As is well known, in the past two years, the situation of China's construction machinery industry has not been very stable. Let us review 2012. Through the 2012 annual reports of several construction machinery manufacturers, we can find that both net profits and operating revenues showed a year-on-year decline. According to statistics from the China Construction Machinery Association, the overall sales revenue of 13 major domestic enterprises in 2012 was 369.86 billion yuan, down 3.68% from 2011; profits decreased by 22.343 billion yuan, a drop of 34.1%. More seriously, the bank interest of the 13 major enterprises increased by 55.38% year-on-year in 2012, and the total accounts receivable by the end of 2012 was 91 billion yuan, up 61.27% from 2011. Mr. Qi Jun, President of the China Construction Machinery Association, pointed out that "the actual default rate of credit sales in the construction machinery industry in 2012 has reached 20%-30%."

It seems that high accounts receivable have become a major problem that major enterprises in the industry need to face. In 2013, various policies favorable to construction machinery were introduced, such as the urbanization strategy established at the Two Sessions at the beginning of the year and the affirmation of the market's role and the main theme of construction at the Third Plenary Session of the 18th CPC Central Committee at the end of the year. These have given us a glimpse of hope for the industry. But the reality is cruel. Although the monthly sales decline of products gradually narrowed from January to November 2013, the industry continued its previous downturn throughout 2013. Some industry insiders predict that the construction machinery industry will enter a period of low-speed growth in the next 2-3 years and will slow down further in the medium and long term. Based on the 3-4 year repayment period of the credit sales model, the industry's risks will appear in the second half of next year, and 2014-2015 will be the highest risk period.

    From this perspective, risk control has become even more important, and it has also become an important issue for construction machinery enterprises to achieve sustainable development.Explore the causes of industry risks; only targeted measures can be effective

    What we have discussed above is the severe situation currently faced by the construction machinery industry. Next, we will carefully explore the causes of industry risks. Only by understanding their origins and development can we straighten out various relationships and key links from the source, take targeted measures, and fundamentally solve the problems.

    In the past two years, we have often seen news in newspapers and on the Internet that so-and-so removed the GPS positioning system from a construction machine purchased in installments to evade the installment payments he should have borne. Regardless of the legal penalties and economic compensation such actions will bring, let us look at the event itself: why have such cases frequently occurred in the construction machinery field in recent years? Whose fault is this? Such cases have prompted the author to think more deeply. How could the so-and-so in the case easily enter the construction machinery industry? Was he originally a practitioner in this industry? Did he have a professional background in construction machinery? I think not. What really allowed him to enter this industry was the "extremely low down payment." We all know that construction machinery is a highly specialized field, and the prices of machinery products are relatively high. In the past, this was a field not often accessed by ordinary people. However, starting from the second half of 2011, China's construction machinery industry gradually stopped its high-speed growth after the previous "golden decade." Due to insufficient project starts and continued sluggish market demand, the industry's downturn has now spread to all links of the entire industrial chain.

    The natural laws of market operation tell us that when market space stops expanding and the industry's originally huge production capacity cannot be effectively channeled, industry competition will intensify unprecedentedly. So manufacturers began to resort to any means to seize limited market share. As a result, merchants in the construction machinery field launched crazy promotions in turn, with down payments reduced to 20%, 10%, and even "zero down payment." As for purchase gifts, they kept escalating. Today, buying a machine and getting a car or housing as a gift is no longer new. I think anyone with three to four years of experience in construction machinery must still remember the craziness of "zero down payment" at that time!

    The price of construction machinery products dropped to the lowest, which meant the entry threshold for the construction machinery industry was also set at the lowest. Previously, one had to struggle at the grassroots level in this field for several years before daring to carefully purchase equipment and enter the industry. Now, one can enter with "zero experience and zero down payment." As a result, many people, encouraged by manufacturer sales staff, blindly entered the industry, only to feel after entering that the market situation this year was continuously sluggish. With no engineering projects to take on, naturally there was no expected "considerable income," and later they could not repay the machine purchase installments on time. Many agents, through credit sales, conveyed incorrect market information to upstream manufacturers, so enterprises would continue to expand production capacity. But eventually, the truth comes out. When enterprises ultimately cannot secure customer payments, the capital chain of manufacturing enterprises will tighten, various investments will shrink accordingly, and ultimately the competitiveness of enterprises will decline.

    This is truly a vicious cycle. Who ultimately suffers from such vicious competition? The buyers? Or the enterprises themselves? The author believes that in today's sluggish market, both buyers and enterprises are victims, but the biggest victim should be the entire construction machinery industry.

    It seems that risks come not only from customers but also from enterprises and agents. For customers, zero down payment has lowered the entry threshold. Enterprises and agents have not conducted objective, fair, and effective assessments of their qualifications, and agents have not conveyed the true sales situation to upstream manufacturers, ultimately causing misjudgments by enterprises. There is also no good mechanism at the enterprise level; they have not sent anyone to seriously verify the true situation of customers and agents, and ultimately enterprises must drink this bitter cup.

    Having found the internal root causes of industry risks, we can take targeted measures. To quickly reverse the current situation, all enterprises in the construction machinery industry need to earnestly carry out various assessment tasks and firmly and resolutely implement them.