THE TIMES ARE CHANGING

China has overseen rapid development, which has led to many of the country’s construction contractors and OEMs grow into world-leading companies. With most of that development now complete the future is likely one of slower growth but with a focus on technology, writes Andy Brown

China has by far the largest high-speed rail network in the world, but most of the needed development has now taken place

PHOTO: ADOBE STOCK

The Chinese construction industry – both in terms of the infrastructure of the country and the equipment manufacturers and contractors – has developed rapidly in the last 30 years. This development has led to contractors and OEMs seeing yearon-year growth that was often in the double digitals, as was the case with the country’s Gross Domestic Product (GDP).

The country’s average annual GDP from 1989 until 2024 was 8.86%, reaching an alltime high of 18.70% in the first quarter of 2021. Quite clearly, this level of growth is not sustainable and, as the country transitions from an emerging economy into an advanced one, growth has understandably slowed.

With most of the country’s major infrastructure projects now built and the property sector enduring very challenging times, the Chinese construction sector has entered a new age – one where growth is slower, but the declines are also less steep and one in which attention turns firmly to new technology and sustainable solutions.

Zoomlion’s co-president, Wang Yongxiang, makes the point that in the construction sector in general – and arguably China in particular – cycles of very high sales followed by deep declines in sales are common, so the fact that the Chinese market has been on a downward trajectory in the last few years is nothing to be too concerned with.

“Zoomlion has been established for 32 years, so we already experienced a couple of up and down market cycles. So, we are very comfortable facing this challenge,” he comments.

It is certainly true that China has been a very cyclical market, but it may be that the extreme nature of the highs and lows becomes less pronounced. “I think in the future, I believe that the next five years the market will keep growing slowly, not quickly. I believe too quick is dangerous for us,” comments Chairman Zeng from LiuGong.

“The Chinese economy structures change; the demand for the equipment has diversified.

For example, the market demands more and more small equipment,” he says, before adding, “The market in general in the next five to 10 years will be more like the European market.”

Chairman Zeng from LiuGong

Mr Yu HongFu, president at Sany agrees with this assessment, saying, “I expect growth to be steady and mild, because of the real estate industry and in infrastructures the demand isn’t as high as before. So mild growth.” He adds with a laugh that, “It’s very difficult to go back to 2016 when the market kind of doubles.”

As well as more gradual growth, another change in the Chinese construction sector – and the country as a whole – has been the increasing shift of the importance of sustainability.

“The mindset of the Chinese people is also changing. So right now, people believe that the standard of living in China does not solely rely on the growth of GDP, but also the environment. The Chinese government asserts great importance on the rehabilitation of the environment in China,” says Mr Yu from Sany. “This is a very big potential growth point for the Chinese economy. We want a greener China in the future and people in China have a more friendly relationship with nature. So, especially in the rural parts of China, the government has brought up the concept of water recycling and emphasises decarbonisation. The rehabilitation of contaminated water source resources is a huge project, the rehabilitation of land. All these projects cannot be done without construction machines.”

Tariffs and trade wars

Both the US and Europe have announced tariffs on Chinese products – for instance the European Union has raised tariffs on Chinese electric vehicles with the new tariffs on individual manufacturers ranging from 17.4% to 37.6%, which is on top of a 10% duty that was already in place for all electric cars imported from China.

Sany’s factory – the production facilities of the larger OEMs in China are among the best in the world

ZOOMLION’S FACTORY OF THE FUTURE

Based in Changsha, the capital and the largest city of Hunan Province of China, sits Zoomlion’s factory and offices. The OEM – which has a large product line consisting of approximately 100 products in 18 categories – told International Construction that they were inspired to create an ultra modern factory after a visit to Germany.

“Our original plan was inspired by the Bosch factory headquarter in Germany when we visited there in 2018. We experienced that facility and talked to their management and we felt inspired and wanted to have such a factory representing the construction sector,” says Wang Yongxiang, Zoomlion co-president.

The excavator factory is almost completely autonomous – robots carry out the work and even transfer parts and whatever is needed from sector to sector. The lack of humans in the building is striking. The co-president says that over the last 20 years technology has developed in the construction sector and they wanted to harness this into a factory to, “transfer the technology into productivity.”

He adds that, “We believe the factory will be the platform to make these things happen, to increase productivity. We have also seen our material utilization increase by 15% and our labour costs decrease by 30-40%.”

The OEM says that approximately 50% of its sales are in China and 50% are in overseas markets, and that the ultra-modern factory helps to ensure the highest standards of quality that are expected, especially in more demanding markets such as America and Europe.

At the moment the excavator factory is the most modern, but in the future Zoomlion says that it sees all of its facilities following this model.

Zoomlion’s co-president, Wang Yongxiang

There are concerns about what tariffs might mean in the future for electric construction equipment and come on the back of the EU’s proposed tariffs on Mobile Elevated Work Platforms (MEWPs) produced in China, following its anti-dumping investigation. These tariffs range from 56.1% to 23.6% and numerous Chinese manufacturers are appealing the proposed tariffs.

In May, US President Joe Biden announced tariffs on US$18 billion of imports from China on products such as steel and aluminium, semi conductors, electric vehicles and batteries and battery components.

Giving his opinion on the situation Chairman Zeng commented that, “If you think about it, the European and North American markets are very mature, very stable. And the game is always the same. So, if you have a newcomer, everybody is surprised. You have a different type of equipment, policy, everything like that, we try to penetrate the territory. I fully understand that. But you know, Chinese manufacturing today has good quality and with lots of innovation.”

Commenting on the situation the Sany president, Mr Yu, says, “Barriers like tariffs is a big concern for us. But we believe if we realise our ultimate goal – to be an organic part of the local industry – then the tariffs won’t be a problem anymore. We do not expect more, we just want to be treated equally as the local companies. Of course, at the same time, we want to bring more value to our local clients.” One of China’s biggest producers of access equipment is Sinoboom, and the company was hit with the largest tariff that the EU gave, at 56.1%. Talking to International Construction, Bill Zheng, legal director at the company commented that, “The result is really frustrating – we are disappointed about the result.” He also mentioned that one of the reasons for the high tariff was due to a “technical issue” with how the EU cost calculation was made and that the company’s European subsidiary, Netherland-based Sinoboom BV, has been included in the calculations.

In the latest Access M20 listing published by Access International magazine Sinoboom was ranked as the world’s tenth biggest MEWP manufacturer

“In the calculation of this, they deduct the cost of our European company, which is Sinoboom BV, and they envision some profits, which means our price compared to our European competitors was deducted by a considerable amount, which enlarged the gap when the calculations were made,” said Zheng. “But this is the rule. We cannot agree with the decision, but we respect this is the rule.” He added that part of the reason costs were so low in China was due to good management of the supply chain.

Sector betting on electric

There’s no doubt that China has bet on electric power and that this policy has been decided by the government and permeated into all sectors, with construction a key example. The government has backed up its vision – it has recently been reported that the country’s electricity grid is set for record investment of more than US$800 billion in the next six years to overcome strains on the energy system as the country makes a rapid shift to renewable sources.

Data from research group Rystad Energy suggests that China’s forecast capital expenditure is set to rise from about US$102 billion this year to US$157 billion by 2030 in power grid projects.

LiuGong’s Chairman Zeng says that electric power is now a “very mature technology” and that they have a range of electric products available, such as excavators, wheeled loaders and rollers. He adds that electric equipment can save 50% of the operation cost and, in the near future, in China electric equipment will account for about 15% of the whole market.

Mr Yu HongFu, President, Sany

Sany’s Yu HongFu says that the demand for more sustainable products is there, and that China has the supply chain and expertise to deliver on this. “China has a very comprehensive industrial chain on electric products. The Chinese companies are very competitive, both in technology, technological innovation, and in bringing down cost.

“Chinese electricity infrastructure is one of the leading countries in the world. Demand plus ability plus electricity infrastructure. This triangle will make sure that the Chinese companies will be a leading force in the electrification of equipment.”

He adds that the cost of electric equipment is decreasing, and that OEMs are profitable on electric equipment with government subsidiaries and the lower running costs of electric equipment is a major advantage. “A customer can collect his investment on a unit of electric equipment within around 12 months to 18 months. So given these advantages, we believe the trend for electrification is inevitable in China.”

We believe if we realise our ultimate goal – to be an organic part of the local industry – then the tariffs won’t be a problem anymore.