In 2017, China's construction machinery industry is ushering in considerable changes, and the momentum of an early spring in February is a foregone conclusion. The industry generally believes that this year will be a peak for the commencement of large-scale projects, and the next two years should be the industry's investment peak. A substantial profit growth for the construction machinery industry in 2017 is a high-probability event.

"13th Five-Year Plan" projects commence in a concentrated manner in the new year

According to national plans such as the Medium- and Long-Term Railway Network Plan and the Three-Year Action Plan for Major Transportation Infrastructure Construction, China will focus on advancing transportation infrastructure projects. In 2017, infrastructure investment growth will remain at around 20%, with the overall scale expected to be around 16 trillion yuan.

Generally speaking, the rough path for advancing "13th Five-Year Plan" projects is that 2016 was the year of signing contracts, and 2017 is the year of implementation and commencement. After a long period of preliminary preparation and adjustment, projects across the country are moving from planning to action, bringing more substantive contributions to infrastructure and the economy. In a sense, the implementation of large-scale construction projects will inevitably absorb the problem of overcapacity in domestic construction machinery, thereby also playing a considerable role in promoting the development of the construction machinery industry in 2017.

The industry will usher in a "replacement wave"

The elimination cycle for construction machinery equipment is about 8 years. Since the peak in equipment sales in 2008, a large amount of equipment has needed replacement. The industry estimates that in 2017, among the market stock of more than 7 million units of construction machinery, about 2.4 million old units will be gradually phased out. This will free up effective market space for new construction machinery sales and play a positive role in driving market demand for construction machinery.

According to the relevant provisions of GB20891—2014, starting from April 1, 2016, industry enterprises completely stopped selling construction machinery equipped with National Stage II diesel engines. The mandatory implementation of the National Stage III standard will also cause a large number of existing equipment to exit use, freeing up space for new equipment. As the market effects of this policy begin to appear, in 2017 the construction machinery industry will usher in a wave of equipment replacement.

Service quality becomes the industry watershed

With the enhancement of consumer awareness of rights protection, consumers are paying more attention to the after-sales service quality of products and equipment.

The launch of major projects will greatly increase equipment utilization rates, and after-sales issues such as maintenance of old equipment and running-in of newly purchased equipment will see a wave of growth. In addition to the quality of the products themselves, differentiated and high-quality services will become the biggest watershed determining industry brand reputation in 2017.

The "Belt and Road" will further accelerate

According to data released by industry institutions, the internationalization process of China's construction machinery industry is still at a basic stage, and very few enterprises have export sales accounting for 30% of total sales.

A series of factors, including the conclusion of the U.S. election, domestic policy support, and the depreciation of the renminbi, will drive further acceleration of the "Belt and Road," more major projects will be implemented, and the construction machinery industry will have development prospects to look forward to.

The overall operating environment of the industry improves significantly

After the ebb of the 4 trillion yuan investment, the construction machinery industry slid all the way down. At the peak of the excavator industry, there were more than 100 enterprises, and now only more than 20 remain. A closer study reveals that the companies that fell were all those that rushed in to join the excitement back then, without deeply cultivating the market, without complete products, mature marketing systems, and deep customer bases. Falling in this way is very consistent with the competitive mechanism of survival of the fittest.

After experiencing the baptism of the ebb, the remaining enterprises and customers are all high-quality. Customers with procurement needs all have real demand, and enterprises also pay more attention to payment collection and cash flow when selling. All of these have left a relatively healthy environment for this year's industry recovery.