Caterpillar Inc. (CAT.NYSE) has lost ground to local players in China’s hydraulic excavator market, one of its most important product categories, the Wall Street Journal reported. Strong demand from China and other emerging markets has buoyed the business of US-based Caterpillar and rivals like Komatsu Ltd (6301.TYO) of Japan amid weak sales in North America, Europe and Japan. However, most foreign manufacturers haven’t increased production capacity in China fast enough to keep up with demand for excavators. This has allowed Sany Heavy Industry (600031.SH, 0631.HK) and other smaller Chinese rivals to increase their market share, according to data from Off-Highway Research, a London-based consulting firm. Sany and other Chinese companies are now looking to expand into the US and Europe. A Caterpillar spokesman said the company, which is scheduled to report second-quarter earnings on Friday, sells a wide variety of construction and mining equipment in China, not just excavators.