China Construction Machinery: Having Core Competence to Have a Future

It is reported that XCMG is currently acquiring two component manufacturers in Europe through its listed company XCMG. The acquisition plan is expected to be completed in July. According to industry sources, the two European companies acquired by Xugong Group have core technologies in the manufacturing of high-end hydraulic parts, which is precisely what domestic companies lack. In the core technology of key components, the speed of industrialization through independent research and development is too slow, and mergers and acquisitions in the case of foreign companies in a sluggish situation will be a faster way.

For a long time, in the aspect of high-pressure and large-flow hydraulic devices, the products of domestic parts and components companies are still difficult to meet the matching requirements of the host companies, which makes imports the only choice, especially on excavator products. However, the price is so expensive that the reality of “eaten 70% of the profits of the construction machinery industry” and the long-term passive control of people are clearly not acceptable to leading Chinese engineering machinery companies that have shown strong growth momentum. In this sense, Xu Gong’s current attempt should be only a phased achievement of China’s construction machinery companies’ implementation of overseas acquisitions.

Once, the supply period of German Rexroth to Chinese companies was 88 weeks. This means that Chinese companies need to decide their own hydraulic product purchases a year and a half in advance. It can be imagined that due to market uncertainty, such a contract involves a great deal of risk. However, when the global economy was severely affected by the financial crisis and market demand seriously shrunk, Rexroth asked Chinese companies to take delivery within four months, but did not mention it overdue, and the deposit was not refundable; when there was a gap in the supply of products, for delivery For the postponement, the amount of compensation is also determined by itself. These terms are unfavorable to the buyer. But this is the power of "monopoly products." It should be noted that the annual sales volume of Rexroth hydraulic products in the world exceeds the total output value of China's entire hydraulic industry. The domestic companies forced to help can only turn for the second best, so Kawasaki Corporation of Japan has a great market opportunity. However, due to the pulse-like fluctuations in the market, Kawasaki will always give priority to meet the matching needs of local host manufacturers every time demand peaks. Domestic companies are still feeling pressure. The same is true for Korean hydraulics companies, and their installations are also in short supply. I really don't know who the next lucky one is. So, can China's excavator's production be able to operate freely, isn't it entirely controlled by foreign hydraulic suppliers?

In fact, not only is China's construction machinery industry, but in many areas of equipment manufacturing, the lack of manufacturing capabilities of core components is widespread, but only to varying degrees. For example, high-end CNC systems and key functional components in the machine tool industry; spindles, high-specification bearings and gearboxes in the wind power industry; pumps and valves at the core of the nuclear power sector; and high-end automation systems and critical precision testing instruments at major projects In the field, there are few places for domestic products. This is the reason why China's manufacturing industry is often seen as a rising competitor, but its global competitiveness mainly comes from factors other than innovation.

It can be seen that in the equipment manufacturing industry, especially in the high-end equipment manufacturing industry, only with core manufacturing capabilities can the corresponding technological added value be obtained in order to reflect the high-end high-yield, in order to gradually gather real competitive advantages, and thus become respected. Global market competitors.

Are all the "Dutch disease" troubles?

The Chinese economy suffers from “Dutch disease” is a view held by some European and American economists. The Dutch disease (the Dutch disease) refers to a phenomenon in which a certain primary product sector in a country, especially a small and medium-sized economy, has boomed and led to the decline of other sectors. If objective and in-depth observation of the current industrial economic structure of China, especially the status quo of the manufacturing industry, it is not difficult to find that the Chinese industrial economy does indeed show the symptoms of "Dutch disease" to some extent. Indeed, long-term reliance on labor and foreign investment contributed to the miracle of China's economic growth, sharp increase in exports, and a large surplus in the balance of payments, and the economy has shown a prosperous picture. At present, China’s foreign exchange reserves have reached as much as US$3 trillion, making it the highest in the world.

At the same time, however, the deep processing and finishing industries with high technological content are not easy to develop; the prosperity of the resource industry (in China, which represents a sharp increase in the export of primary products and labor-intensive products) has come at the expense of other industries. Dragging down the entire national economic development; The sharp increase in exports has led to the appreciation of the national currency, weakening the competitiveness of the country’s economy in the international arena; The income gap of domestic residents has widened, and regional disparities will also widen due to the pros and cons of resource conditions. “Dutch disease” Several of the major symptoms have been shown in the Chinese economy. In other words, the growth of China’s economy has not brought about an increase in international competitiveness. At present, the reality of the "hollow" core technology of equipment manufacturing is a typical example.

In the 1970s, through a series of effective measures such as “high-end machine tool battles,” China's machine tool industry can be compared with the highest level in East Asia at that time. However, due to well-known reasons, this trend of continuous improvement has been completely interrupted. After the reform and opening up, the development focus of China's manufacturing industry shifted to labor-intensive industries supported by a large amount of cheap labor and foreign capital. This should be a realistic choice under the historical conditions at that time—the economic recession, the large surplus of labor force, and the difficulty in finding a way out. While emphasizing the development of labor-intensive industries, export-led growth has enabled China to achieve the world’s largest number of daily consumer goods production and achieved “profit sharing” in economic growth (most of which have been acquired by foreign investors). Make enterprises lose the incentive of system and technology innovation. Because companies only need to rely on the long-term occupation of cheap labor, through the expansion of production capacity will be able to obtain enough room for development, has become a habit. This reality of making profits simple has led to the concentration of resources such as capital, land, and labor to labor-intensive companies, which has squeezed the space for development of other types of companies, especially technology-intensive ones. Moreover, the technology brought by foreign capital is rarely mastered by the Chinese, and its super-national treatment enjoyed in China has deprived Chinese companies of an opportunity for fair competition and reduced the growth space of Chinese companies, resulting in the inability of Chinese companies to obtain technological innovation. The time required and capital accumulation.

When the factor cost continues to increase and the traditional growth mode is difficult to sustain, it is discovered that industries including equipment manufacturing that can help the transformation and upgrading of economic development have become the direct victims of “Dutch disease” and must pass “ The "revitalization" approach can be used to boost the competitiveness of China's industrial economy and maintain sustainable development.

Despite the influence of “Dutch disease”, which has opened up a certain gap between high-tech industries including China's equipment manufacturing industry and international standards, it should also be seen that in recent years, policy-level adjustments have been made. The overall level of equipment manufacturing industry has been greatly improved, and it has reached the world advanced level in some areas, including some products in the construction machinery industry. Of course, if the policy level deserves more expectation, this kind of catch-up may be able to speed up again.

The adjustment of organizational structure also needs to deepen the increasingly fierce competition in the global market, the new changes in market demand, the large-scale enterprises and unique competitiveness, will inevitably play an increasingly important role in the industrial organization structure system. The continuous increase in the degree of production socialization in the international scope requires that the production process be further specialized, standardized, and coordinated, which is precisely the strength of SMEs. Therefore, at this stage and in the coming period, the coexistence of a large-scale enterprise with bipolar characteristics and a large number of SMEs will become the main form of the development of the industrial organization structure. In contrast, the irrational organizational structure in China's construction machinery industry remains prominent.

At present, there are still a considerable number of state-owned enterprises still unable to become independent investment subjects, with investment constraints and risk-asymmetry asymmetrical, with unclear responsibilities and powers, lack of scientific decision-making systems and development strategies, and subjective arbitrariness of investment decisions.

On the other hand, the overall benefit of the current construction machinery industry is still relatively low. The main reason is that the product technology content is low, the technology-intensive products and user requirements are far apart, and the high-value-added large-scale complete sets of equipment and engineering equipment have insufficient core manufacturing capabilities. Invisibly added more pressure on the industry. Therefore, while continuing to deepen the reform of state-owned enterprises, it is necessary to adjust the organizational structure of the industry through institutional roles, and to stimulate the enthusiasm and enthusiasm of independent innovation of enterprises through institutional construction.

Analysts pointed out that from the perspective of the current competition in the industry, the realization of industrial transformation and upgrading is a task that must be completed. Because, the factors constraining the long-term rapid development of the construction machinery industry have gradually shifted from investment to advanced manufacturing. For enterprises, there are only two ways to exit: First, continue to "shanzhai", in the intellectual property rights disputes will be the ultimate market share; second is to surpass the "cottage" and enhance their own core capabilities and international reputation.

It should be noted that, unlike other industries in the equipment manufacturing industry, in the Chinese construction machinery industry, a group of companies represented by Sany Heavy Industry and Zoomlion are playing an important role in guiding and promoting the entire industry. This may be an important reason why the construction machinery industry has become "the highest level in China's equipment manufacturing industry, the most representative of the core capabilities."

Sany Heavy Industry, known for its ability to produce the longest boom pump truck in the world, deserves recognition for its efforts in independent technological innovation. The first kiloton-class all-terrain crane that broke the foreign monopoly in the country, and the world’s first micro-bubble asphalt cement mortar vehicle, all come from their hands. At present, Sany Heavy Industry has a R&D team of more than 5,000 people and is the most in the Chinese construction machinery industry. In addition, Sany Heavy Industry has set up 23 research institutes and 138 product research institutes on a global scale, and has established state-level enterprise technology centers and national post-doctoral research stations. According to the relevant personage of Sany Heavy Industry, “Sany Heavy Industry invests 5% to 7% of its sales revenue in R&D every year, focusing on building innovative companies and nurturing R&D and innovation capabilities as a core competence.”

In one of CIDEG's research topics, there was such a comment: "In some successful East Asian economies, the government is generally actively involved in innovation activities, but none of these successes depends on the state-owned enterprises. On the contrary, just because of those The collective actions of private companies that are eager to impact the frontiers of technology become possible.” If we observe and evaluate the international competitiveness of various industries in China's equipment manufacturing industry without prejudice, it is easy to find that when major technical resources, especially public technical resources, are mostly state-owned When enterprises control, the competitiveness of the industry must be relatively weak. In this sense, it is more worthwhile for China’s construction machinery to catch up and even surpass it.