Caterpillar digs for new opportunities

China's stricter environmental protection regulations and its booming natural gas industry will create opportunities for global machinery manufacturers, which are grappling with a global economic slowdown.

Last year was a tough one for the world's heavy equipment producers. The world's second-largest economy - China - was facing multiple problems, such as rising costs, low product prices and falling demand, which throttled profit growth.

However, foreign participants in the industry still express strong confidence in China's economy as they seek new growth avenues.

"Every country has to go through an adjustment period, since no boom can last for hundreds of years, but after a painful transition, it will be healthy," said Douglas R. Oberhelman, chairman and chief executive officer of Caterpillar Inc, the world's largest maker of construction and mining equipment.

He said the company will continue to invest in the Chinese market, which has huge potential.

Given the country's serious pollution problem, the Chinese government has taken a range of steps: closing small coal-fired power plants, for example, and toughening emission standards for steel mills, construction equipment and refineries.

"Caterpillar has mature clean technology that we've been developing for 15 years, since the United States and Japan went through a similar period to what China is now in terms of dealing with pollution," said Oberhelman.

"It is cost-saving, in that we don't need to do all the R&D work for China, particularly to develop environmentally friendly equipment. We just need to bring the technology here, which we would love to do."

To increase the use of clean energy, China is pushing the development of conventional and unconventional sources of natural gas. Oberhelman believes that drive will bring huge opportunities for Caterpillar's natural gas engine unit.

"China is at the starting stage of a natural gas industry ... that will bring huge market opportunities," he said.

Oberhelman said the company will continue to focus on construction and underground mining equipment for its product structure while grasping the opportunities created by China's natural gas boom.

He forecast GDP growth of 7 to 8 percent in China in the coming years, which is still much higher than growth in other markets.

"I see it as a big opportunity, and we will become a market leader in the industry in China," he said.

China's machinery sector began to falter in 2011 after years of approximately 30 percent annual growth, because of excess capacity and a slowing economy.

Cai Weici, vice-chairman of the China Machinery Industry Federation, said profit growth in the nation's machinery industry has been decelerating for several years.

Profit will be flat in the years to come, he said, and "companies should be prepared."

"Thanks to a diverse product structure, we are happy with our profits last year," said Oberhelman. "Our return on capital investment in China is very acceptable."

According to the company, Caterpillar's China sales increased 20 percent in 2013. Global sales slid 16 percent to $55.656 billion.