In 2005, China's construction machinery industry accounted for 11.7% of the global market in terms of sales, and when measured by the number of machines, this figure reached 22%. Meanwhile, international brand products (including direct imports) held nearly 50% of the Chinese market share, indicating that both the market and enterprises had entered a more globalized environment. This shift marked a significant milestone in China’s construction machinery sector, as it began to compete on an international scale.
China’s exports of construction machinery reached $2.94 billion in 2005, marking the first time that import and export volumes remained roughly balanced. This shift reversed years of trade deficits and signaled growing competitive strength in the global market. International giants like Caterpillar Inc. recognized the potential of the Chinese market and began to take a closer look at the capabilities of domestic manufacturers. These multinational corporations saw China not only as a large market but also as a strategic location for long-term growth, increasing their investments and presence in the country.
At the same time, private enterprises such as Sany Group, Longgong Group, Fangyuan Group, and others emerged as strong players in the construction machinery industry. Their efficient and flexible operations brought new energy to the sector. However, many state-owned enterprises struggled due to outdated systems and inefficiencies, leading to declining performance and even some facing survival crises. As a result, the domestic market became fragmented, with distinct dynamics among foreign capital, private companies, and state-owned enterprises.
Over 13 major construction machinery products faced overcapacity, intensifying competition. State-owned enterprises, including XCMG, found it increasingly difficult to adapt to market demands. While XCMG was once a leader in China, its development lagged behind both foreign competitors and rising private firms. In terms of technology, most of its products were still in the imitation stage, with overall performance equivalent to late-1980s standards. In contrast, companies like Sany and Longgong leveraged their flexible structures and cost advantages to capture more market share, especially in mid- and low-end segments.
To address these challenges, XCMG initiated a comprehensive restructuring plan. Starting from 1989, the company was formed through the merger of several subsidiaries under the "Nine Unity" model, receiving substantial government support. Over the years, XCMG grew into a leading player, but in recent decades, its economic efficiency declined due to outdated mechanisms. By 2005, XCMG ranked last among top industry players in terms of overall efficiency and competitiveness.
The company also faced heavy debt, with loans exceeding 2 billion yuan and a large portion of its equity pledged as collateral. With repayment deadlines approaching, XCMG urgently needed investment and reform to resolve its financial difficulties and restructure effectively.
The restructuring strategy focused on transforming the company’s ownership structure, introducing foreign investors, enhancing management, and boosting R&D and innovation. The goal was to build a globally competitive brand while addressing historical issues. The reform was planned in three phases: first, reforming the property rights system; second, adopting advanced technologies and expanding markets; and third, listing overseas to become a multinational public company.
Through these efforts, XCMG aimed to restore its leadership position and transform the “Xugong†brand into a globally recognized name.
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