The "One Belt, One Road" initiative gives hope to heavy machinery makers like Zoomlion who have experienced net profit decrease last year due to dried-up domestic demand. (Photo : Reuters)
The initiative “One Belt, One Road” by the Chinese government is seen as a key toward the survival of heavy machinery-making companies in the overly competitive industry.
Formally known as the Silk Road Economic Belt and the 21st Maritime Silk Road, the campaign aims to revive the ancient intercontinental routes and build maritime connections.
The programs offered under this initiative give an opportunity to heavy equipment makers to create business transactions overseas--an escape from the unexpected plummet in the domestic market.
According to Zoomlion Heavy Industry Science and Technology Co. Ltd. chairman Zhan Chunxin, 2014 was "the worst ever" for such firms, citing the significant decline in demand despite the property market boom.
"The slump in economic growth caught us totally unprepared. We had no idea how to cope," Zhan remarked.
In the company's annual report, its net profit has gone down by 84.53 percent last year.
The company stated in its regulatory filings to the Shenzhen Stock Exchange: "With developers curtailing projects as housing prices fell, demand for construction machinery, including concrete machinery and tower cranes, fell significantly last year. Demand for concrete machinery fell by 38.6 percent, while demand for tower cranes fell by 40.52 percent."
Zoomlion's major competitors also share the same struggle. In its third-quarter report, Sany Heavy Industry Co. Ltd. reported that it has experienced a net profit decline of 46.5 percent year on year.
Jiangsu-based XCMG Construction Machinery Co. Ltd. revealed that its net profit would probably fall by about 65 to 75 percent in 2014. The company also cited the "continuous sluggish construction machinery market."
Amid the profit decrease, Zhan has high hopes that Zoomlion could make a rejoinder this 2015. He said that they "have taken steps to cut costs, including staff reductions and simplifying procedures within the company."
