Caterpillar's Woes In China Continue

Over the last two weeks, all news about the Chinese construction sector has been marked with ambiguity. On one hand, Caterpillar's (CAT) CEO Doug Oberhelman was reported saying that his recent visit to China revealed a positive "attitude change" among CAT's customers. On the other hand, CAT's largest competitor in China, Sany Heavy Industry Co, reported a 59% decline in profits and attributed it to slow economic growth in the region.

It has now become evident that CAT's CEO was right when he said that there is a lot of economic uncertainty and it will take another 60-90 days for the cloud to clear and the future to become more visible. On one side, the rise in imports of iron ore by China has sent positive signals to the economy. On the other hand, no one is sure for how long the rise in demand will stay, as many think this is a temporary surge brought about by the recent approval of $156 billion worth of infrastructural development projects in China.

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