By Lily Wang

According to recent data released by the China Construction Machinery Association， based on the survey of 26 excavator manufacturers， about 23，700 excavators were sold in November 2022， up by 15.8% from the previous year and reaching new heights this year.

Among excavator sales， 14，400 were sold in China， up by 2.74%. This is the first positive growth since March.

As a barometer of the economy， the recovery of construction machinery data shows that the policies of stabilizing growth have been working. According to institutional analysis， the acceleration of infrastructural building and continuous easing of real estate regulation and control policies have led to improvement of the demand side. In addition， as the export of excavators continued to increase and the national standard switched， the sales of excavators have outperformed expectation. With further simulation of supporting policies for infrastructure and real estate industries and the continuous optimization of pandemic prevention policies， the construction machinery industry is expected to keep improving.

Emission Standard Switch Stimulates the Market

Since 2022， domestic construction engineering companies have faced huge market pressures. In the first half year， due to the falling number of infrastructural and real estate projects， and the spread of the pandemic， the construction machinery industry saw a big decrease in sales. In the second half year， with the promotion of the resumption of work and production in China， many projects reopened construction.

According to the CCTV Finance Excavator Index， in October， 2022， Chinas average equipment operating rate was 64.07%， up by 2.23 percentage points compared to Q3 of 2022. The cumulative workload of excavators reached 101 hours and 102.1 hours in September and October respectively， showing month-to-month increase.

Meng Wei， Spokesperson of National Reform and Development Commission， said recently that at then end of July 2022， the State Council increased financing support to key projects through policy-oriented financial instruments. Now the policyoriented capital of RMB 739.9 billion has been fully invested and most of the supported projects have started construction. Now many projects have made tangible progress.

The switch of national IV standard has also stimulated the market sales in November last year. According to the Technical Requirements for Pollutant Emission Control of Non-road Diesel Mobile Machinery issued by the Ministry of Ecology and Environment， from December 1， 2022， all construction machinery with the displacement of 560kW or less produced， imported and sold shall comply with the “National IV”standard， and enterprises cannot produce and sell “National III” construction machinery again.

November 2022 is the last month during which it is possible to sell National III construction machinery. The inventory level of main machinery manufacturers will have a huge impact on market sales for the month. In order to avoid punishment by regulatory authorities， construction machinery enterprises must sell all the “national III”inventories before December 1， 2022， which also boosted the sales volume of the industry.

A staff members from Sany Heavy Industry said， “Chinas excavator sales have been rising steadily. On the one hand， the government has issued a series of stable growth policies to boost the downstream demand of the construction machinery industry. Since late September of 2022， the downstream construction has significantly improved， even seeing the best situation of this year； on the other hand， the overseas sales volume has maintained a rapid growth trend， effectively offsetting the decline of domestic sales volume.”

Somebody in charge of XCMG said， “XCMG has been leader of China in terms of excavator sales for the last few months， with the market share of about 21.5%.”

Construction undergoes rapid growth

The meeting of the Political Bureau of the CPC Central Committee held on December 6， 2022， released a strong signal of stable growth. The meeting clarified that next year it is important to adhere to the principle of “stability first， progress in stability，” continue to implement positive fiscal policies and prudent monetary policies， strengthen coordination of various policies， optimize pandemic prevention and control measures， and form a joint force to promote high-quality development.

The issuance of local bonds and new special bonds reached a new high. As of December 5 of 2022， nearly RMB 7.3 trillion local bonds had been issued in the first 11 months of the year. Among them， the issuance of new special bonds exceeded RMB 4 trillion for the first time， reaching RMB 4.03 trillion and a new high in the past seven years.

Thanks to the issuance of local bonds， a number of major infrastructure projects are under rapid progress to achieve annual goals. According to agency estimates， more than 60% of the new special bonds in 2022 were invested in infrastructural projects， up 3 percentage points from the end of last year. According to the data released by the National Bureau of Statistics， infrastructural investment in the first 10 months of 2022 increased by 8.7% year on year， 0.1 percentage points higher than that in the first three quarters， and rebounded for six consecutive months.

Luo Zhiheng， chief economist of Yuekai Securities， said that it is expected that infrastructural investment will remain strong in 2023， with the growth rate to drop to 8.4% under a high base， but the average growth rate for two years will still be 10%. Infrastructural investment will be dominated by government departments and influenced by factors such as the willingness to stabilize growth， project reserves， sources of funds， and physical workload. In addition， under the background of economic downward pressure， there is still demand for stable growth； in terms of projects， there is still room for improvement in the field of infrastructure construction， and various regions have started reserve more projects； in terms of funds， the quota of some local government special bonds has been released in advance. It is estimated that the financial bond issuance and expenditure will start early in 2023. Monetary policy will help infrastructure investment through policy oriented development financial instruments； in terms of physical workload， there are many newly-started projects this year， and the construction will continue next year. Therefore the workload will be guaranteed.

Cinda Securities pointed out that it will be very likely that the infrastructural construction will keep the strong momentum till the end of the year， thanks to the various policy instruments. It is expected that the infrastructure growth rate will be around 11.7% this year. Infrastructure construction will remain strong next year， with the growth rate expected to reach about 10%. With the optimization of pandemic prevention and control measures， the performance of private investment in infrastructure will further improve. Even though there will not be as many incremental tools to support infrastructure as this year， the capital for infrastructure investment in the whole society may surpass the year 2022.

Accelerate overseas expansion

According to data from the China Construction Machinery Industry Association， since April 2021， the export of excavators has been growing fast. In November， 2022， a total of 9，282 excavators were exported， with a year-on-year growth of 44.4%， and the growth rate dropped compared with 65% this year. The decline in growth rate may be related to the slowing November export growth. At the same time， insiders also suggested that the actual export volume of excavators is still very large， and they have firm confidence in the future export situation of Chinas construction machinery.

“The export scale is getting closer to the domestic sales， even surpassing the domestic volume in some months of this year， reflecting the increasing competitiveness of Chinas excavators in the overseas market，” said the relevant person in charge of Sany Heavy Industry.

With the rapid growth of construction machinery export， the overseas revenue of Chinas listed construction machinery companies is also growing rapidly. Take Sany Heavy Industry as an example， in the first nine months of this year， the company achieved an international sales revenue of RMB 25.88 billion， up by 43.7% year on year. Also， Sany Heavy Industrys market share has also been increasing rapidly， having taken more than 8% of the world excavator market. In the United States， Britain， Italy and other major overseas excavator markets， Sanys sales revenue grew by more than 60%.

Liu Jiansen， Vice President of XCMG and general manager of XCMG Import and Export Corporation， said：“at present， XCMG has more than 300 dealers， more than 1，000 sales outlets， and 5，000 service and sales personnel around the world. This enables XCMG to possess strong global service and sales capabilities， a signal of real internationalization.”

The person in charge of Sany Heavy Industry said： “the internationalization strategy is one of the most important strategies of Sany Heavy Industry. In the past two or three years， the company has increased its efforts to expand the market in developed countries， established an international research institute， and developed products suitable for overseas markets. At the same time， the company has also strengthened efforts to build a supply chain system for overseas sales and service channels， brands， and accessories.”

Industry insiders believe that the current domestic construction machinery market is at the bottom stage， while the overseas market has become a new growth pole of the industry. The leading domestic construction machinery enterprises shall seize the opportunity and expand the overseas market， so that their global competitiveness is expected to further improve.