Jun Jun, president of the China Construction Machinery Industry Association, revealed yesterday that after the explosive growth of the construction machinery industry in the first quarter, industry sales fell sharply in April and May. He attributed this to previous sales overdrafts and national macroeconomic controls.

In April sales fell after the construction machinery industry achieved sales growth of more than 50% in the first quarter. In April and May, sales volume fell sharply. Major construction machinery products including excavators, loaders, bulldozers, and cranes all experienced a decline of around 30% in April.

Among them, excavator sales volume in March hit a new high, in April the chain fell 38.79%; total volume of loaders in April fell 2.86% year-on-year, a decrease of 28.27% from the previous quarter; bulldozer sales in April increased by 1.19% year-on-year, a decrease of 32.81%.

Yan Jun disclosed the above information at the press conference of "2011 Global Construction Machinery Industry Conference". The conference was jointly sponsored by the China Construction Machinery Industry Association and the American Equipment Manufacturers Association, the Japan Construction Machinery Industry Association, and the Korea Construction Machinery Industry Association, aiming to enhance the international discourse power of the Chinese construction machinery industry and build a global industrial supply chain.

Secretary General Su Zimeng also revealed that the Ministry of Industry and Information Technology has already identified hydraulic valves, hydraulic pumps, and hydraulic motors as key breakthroughs for parts of construction machinery. He said that he encouraged the host companies to become the leading force in technological breakthroughs in key components.

Among the three major unfavorable factors, apart from the explosive growth in sales in the first quarter and the second quarter overdraft, the decline in state fixed asset investment and the increase in bank interest rates are also important reasons for the decline in sales volume of the construction machinery industry.

The impact of domestic economic adjustments on construction machinery has emerged. April's PMI was 52.9%, down 0.5% from the previous quarter. In general, the PMI index will continue to rise in March and April, but in March this year, the recovery of the PMI index was less than that of previous years. After a brief recovery in the previous month, it fell again in April, indicating that the economic growth is in the process of moderate correction. From January to April, the total planned investment for new projects started was 5,388.9 billion yuan, a year-on-year decrease of 1.1%. After the number of projects dropped sharply, the amount of investment fell.

Higher bank interest rates have curbed some of the consumption. In the past few years, construction machinery has become an investment product to a certain extent. Companies and individuals who purchase excavators and loaders generally can recoup their investment within three years. At low bank interest rates, investors can make maximum use of banks. Leverage, to obtain excess returns, but bank interest rates have risen and banks have tightened lending, and this part of investment has been suppressed by the purchase of construction machinery products.

The impact of credit tightening on the sales of construction machinery cannot be quantified, and Jun Jun believes that this will have a major impact on the industry, and sales throughout the year may be affected.

It is still promising in the long term, however, there are still many positive developments in the construction machinery industry.

The financial investment in fixed asset investment has not decreased. In the first four months, total fixed asset investment in the entire society increased by 24% year-on-year. According to the previous laws, 1.4% of the investment in fixed assets was used to invest in the purchase of construction machinery products, which provided the foundation for the continued growth of the construction machinery industry.

The urbanization level in China is currently 47.5%, which is far lower than the 80% in developed countries. The improvement of urbanization in China in the next two to three decades is still an important driving force for economic development. This will continue to maintain the rapid growth of the construction machinery industry.

Exports of construction machinery are growing rapidly. The global economy gradually recovered in 2011, increasing demand for construction machinery. In the first quarter, the export situation of several domestic leading construction machinery enterprises was very good. Xugong Machinery doubled its exports in the first quarter. Liugong exported more than 800 machines for the first time in March.

Sales data for the past four months show that the leading position in the construction machinery industry is increasingly strengthening. In terms of excavators, in the first 4 months, 13 domestic excavator brands sold a total of 35,253 units with a market share of 34.76%, which was higher than 28.71% in 2010. In terms of loaders, the cumulative sales volume of the four loaders Longgong, Xiagong, Liugong, and Lingong were all over 14,000 units in the first four months. The market share further converged. The temporary workers lag behind, but the growth rate far exceeds the top three. It reached 56.77%. In terms of bulldozers, Shantui’s accumulated sales ranked first, accounting for 67.46% of the bulldozer market, and its leading position in the industry was further consolidated.

Based on this, Yu Jun believes that the construction machinery industry will still maintain a growth rate of around 20% this year and can maintain a growth rate of 17% in the next five years.