Overseas equipment procurement and demand are growing in emerging countries

　　Thanks to its special geographical location and increasingly close exchanges between Asia and Europe, Turkey has become an important transportation hub connecting the two continents. To meet new needs, the Turkish government has announced that several world-class engineering projects will be launched in the coming years. For example, Istanbul will build the world's largest new airport (expected to reach a passenger capacity of 150 million trips per year once fully completed). The Turkish government has also recently announced that it will invest US$6 billion to launch a canal project connecting the Black Sea and the Aegean Sea.

　　India plans to increase its domestic infrastructure investment between 2012 and 2017, with estimated spending of US$1 trillion. As India's economic indicators have remained high in recent years while its domestic supporting construction and engineering-related manufacturing have developed relatively slowly, currently only about 28% of machinery in India can meet domestic market needs, and India's construction requires more involvement of overseas equipment. As a major construction machinery country neighboring India, China can not only provide cost-effective products but also enjoys a geographical advantage; leveraging this advantage, China can supply equipment to India in less than half the time required by Europe and the United States (from order to on-site commissioning).

　　As one of the BRIC countries, Brazil saw its government's annual infrastructure investment as a share of GDP fall from 3.6% to 1% over the past 30 years, causing Brazil's power (market section), port, transportation and livelihood construction to lag severely behind its own development speed. This situation has, on the one hand, constrained sustained economic development and, on the other hand, brought inconvenience to the lives of local people in Brazil. To change this situation, Brazil has set off a "infrastructure" boom. In 2012, total investment in various infrastructure projects reached US$480 billion, including US$232 billion in energy projects, US$140 billion in housing projects, US$52 billion in transportation projects, as well as key projects in other fields such as urban renewal and water quality improvement. In addition, as one of the world's most promising countries, Brazil's future market size is limitless (currently, Brazil's construction machinery market accounts for 3.5% of global sales of various products and as much as 40% in Latin America).

　　At present, although the total demand for construction machinery in emerging countries is still relatively limited, given their generally inadequate domestic infrastructure, demand for related supporting products will inevitably rise steadily in the future, while their domestic manufacturing industries will find it difficult to meet their own needs in a short time. Therefore, this will be a rare opportunity for Chinese construction machinery enterprises eager to break out of their difficulties.

　　The arduous overseas journey of China's construction machinery

　　In the past two years, after encountering an "ice age," construction machinery has never recovered its vitality. Along with repeated declines in construction machinery sales, voices of recovery have risen and fallen, but no true recovery has occurred. With the slowdown in domestic infrastructure project growth and the rejection of economic stimulus plans by relevant state departments, expanding overseas markets has become the only "way out" for construction machinery. However, due to various factors, the overseas path of China's construction machinery is also fraught with thorns.

　　From the perspective of the international environment and the domestic market, the foreign trade situation for construction machinery products is not optimistic. Recently, with the substantial appreciation of the RMB, China's construction machinery exports have been significantly impacted. RMB appreciation has subjected enterprises to a two-way squeeze on costs and profits, leading to a decline in export profits, dampening enterprises' enthusiasm for exports, and affecting the process of destocking construction machinery to some extent. On the other hand, RMB appreciation has also weakened the price advantage of "Made in China," reducing the competitiveness of Chinese construction machinery in overseas markets.

　　It is worth noting that in the export structure of construction machinery products in the first half of this year, two "divergences" appeared. First, exports of traditional low-tech products declined, while high-tech special equipment grew rapidly. Second, exports of parts and components fell, while exports of complete machines grew slightly. It can be said that these two "divergences" reflect the problems existing in the domestic construction machinery market: enterprises are keen on producing (or assembling) complete machines, which are higher-priced and seemingly more profitable, while neglecting the R&D and production of a wide variety of parts and components, especially core components. This will cause China's construction machinery product exports to remain in a low-price export situation for a considerable period. On the other hand, the rapid growth of high-tech special equipment not only affirms some enterprises' emphasis on R&D and efforts to master core technologies, but also points out a path of high-tech, differentiated competition for construction machinery product exports.