China's construction machinery
makers are opening banks, designing tractors and abandoning core business deals
in an effort to diversify and stay profitable as a sputtering economy brings a
sustained downturn to a once-booming market.
With domestic demand, government
investment and the housing market all weakening, growth in the world's
second-biggest economy slid to a 24-year low of 7.4 per cent last year. The head
of the central bank's research bureau says growth could slow again this year,
and all but one of the country's 30 provinces have cut their 2015 economic
targets. At Sany, which cut staff by about 18 per cent in 2013 as the downturn
started to bite, the firm's parent group is setting up a bank in partnership
with privately owned firms.
In a stock exchange filing, Sany
said it saw "huge growth potential" in banking, without disclosing details of
its plans.
"It will be another tough year for
construction machinery makers as the
growth of the country's fixed-asset investment continues to slow," said Shi
Yang, a senior consultant with industry intelligence firm Off-Highway
Research.
That is bad news for an industry
already burdened with chronic overcapacity. In 2013, Shi said, China alone had
enough plants to make 420,000 wheel loaders, used to move materials around
construction sites, nearly twice global demand of 240,000 for the year.
The machinery makers' response has
been to cast their net far and wide in an urgent search for new business.
Zoomlion, which warned in January its profit for last year might slump by
four-fifths, has added snow ploughs, fire-fighting vehicles and even farm
tractors and harvesters to its equipment portfolio. Encouraged to expand after
Beijing fired up a four trillion yuan stimulus package seven years ago to help
them beat the global financial crisis, manufacturers from Zoomlion Heavy
Industry Science & Technology to Sany Heavy Industry are stuck with a glut
of unsold equipment, factories they do not need and tumbling earnings.
Complicating the overcapacity
situation is a swathe of industry outsiders that spent money building
machinery-making plants in the years following Beijing's stimulus
package.
Wuliangye Group, the parent of
liquor maker Wuliangye Yibin, had halted production at a plant in Yibin, Sichuan
province, that could make 10,000 construction site excavators a year, a
Wuliangye Yibin executive said, adding that the firm was reviewing options for
the business
"We are now transforming into a
diversified manufacturer," Zoomlion spokesman Wang Xuhong said. The firm is
awaiting regulatory approval to get into the heavy-truck business.
"If we can make it, Zoomlion could
be five or six times as big in the future and won't be so vulnerable to a
downturn in any particular sector," Wang said.
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