China engineering industry analysis - construction machinery industry risk analysis

Global economic growth continues to slow, regional differentiation is serious, construction machinery industry overseas market development is uneven

The IMF's October 2023 World Economic Outlook forecasts that global growth will slow from 3.5% in 2022 to 3% in 2023 and 2.9% in 2024. The World Bank's January 2024 Global Economic Prospects project that global economic growth will slow from 2.6 percent in 2023 to 2.4 percent in 2024. According to the forecasts of the IMF and the World Bank, the global economy has slowed for the third consecutive year, and at the same time, regional growth divergence is becoming more and more serious. Among developed economies, the momentum of economic growth in the United States is still strong, the risk of economic stagnation in Europe is rising, and the strength of economic recovery in Japan is weak. Among the six ASEAN countries, the growth of five countries except Thailand slowed down from the previous year, and Thailand's economic growth was basically flat with the previous year. Among the BRICS countries, India's economy continues to grow steadily, Brazil's economic recovery speed has slightly improved, South Africa's inflation uncertainty is greater, and Russia's economy has obvious short-term resilience. Overall, the global economic growth is still showing a slowing trend, the regional economic development situation is more differentiated, and the construction machinery industry is facing an uneven environment of overseas market development.

The global real estate sector has a backlog of risks, and the long-term slowdown in growth has increased the pressure on the construction machinery industry

According to the IMF report, global real house prices have been falling since the end of 2022. In the first quarter of 2023, real house prices in advanced economies fell by 8.4%, while the decline in emerging markets was smaller, at about 2.4%. In countries with a high share of adjustable-rate mortgages and where prices are higher than the pre-pandemic average, house prices have fallen by double digits. In addition, in the high interest rate environment, the global commercial real estate financing scale has also fallen off a cliff. Moreover, in the case of rising interest rates and tightening financial conditions, small and medium-sized enterprises in the construction industry face the risk of rising input costs and financing problems, and a large number of enterprises in the construction industry in Western Europe go bankrupt. Overall, the global real estate sector is still facing greater risks, the growth rate is slowing down or will continue for a period of time, and the risk backlog in downstream key industries will put pressure on the development of the construction machinery industry.

Global environmental awareness, digital intelligence and low carbonization are widely used, and the construction machinery industry is facing technical challenges

With the improvement of global environmental standards and the limitation of energy consumption, the demand for some traditional construction machinery has gradually declined, and the construction machinery industry will face more fierce market competition and higher technical requirements. In the process of the transformation of the industry to the direction of electrification, digitalization and intelligence, construction machinery agents are required to constantly update and upgrade their technology and equipment to meet the needs of the market, in addition, it is necessary to strengthen market development and service system construction. Although China's construction machinery manufacturers are constantly introducing electric, intelligent products, but the overall product structure still needs to be further optimized, high-quality development should become the main theme of China's construction machinery industry, the entire industry will usher in higher technical challenges.