excavator Photo:VCG

Although sales of the Chinese excavator industry fell in April from March, and shares of industry representative SANY Group have fared poorly in the stock market, industry insiders believe that the sector remains resilient as infrastructure continues to keep pace with China's economic growth.

Excavator sales are often used to analyze construction activity in China. Sales of excavators are also a reflection of China's economic growth momentum, with infrastructure projects playing an important part in GDP growth.

SANY's share prices have fallen more than 40 percent from a peak of 50.3 yuan registered in middle February, wiping out more than 180 billion yuan in market value.

The stock market performance reflects the company's falling sales. Data from the China Construction Machinery Association showed that in April, 41,100 units were sold in the domestic market, down 5.2 percent year-on-year. 

Although exports increased 166.3 percent year-on-year in April, there was a downtrend month-on-month, falling from 6,058 units in March to 5,472 units in April, amid the disruption caused by the COVID-19 outbreak in many parts of the world.

Nonetheless, sales were at historic highs. Cumulative sales from January to April reached 174,000 units, exceeding the annual sales of almost all of the years before 2018, data showed.

Industry insiders said that the stock fluctuations will be temporary, partly because they are caused by speculation, and partly because they are a sign of China's transformation from an infrastructure-driven to a consumption-driven economy.

"The public puts too much emphasis on stock market moves in the sector," Li Hongbao, an excavator industry observer, told the Global Times on Thursday.

Another reason for the decline is that China's economy is getting better and all industries are developing soundly, so there's no need for the country to invest too much in infrastructure to boost GDP, said Li.

In March, public spending grew 0.2 percent year-on-year, which was a 4.7-percentage point decline compared with that in 2019. The growth rate also slowed, indicating that fiscal support for the economy, especially the expenditure on construction activities such as transportation was limited, media reports said.

A source with SANY Group told the Global Times on Thursday that the stock market is not always an actual reflection of its business performance and investors should not be carried away by it.

"The market may be worried that high steel prices will affect the company's future business performance," said the source.

It will still be a good era for construction machinery in the next two to three years, since the environment for domestic infrastructure investment and urbanization will not change, said the source at SANY.