One of the EMBA programs offered in Shanghai recently took its students for a site visit to the Shanghai facilities of Lonking, one of China’s largest manufacturers of excavation and construction equipment. The class toured the production line, viewed a yard full of ready-for-work equipment, and spent an hour talking with the CEO, Qiu Debo. During the discussion, Qiu reviewed a number of market factors related to his business, including the fact that this year’s market for wheel loaders, basically tractors with big scoops on the front, will reach about 200,000, up from about 160,000 in 2009 and about 120,000 in 2008.
Lined up nose to tail, a convoy of 200,000 wheel loaders would be 1,000 kilometers long, stretching from Beijing nearly to Shanghai. Add all the other wheel loaders in service in the country and you triple the length of the wheel loader traffic jam.
That many wheel loaders in operation means there’s a lot of dirt being moved around here – a physical indication of the scope of China’s investment in infrastructure, especially since the financial downturn and the stimulus measures the PRC government launched in response. According to a representative of Lonking, China’s market for dirt movers is ten times that of India (wheel loaders in China, backhoes in India) by unit, and much more in terms of dirt moving capacity; a wheel loader moves a lot more dirt per scoop than a backhoe does.
All those wheel loaders rolling off the production line at Lonking’s factory also points at something else too rarely noticed by foreigners: the scope of domestic consumption. Founded less than 20 years ago, Lonking will probably pull in more than US$1.5 billion in revenue this year. Its founder and chair, Li Xinyan, is one of China’s 100-plus dollar billionaires. And about 95% of Lonking’s total sales are domestic. Millions more companies are growing with such rapidity, and doing so without any exports to speak of – facts proving the increasing power of the domestic market.
Sometimes the most revealing business education occurs outside of the classroom.
John D. Van Fleet is Assistant Dean and Executive Director of the Global Executive MBA in Shanghai, a collaboration between the Antai College of Economics and Management, Shanghai Jiao Tong University, and the Marshall School of Business, University of Southern California.