.   A few days ago, the Excavating Machinery Branch of the China Construction Machinery Association issued a proposal on “rational competition and cooperation to guard against risks,” calling on the whole industry to remain rational, objectively and prudently interpret short-term demand changes, and cherish the hard-won new situation of further improvement in the industry.

    　The Excavating Machinery Branch of the China Construction Machinery Association warns the industry to guard against risks. I believe this is both very necessary and timely, with extraordinary significance. The main reasons are as follows:

    　First, it reminds the industry that when a recovery appears, it must remain clear-headed. Since 2012, the situation in the construction machinery industry has been continuously unsatisfactory. After the economy entered the new normal, China's excavating machinery industry continued to operate at a low level. After five years of volatile adjustment, the industry showed signs of bottoming out and stabilizing in stages in the third quarter of 2016. However, it must be pointed out that in the face of good signs, we must clearly see that the problems accumulated in the long-term development of the construction machinery industry still exist and have not been completely resolved.

   　 Second, it reminds that the total domestic demand in the excavator industry is limited, and the overall relationship between supply and demand is that supply exceeds demand. According to sales in 2016, the cumulative annual sales volume of excavators was 70,320 units, a year-on-year increase of 24.8%, the first positive growth in excavator sales since 2013. Even so, sales conditions show that last year's quarterly sales still fluctuated in waves, with great differences. I believe this situation involves seasonal and structural issues. For example, demand for small agricultural excavators is relatively large, and it occurs during the spring plowing preparation period, while when the infrastructure construction period begins, the volume used for infrastructure will increase. On the one hand, total sales reflect the growth of investment in various construction projects across the country. Statistics from the National Bureau of Statistics show that fixed asset investment grew by 8.1% in 2016, among which manufacturing investment growth rebounded. On the other hand, they also reflect that excavators, if well maintained, are relatively durable construction machinery, and there are many manufacturers, which slows the replacement cycle. This is also an important factor that has kept the excavator industry in a state of overcapacity under the sluggish economic growth in recent years. We must not be blindly optimistic about this.

   　 Third, it reminds that China's excavating machinery industry is a fully market-oriented industry and must avoid disorderly competition. The socialist market economy encourages competition, but competition is not a life-and-death struggle; rather, it advocates win-win competition and cooperation and common development. Since reform and opening up, benign competition among enterprises has been an important driving force promoting the sound and rapid development of China's excavating machinery industry. Therefore, while the impact of the “new normal” economic environment on the industry market still persists, the Excavating Machinery Branch of the China Construction Machinery Association proposes that the industry and enterprises continue to advance capacity reduction, inventory reduction, deleveraging, cost reduction, and weakness remediation, continuously advance transformation and upgrading, and improve the quality and efficiency of enterprise operations; cooperate amid competition, target niche markets that suit enterprise characteristics, and achieve differentiated competition. This is very realistic and certainly affirmed.

    　Fourth, it reminds excavator enterprises to cultivate intensively and strive to develop domestic and international markets. The Excavating Machinery Branch of the China Construction Machinery Association points out that excavator enterprises must strictly control channels, cultivate intensively, take users as the center, strictly control customer quality, properly manage receivables and corporate cash flow, reject price wars, and ensure that enterprises have comprehensive capabilities for long-term stable operation and risk resistance. On this basis, as national strategies such as the domestic “Belt and Road,” “Yangtze River Economic Belt,” and “Beijing-Tianjin-Hebei Integration” are gradually implemented and supply-side structural reform continues to deepen, all will bring new strategic opportunities and development space to the industry. As long as industry enterprises actively carry out innovation and transformation, engage in rational competition and cooperation, and guard against risks, they will certainly continue to open up new horizons suited to their own development. At the same time, international market demand is diverse and the space is huge. Chinese domestic enterprises should actively advance the “going global” strategy, participate in international market competition, and seek broader development space. Only in this way can enterprises avoid tasting again the bitter fruit brought by excessive investment and vicious competition.

                                                 　　　　　　　　　　　　　　　　　　

　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　   By Wu Yue