Manufacturing News

Machinery in high gear as infra on an uptrend

China's construction sector kicked into high gear as the country doubled down on infrastructure investment to spur economic growth.

The latest excavator index — a tracker on sales and use of heavy construction equipment often used as a barometer of the country's fixed-asset investment — showed an accelerated pace of construction activity.

During January-August, the average monthly operating rate of construction machinery in China was 61.45 percent, with the monthly rate for August alone standing at 63.99 percent, showing that growth momentum has been sustained since the second quarter. The index is jointly tracked by State broadcaster CCTV, leading construction equipment maker Sany Heavy Industry Co Ltd and industrial internet service provider Rootcloud.

The index, which observes the operating rate and working hours of various types of heavy machinery, offers a full picture of the projects under construction across the country.

Among the equipment surveyed, four types of equipment, including crane trucks, excavators, pump trucks and pavers — all necessary for infrastructure projects — saw their operating rate exceed 60 percent.

In another sign of improvement, the production and prices of construction materials, such as steel and cement, also saw a rise.

China Iron and Steel Association said that the average daily output of crude steel from the country's major steel mills increased 2.23 percent in mid-September from early September.

Due to growing demand, cement prices across the country have steadily increased since the beginning of August, with the price index for cement up 2.12 percent at end-August from a month earlier, according to data from industry information provider

The industry data, which pointed to an acceleration in construction output, was in line with the growth of fixed-asset investment, which went up 5.8 percent year-on-year in the first eight months of this year. Meanwhile, investment in infrastructure rose 8.3 percent year-on-year, official data showed.

Behind the upbeat statistics lies the government's channeling of support into infrastructure construction amid national efforts to catalyze domestic demand and sustain economic recovery.

The State Council executive meeting announced last month that the quota of "policy-backed and development-oriented financial instruments" would be expanded by another 300 billion yuan ($42.7 billion) to better fund major infrastructure projects.

Prior to this, 300 billion yuan in total had already been allocated via such instruments through two funds operated by China Development Bank and Agricultural Development Bank of China.

Meanwhile, more capital has been poured into the sector by expediting the issuance of special-purpose bonds to spur investment. During the first eight months, bonds worth a total of 3.52 trillion yuan were issued nationwide, with those issued for project construction hitting the annual quota, said the Ministry of Finance.

The country will continue to leverage special-purpose bonds to boost effective investment, with a focus on new infrastructure and new energy projects, Ou Wenhan, assistant finance minister, said at a news conference earlier this month.

Looking ahead, total infrastructure investment in 2022 is projected to grow by 10 to 12 percent, lifting nominal GDP growth rate by 1.2 to 1.4 percentage points, as estimated in a recent research report by the China International Capital Corp.

Infrastructure investment will likely give a stronger boost to the economy in September, and its multiplier effect will also increase, the report added.

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