China looms large in our consciousness for good reason. The People’s Republic of China is the world’s most populous country and the world’s second-largest by land area. The PRC is big—but it is not the only player.
China has the world’s second-largest economy behind you know who, the U.S. Among the many products manufactured in China is construction equipment under such brand names as Sany and LiuGong. Equipment manufacturers in the U.S. and elsewhere in the world are feeling the presence in the market of Chinese firms.
Western manufacturers also are experiencing the effects of a slowdown in the Chinese economy. Volvo Construction Equipment just reported a drop in sales because of a "considerable decline" in China, deemed the world’s largest market for construction equipment. As goes China’s construction economy, so goes the bottom line for heavy equipment manufacturers.
Caterpillar Inc. also reported weaker earnings in the second quarter and predicted the second half of the year will not be much better. The culprit? Again, China’s slumping economy.
But here’s the rest of the story: Cat made money in the first half of the year. It did so from stronger sales of construction equipment in the U.S., where contractors continue to hope against hope that an economic recovery is coming. Furthermore, Caterpillar is experiencing "strong" sales for its engines—"particularly those used in oil and natural gas production," according to the Wall Street Journal. Fracking and parallel drilling to the rescue!
The surest way for U.S. heavy equipment manufacturers and building contractors to stay busy and profitable is for the domestic economy to come charging back. Oil and gas drilling are contributing to that. Better policy-making decisions at state and federal levels would help.
When U.S. equipment-makers have trouble keeping up with foreign demand for their machines because so much of their output is being sold domestically, recovery will have happened. That day can’t come too soon.
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