China conducive to Caterpillar's expansion

SHANGHAI - A senior executive of Caterpillar, a United States-based construction equipment maker, said on Tuesday that the income-doubling goal set in a recent Communist Party of China report will be beneficial to the company's expansion in China.

Growth in China's gross domestic product per capita will lead to a consumer society, which will in turn benefit Caterpillar's business in the country, said Edward J. Rapp, Caterpillar group president and chief financial officer, at a mechanical engineering expo in Shanghai.

The CPC announced the aim of doubling the country's GDP and per capita residents' income by 2020 from 2010 levels at the 18th CPC National Congress held in Beijing earlier this month.

"I don't anticipate high labor costs resulting from the goal having any significant impact on our expansion plan in China, because our manufacturing strategy has always been to be a local manufacturer -- primarily what we build in China we sell in China, " said Rapp.

Rapp, who will take the role of Caterpillar's group president with responsibility for construction industries beginning next year, said he holds long-term optimistic views toward the Chinese market.

"The part that gives me confidence is the approach China has taken over time to clearly articulate what growth they want to drive... providing that clarity helps us understand where the country wants to go and help us determine where we need to invest, " he said.

As China is in transition to a new government, Rapp expects to see that the government continues to invest in infrastructure and move toward urbanization, which will serve as fundamental drivers for Caterpillar's Chinese growth in the long term.

Caterpillar has boosted the number of its manufacturing facilities in China to 22 from 17 earlier in the year. Four new facilities are currently under construction in the country.

Rapp believes China's growth has currently bottomed out, and he projected modest growth in the country in 2013. His firm's data showed an increase in the hours of utilization of its machines from its customers, which indicated improvement in the market.

The construction and mining sectors have been hard-hit amid the country's slowdown. China's third-quarter growth dropped to a seven-quarter low of 7.4 percent due to flagging exports and government tightening measures to cap inflation.

In an effort to boost its presence in China, Caterpillar is showcasing nearly 50 machines, including six new products, at the biennial Bauma China Show, marking its largest display ever at the expo.

Caterpillar's global revenue in 2011 soared 41 percent year-on-year to exceed $60 billion, with revenue estimated to exceed $70 billion in the year.