The Chinese government’s long-established strategy of using construction projects to boost domestic demand seems to have contributed to better-than-expected quarterly GDP results – and a huge spike in sales of construction machinery.
China today reported economic growth of 6.4% for January to March of this year, which was the slowest quarterly figure for 27 years but ahead of analysts’ expectations of between 6.3% and 6.2%.
Beijing has sought to head off the effects of weak global growth and the Chinese economy’s growing debt problems by sharply increased domestic investment this year. This has taken the form of tax cuts, infrastructure spending and total bank loans over the quarter of $865bn.
Infrastructure spending is expected to grow 4.3% in 2019. This includes $120bn in railway construction and $270bn in road and waterway projects.
The first consequence of the investment boost appears to be a rush on the part of contractors to increase their production capacity, and this has led to a bonanza for companies making heavy construction machinery.
The South China Morning Post reports that the country’s 25 largest excavator makers sold 44,278 units in March, the highest monthly figure on record; this was 69% higher than in February and an 18% jump year on year.
Sales of mobile crane trucks were 60% higher in January and February than a year earlier, and heavy trucks sales in March were up 4% year on year, reaching a figure of 144,000 units – another record.
Unsurprisingly, China’s heavy equipment makers are forecasting robust profit growth in the first quarter of 2019.
The biggest Chinese firm is Sany Heavy Industry, whose turnover grew 46% to $8bn last year, making it the sixth largest equipment maker in the world.
It said on Monday, 15 April, that its profit for this period would probably increase by between 100% and 120% on the $913m it made in 2018.
XCMG Construction Machinery also said its first-quarter profit would grow 120%, in its case reaching $150m, and Zoomlion forecast a surge of up to 180%.
China’s foreign trade also expanded rapidly in the quarter, growing 21% in March alone – higher than market expectations.
Image: China’s mobile truck crane sales rose 60% (Zoomlion)