Machinery / Industrial Parts & Tools

"The potential infrastructure demand of 64 countries along the the Belt and Road is about US $1.1 trillion per year, or even US $2 trillion under optimistic assumptions."

On May 30, UBS held a media sharing meeting on the interpretation of the 10th anniversary of China's "the Belt and Road" initiative and the prospect of infrastructure industry, said Xu Bin, head of Asian industrial industry and deputy director of China Research Department of UBS Securities.

Xu Bin pointed out that China's entire construction supply chain is expected to benefit from the potential infrastructure opportunities brought by the "the Belt and Road" countries, and contractors (construction enterprises), raw material suppliers, etc. will have more development in the next decade.

In the past two to three years, overall overseas infrastructure orders have weakened. It is expected that overseas orders will rebound rapidly this year and will be concentrated in the second half of this year, "Xu Bin said.

He stated that Chinese contractors have been active in the international market, continuously improving their global market rankings, and proving their competitiveness overseas.

According to import and export data, in 2022, Chinese contractors will earn US $85 billion from countries along the "the Belt and Road" and US $130 billion from newly signed contracts, accounting for 55% and 51% of their overseas total respectively.

Among them, Chinese construction enterprises hold a significant share in the international contracting market related to electricity, water supply, and transportation.

Thanks to the "the Belt and Road", China's capital goods exports have steadily increased in the past decade. UBS stated that Chinese capital goods will have sufficient competitiveness to gain more market share in the global market.

Battery materials and engineering machinery may become the most positive export industries in the coming years, "UBS pointed out.

Capital goods refer to the machinery and equipment used by enterprises for production, namely fixed capital, mainly involving industries such as steel, petrochemical, and non-ferrous metals.

UBS stated that domestic sales of excavators have declined this year, but since last year, sales in overseas markets have increased significantly, replacing some foreign brands.

The latest import and export data released by the China Construction Machinery Industry Association shows that last year, the sales of excavators by 26 domestic excavator manufacturers totaled 261300 units, a year-on-year decrease of 23.8%.

According to import and export data, the domestic market sales volume was 151900 units, a year-on-year decrease of 44.6%; The export sales volume was 109500 units, a year-on-year increase of 59.8%.

UBS predicts that the overseas market share of Chinese excavator and excavator cylinder suppliers will continue to expand in the next five years.

In 2022, the number of excavators exported by China to the Middle East has increased sixfold compared to the past few years. "Xu Bin said that the Middle East attaches great importance to infrastructure and is a very important market for Chinese companies, with significant future growth.

In addition, due to competitive cost and price, complete sales network and excellent service, Chinese construction machinery manufacturers have performed well in emerging markets in recent years and are expected to continue to gain share.

In addition to engineering machinery, battery materials may also become a rapidly growing export product in the future.

According to customs import and export data, in the first quarter of this year, China's total exports of electric passenger vehicles, lithium batteries, and solar cells amounted to 264.69 billion yuan, a year-on-year increase of 66.9%, accounting for 4.7% of the export proportion, and a year-on-year increase of 1.7 percentage points.

According to import and export data, the export of lithium batteries reached 109.79 billion yuan, with a growth rate of 94.3%; The export of solar cells exceeded 90 billion yuan, an increase of 23.6% year-on-year.

UBS believes that in the future, the proportion of overseas revenue from such capital goods will increase, and exports will drive the overall revenue and profit growth of capital goods. In addition, the price in overseas market is generally better than that in China, with higher Gross margin and faster profit growth.