New Urbanization Gives Green Light

　　From December 12 to 13, 2013, the Central Urbanization Work Conference was held in Beijing, discussing the 'National New Urbanization Plan', which relevant departments will revise based on the conference discussions. Xu Shaoshi, Director of the National Development and Reform Commission, stated that the national new urbanization plan will be promptly revised and improved for release and implementation as soon as possible. According to estimates by the China Development Bank, the demand for investment and financing in China's urbanization will reach 25 trillion yuan in the next three years.

　　From December 23 to 24, 2013, the Central Rural Work Conference was held in Beijing. The conference pointed out: 'We must actively and steadily advance urbanization. By 2020, we need to settle about 100 million rural migrant workers who have moved to cities, renovate shantytowns and urban villages for about 100 million people, and achieve urbanization for about 100 million people in the central and western regions. New urbanization must complement agricultural modernization.' Among these, renovating shantytowns and urban villages for about 100 million people and urbanizing about 100 million people in the central and western regions involve massive affordable housing construction. According to the Ministry of Housing and Urban-Rural Development's plan, the target for urban affordable housing projects in 2014 alone is: to basically complete over 4.8 million units of affordable housing, start construction on over 6 million units, including over 3.7 million units of shantytown renovation.

　　Undoubtedly, new urbanization will be a huge engine for China's economic growth, driving the pace of new rural construction. A large number of rural housing renovations, farmland water conservancy projects, and urban infrastructure construction will bring unprecedented development space for the construction machinery industry.

　　Experts say that China's urbanization rate rose from 27.99% in 1993 to 51.27% in 2012, bringing robust demand to the construction machinery industry and serving as the backdrop for the industry's previous golden decade. It is estimated that by 2020, China's urbanization rate will reach about 60%, ushering in the next golden decade for the construction machinery industry.

　　Smog Warns: Take the Path of Energy Conservation and Environmental Protection

　　Since the outbreak of large-scale smog in early 2013, environmental issues have become a focus of public attention and have drawn the attention of Chinese leaders.

　　Relevant data shows that over 70% of emissions causing environmental pollution in China come from manufacturing, which generates about 5.5 billion tons of harmless waste and 700 million tons of hazardous waste annually.

　　In China's manufacturing sector, construction machinery is the second-largest polluting industry after automobiles. Among them, second-hand construction machinery is often called an 'environmental killer'. As is well known, engines are installed when new machines roll off the production line. As the years of operation extend, carbon dioxide emissions from engines increase, and the 'indefinite' use of second-hand construction machinery puts enormous pressure on the environment. According to incomplete statistics, in the domestic market, second-hand construction machinery with excessive carbon dioxide emissions accounts for about 40% of the total construction machinery.

　　The frequent smog has once again sounded the alarm. The 'green strategy' has become an inevitable trend in the engineering industry. Driven by smog control and the concept of energy conservation and environmental protection, construction machinery giants such as Sany Heavy Industry (600031, stock bar) and Zoomlion (000157, stock bar) are leading enterprises into the 'green era'.

　　In fact, years ago, the construction machinery industry realized that economic development cannot come at the expense of the environment and began continuous exploration. Before the 2008 Olympics, to improve China's environmental quality, Beijing installed 'particulate filters' on 10,000 heavy diesel vehicles below National III standards. However, due to the generally poor condition of these heavy diesel vehicles, the emission reduction effect was not good.

　　Subsequently, XCMG took the initiative. Starting from product fuel consumption and performance, with technological innovation, it pioneered new energy power and was the first in China to develop and launch the LW500K-LNG natural gas loader, setting off a green whirlwind of new energy power in the industry.

　　Some experts predict that to achieve energy conservation and emission reduction targets, the construction machinery industry will become an important sector in China's efforts over the next 5 to 10 years, with market potential not to be underestimated. Qi Jun, Chairman of the China Construction Machinery Association, also stated that China can be called 'the world's largest construction site'. Engineering construction will drive the rapid development of the construction machinery industry, and as people pay more attention to the environment, the industry will become an important force in promoting energy conservation and emission reduction in China over the next 5 to 10 years.

　　Overseas Expansion to Resolve Overcapacity

　　At the 2013 Global Construction Machinery Industry Conference, Zhan Chunxin, Chairman of Zoomlion, pointed out that from a global perspective, China's construction machinery industry still has overcapacity. In the Chinese market, when domestic GDP growth is below double digits, industry capacity is severely excessive. Over the past few years, the growth rate of China's construction machinery industry has been about twice that of GDP. In the future, if GDP growth is at 7% to 8%, industry growth will be around 15%.

　　With domestic demand declining and overcapacity severe, leading Chinese construction machinery companies are not only consolidating their position in the Chinese market but also making all-out breakthroughs in the high-threshold international market. On June 28, 2013, Weichai Power (000338, stock bar) acquired Kion, the world's leading industrial forklift manufacturer; on July 1, Sany Heavy Industry acquired the remaining 10% stake in Putzmeister, completing 100% ownership; on September 10, Zoomlion completed full ownership of CIFA; on October 31, LiuGong (000528, stock bar) Machinery acquired the ZZN transmission parts factory in Stalowa Wola, Poland; on December 25, Zoomlion acquired the world's top dry mortar brand, Germany's M-TEC, from Saint-Gobain. This is another overseas acquisition by Zoomlion after its 2008 acquisition of Italy's CIFA.

　　Nevertheless, Gao Xiaoshi stated that the internationalization strategy of Chinese construction machinery enterprises is not easy. Cultural differences, local protectionism, and direct competition from leading global brands will all bring enormous pressure to Chinese construction machinery enterprises.