GOLDMAN: We Just Visited China, And Here's What We Saw

china post

Photo: Bloomberg

Goldman Sachs‘ machinery research team just got back from a tour of China.They noted that demand is increasing and the industry leaders also led in R&D.

Their full report of the trip explores individual companies more closely.  But we pulled the key themes for industrials in China.

Demand for machinery is increasing again in September

'Meetings on our Global Industrials trip to China point to a modest demand pickup across key machinery markets, though competitive intensity for Western companies is clearly rising.'

Source: Goldman Sachs

But people aren't sure about 2012

'Broad visibility on 2012 remains limited due to the completion of China's stimulus infrastructure buildout, high inflation, and a transition in leadership.'

Source: Goldman Sachs

Demand for mining machinery is still enormous

The combination of rising energy demand and deteriorating resource quality is bullish for mining equipment sales.

Source: Goldman Sachs

Chinese equipment makers are starting to eat the lunch of Western competitors

The size of China's mining equipment industry has tripled in the last four years. Western competitors have only experienced modest growth.

Source: Goldman Sachs

Demand for trucks is huge

According to Cummins dealer inventories are lower while order activity is up.

Source: Goldman Sachs

Meanwhile, Chinese truck makers are gaining market share

Demand for Cummins' high end products is declining while demand for middle market products by competitor Weichai is holding steady. Cummins is now expanding into that market.

Source: Goldman Sachs

But overall, construction machinery demand is starting to lag

Construction has been lagging as China's stimulus funded infrastructure build-out tapers. However, valuations for companies like Lonking are becoming more attractive.

Source: Goldman Sachs

Again, Chinese excavaters are taking market share from the west

Chinese companies like Sany Heavy are growing in market share while western companies like Caterpillar, Komatsu, and Hitachi Construction are shrinking. However, Caterpillar has been introducing new products that have caused market share losses to decelerate.

Source: Goldman Sachs

China May Not Be The Biggest Story In Asia

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.