CLSA senior investment analyst for the construction machinery industry Li Kunlong published a report stating that driven by China's urbanization policy, domestic investment in infrastructure and real estate is expected to be quite active next year. Coupled with ongoing industry consolidation that will eliminate small enterprises, demand for machinery continues to increase and is gradually recovering from the bottom.

　　He mentioned that the Chinese government has allocated over 2 billion yuan in assets to affordable housing projects. Meanwhile, the bank observed that machinery demand had bottomed out and rebounded in the second quarter of this year. Early-cycle products are already on a positive trajectory, while the decline in demand for late-cycle products is narrowing and is expected to return to normal in 2014. At the same time, prices of cement and other commodities have recently risen, reflecting that the government has initiated preparatory work. Therefore, given the current low order base, he expects machinery orders to grow 10-15% annually in 2014-15.

　　In addition, Li believes that domestic contractors tend to purchase higher-quality products. Furthermore, environmental protection equipment can benefit from the urbanization concept, so the government will use machinery that meets emission standards, which will lead to expansion in average machinery prices and gross margins.

　　The report indicates that product technology upgrades and industry consolidation will produce six industry giants capable of maintaining market share, including Zoomlion, Sany International, Weichai's parent company Shandong Heavy Industry Group, YTO's parent company Sinomach, XCMG Machinery, and LiuGong Group.

　　Li Kunlong believes that these six giants are not in a hurry to enter the US market because the US has the best technology and quality. He believes the six giants will start with Southeast Asian countries and then extend to the Asia-Pacific region, Europe, and the United States.