Nearly three consecutive years of relative industry downturn have brought the construction machinery sector—after decades of smooth and rapid development—to an unprecedented trough. If, during the year or more from 2011 to 2012, the industry's slump could still be attributed to a failure to grasp the situation and to high expectations for the new year, then in 2013, although reports said the industry was slightly better than the previous year, the continued downturn still dealt an undeniable blow to the massive construction machinery industry. Weak market demand, overcapacity and fierce competition have forced the industry into deep reflection—summarizing in review and entering rationality in calm. This is what makes 2013 extraordinary; this is 2013's "special contribution" to the construction machinery industry.

What makes 2013 extraordinary is that it made the construction machinery industry realize that development does not always mean triumph all the way 

It should be said that China's construction machinery industry has gone through 62 years along with the founding, growth and development of New China. Keeping pace with the Republic's progress, especially over the 30 years since reform and opening up, China's construction machinery has become an important pillar industry of the country's machinery sector. In the domestic market, domestically produced construction machinery has become the main force, ending the history of imported equipment dominating the market. Moreover, China's construction machinery has entered the international market, with annual export value growing continuously. Over these 62 years, China's construction machinery has by and large enjoyed smooth sailing and earth-shaking change. However, it was precisely this smooth path that led the industry to neglect economic and market laws. When the international financial crisis struck, the state's 4 trillion yuan stimulus investment brought great benefits to the industry, yet the industry remained unaware of the situation and unworried about its development, racing to expand, and ultimately ran into a cold wind when national macroeconomic policy tightened and adjustments came suddenly. Even when the cold wind first arrived in 2011, the industry still believed it was temporary; only when no fundamental improvement was seen through 2013 did it realize that its development was out of step with the national macroeconomic situation, and understand that development is not always "invincible," but is mainly determined by the overall climate of national economic construction and development.

What makes 2013 extraordinary is that it made the construction machinery industry realize that development is not won by production capacity alone

At present, China's construction machinery industry is at an important turning point. On the one hand, national infrastructure construction, driven by the state's policy of expanding domestic demand, has stimulated the development of the domestic construction machinery market; on the other hand, the smooth development of China's construction machinery industry led enterprises to neglect innovation and upgrading, all busy increasing production input. Ever-growing capacity expansion, plus the entry of foreign enterprises, resulted in severe overcapacity and unprecedentedly fierce competition in China's construction machinery industry. It also triggered problems such as identical product technologies, blind development, low-level duplication and vicious price competition. Overcapacity is particularly reflected in white-hot sales competition: to meet targets, manufacturers lower thresholds and disregard customer credit, leading to malicious defaulters lacking integrity, rising accounts receivable, and a crisis of funds, especially cash flow. None of this would have occurred if capacity were not severely excessive but rather in short supply. Throughout 2013, the industry continued to suffer the hardship and confusion brought by overcapacity, making it deeply feel the pain of blind capacity expansion: constrained by technology and market demand, the larger the capacity for products—especially mid- and low-end products—the worse the situation.

What makes 2013 extraordinary is that it made the construction machinery industry realize that development depends on quality and competence  

It should be said that the rapid market changes of the past two years have had a profound impact on the industry's development. Severe overcapacity has brought major difficulties to operations, causing rising product inventory, tight funds, widespread declines in profitability and an industry downturn. This situation forced the industry to calm down and engage in serious rational thinking and strategic readjustment. After decades of rapid development, especially the last ten years, China's construction machinery industry has rapidly strengthened its capabilities in capital, technology and talent, but the cold setback shows that the industry as a whole is still immature, with insufficient experience and products that are not yet high-end enough, and there remains a certain gap compared with construction machinery powers. There are still major deficiencies in the ability to cope with risks and withstand storms, and in self-improvement mechanisms. The experience of persistently poor market conditions in 2013 undoubtedly taught us a profound lesson: the fundamental development of the industry lies not in quantitative expansion but in qualitative breakthrough—the comprehensive improvement of the industry's intrinsic quality and competence.

In short, what makes 2013 extraordinary is that it made the construction machinery industry rationally realize from then on: how enterprises should strengthen internal capabilities, enhance competence and tackle the high end; how to build century-old brands in China's construction machinery industry and build internationalized high-quality enterprises—these are important tasks for a considerable period to come. Under the overall environment in which national economic transformation for quality improvement and seeking progress while maintaining stability have become the established trend, and with the possibility of major ups and downs in the construction machinery industry becoming increasingly small, we must grasp the overall development situation, always adhere to the sustainable development strategy, focus on both domestic and international markets, strengthen independent innovation, and emphasize the improvement of capabilities and levels rather than merely pursuing superficial indicators. In this way, we can avoid the adverse effects of major fluctuations on the industry's sustainable development, occupy the industry high ground in international competition, and thereby ensure the long-term stable development of the construction machinery industry.

Editor: Wu Yue