Chart of the Day: China’s Slowdown Leaves Excavator Sales in a Hole

Sales of excavators by China’s biggest manufacturers this year have increased by less than a third of the level of 2018 as housebuilding and infrastructure investment booms that took off in 2016 have petered out amid government curbs on the property market and slowing economic growth.

In the first 11 months of 2019, the top 25 producers reported domestic sales of 191,839 units of the dirt-moving machines that are essential for large construction projects, according to data (link in Chinese) released Tuesday by the China Construction Machinery Association, an industry group. That’s a year-on-year increase of just 12.8%, down from a 44.2% jump in the same period in 2018 and a 108% surge in the first 11 months of 2017. Exports put in a much better performance albeit from a smaller base — shipments in the first 11 months of this year jumped 36.6% year-on-year to 23,699 units, the data show.

Excavator sales are one of the indicators analysts use to gauge growth in the Chinese economy and the state of investment in infrastructure and property — because you can’t dig holes in the ground without them. After a boom fueled by a massive 4 trillion yuan ($568 billion) stimulus package started in 2008 to cushion the economy from the impact of the global financial crisis, industry sales to the domestic market peaked at 171,599 in 2011 before falling sharply over the next four years. In 2015, just over 60,000 of the machines were sold.

A recovery started in early 2016 spurred by a housing boom and government policies to boost investment to bolster economic growth, but sales growth is now falling again — a reflection of a slowdown in these two key drivers of domestic demand. Infrastructure spending by local governments has stagnated due to lack of funding and a shortage of good projects, and growth in investment in building residential housing has been hit by an increasingly draconian campaign to rein in property prices.

Infrastructure investment grew 4.2% in the first 10 months this year, a slight uptick from the 3.7% rise in the same period in 2018, but way below the 19.6% growth seen in the first 10 months of 2017, government data show.

China’s economic growth as measured by gross domestic product slid to 6.6% in 2018 from 6.8% the previous year, the weakest annual expansion in 28 years, and dropped further to 6.2% in the first nine months of this year, according to data from the National Bureau of Statistics. Analysts forecast that for the full year, the pace could moderate further to 6.1% and drop again to around 5.7% in 2020, which could signal life is set to get even tougher for excavator manufacturers.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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