Going gets tougher for China's machinery makers

Excavators made by the Chinese machinery maker XCMG Group are ready to be shipped to Port Vitoria in Brazil. (Photo: Wang Chun/For China Daily)

China's machinery manufacturers are planning to increase exports as a slowing domestic economy crimps demand at home, industry experts said.

At the same time, some companies are also aggressively expanding their overseas presence with mergers and acquisitions, they said. According to data provided by the China Machinery Industry Federation, the machinery sector reported a record trade surplus of $79.1 billion in 2014.

Private machinery companies were the mainstay of the exports from China, shipping products worth $148.9 billion to foreign markets in 2014, a year-on-year growth of 14.35 percent, according to the federation. Exports by State-owned companies stood at about $47.7 billion during the same period. Exports by joint ventures in China took about half share of the total exports.

Total exports by the industry stood at $402.3 billion in 2014, up 8 percent, while imports rose 8.2 percent to $323.2 billion.

Cai Weici, a senior adviser at the federation, said private companies have better incentive for tapping the overseas market and despite the weak domestic market, have managed to fare well.

Private machinery companies recorded total revenue of 12.7 trillion yuan ($2.03 trillion) last year, accounting for 57.3 percent of the total industry revenue.

"Given the severe overcapacity in the domestic machinery market, boosting exports is the logical long-term choice for companies," Cai said. "It also demonstrates that China's equipment products are becoming competitive in the global market."

While domestic companies are looking at overseas markets, some foreign companies have adopted a dual-brand strategy, which has helped them to be more localized in China.

Martin Weissburg, president of Volvo CE, said the "going global" strategy is not a new trend for the company as SDLG products have already been exported to global markets through Volvo CE's global marketing network for several years.

Cai said Chinese companies have performed better under the dual-brand strategy, which is a good option for growth.