changing. Many firms now offer advanced technology and high-quality products, though it takes time for global customers to recognize this.

Zoomlion is taking steps to enhance its international competitiveness by optimizing its overseas operations. The company plans to expand its manufacturing bases, strengthen information sharing, and improve logistics and service networks. By building a more robust international system, Zoomlion aims to better serve global customers and increase its presence in foreign markets.