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Urbanization to drive Caterpillar's growth in China

By Wei Tian (China Daily)

13:30, March 23, 2012

Although the expansion of China's machinery industry may decelerate amid tightening policies and a slowing economy, urbanization will drive the industry's growth in the long term, the world's largest construction and mining equipment, diesel and gas engine maker, Caterpillar Inc, said.

"The restriction of credit availability had a dampening effect on the machinery industry, which would lead to the market size this year to be about flat with that of the previous year," said Richard Lavin, Caterpillar's group president, in an interview with China Daily.

Lavin's estimate replaces his expectation a few months ago for the market to grow more than 10 percent in 2012, as the country set this year's GDP growth target at a lower-than-expected 7.5 percent earlier this month.

"This is a result of a number of steps the Chinese government has taken over the last 12 months to deal with inflation and try to achieve a soft landing of the economy in total," he said.

But Lavin predicted the market would see some improvement in the second half as the authorities have begun to free up bank reserves.

Meanwhile, urbanization is going to create a continuous need for infrastructure in the long term, and therefore demand for construction equipment, which continues to make the Chinese market attractive.

Experts said that China's urbanization rate is likely to increase from just above 50 percent at present to about 60 percent by 2020 and 65 percent by 2030.

As a result, "infrastructure such as roads, railroads and ports, will continue to be built at an aggressive pace in China," Lavin said.

Mining is another very important area, he said. "As the country expands consumption in resources, its needs for modern technology machinery products, as well as the safety requirements in mining operations, will be increasing."

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