China Expected to Grab Second Place in Global Construction Machinery Market

China Expected to Grab Second Place in Global Construction Machinery Market

Heavy machinery firms in China are set to lead the country's next wave of exports as its manufacturers move up the value chain and as Chinese brands forge further into global markets, a new report from The Economist Intelligence Unit has found.

China's share of the global $153 billion construction equipment export market reached 10.2% in 2010, and is likely this year to surpass those of Germany and Japan, with shares of 11.5% and 10.8%, respectively. The U.S. leads the market with a 15.7% share.

Growth in China's technology and capital-intensive exports is being driven by increasingly close ties with countries that are not part of the Organisation for Economic Co-operation and Development (OECD), in particular with large emerging markets such as Brazil, Russia and India. By early 2012, developing countries will account for more than half of China's exports in this sector.

China's growing share of the equipment market corresponds to shrinking sales by Western countries in emerging markets, with those of the U.S. in steep decline.

Australia's imports of construction machinery parts from China surged from $3.1 million in 2001 to $142 million in 2010, and the trend is likely to continue as Chinese companies build their capacity for after-sales servicing in overseas markets.

Success in international markets of Chinese exporters is transforming the competitive landscape in global trade. In the mid-2000s, around 60% of China's exports were made by foreign-invested companies. That share will fall below 50% by early 2012, underscoring the emergence of domestic Chinese companies and brands in global commerce.

In the report, the Economist Intelligence Unit identifies 14 sectors in which OECD countries currently dominate global trade but which are threatened by Chinese competition.  They include shipbuilding, refrigerators/freezers, heating/cooling equipment, ball bearings, and loading machinery.

China's equipment export boom will also be a boon to its poorer inland regions, which have missed out on the rapid growth seen in coastal provinces for most of the past three decades. The bulk of output in heavy machinery industries is in non-coastal provinces such as Hunan.

Heavy Duty: China's Next Wave of Exports is available free of charge at www.eiu.com/chinaexports

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