Caterpillar, construction equipment--Caterpillar Welcomes Prospect Of More Chinese Government Work

A senior Caterpillar Inc. (CAT) executive on Friday welcomed China's pledge to open up more government contract work to overseas companies with manufacturing operations in the country.

The world's largest supplier of construction equipment, has had difficulty obtaining government-funded contracts because of regulations that give preference to Chinese companies. With more than 7,700 employees in China working at 11 assembly plants, three research centers and offices and distribution centers,

Caterpillar executives have argued their company should viewed as a domestic manufacturer. During a visit to the U.S. this week by Chinese President Hu Jintao, the Chinese government said it would revise its contractor qualifications with the intent of allowing foreign-based companies to be awarded government contracts.

"We were pleased with the tone and the substance of the discussions over the past few days," said Rich Lavin, group president for Caterpillar'sChina and Asia operations, during a panel discussion on trade in Chicago. "Many of the infrastructure projects we bid on are government-sponsored or government- supported. So in order to get your equipment qualified it's important to be seen as a domestic manufacturer."

Lavin declined to offer a prediction on how much of a sales increase Caterpillar could see if it received domestic manufacturer status, but added the policy change would be a significant milestone in China's relationship with foreign-based companies doing business in China.

China's rapid expansion of its public infrastructure and mining sector has made the country the world's fastest growing market for construction equipment. Caterpillar's growing emphasis on China has attracted criticism from some in the U.S. who see the Peoria, Ill., company's overseas expansion as an abandonment of its U.S. manufacturing operations.

But Lavin said as the company's operations in China have grown, so too have the company's U.S. exports to China, particularly U.S.-built mining truck and power-generating engines. Caterpillar said it has exported more than $2 billion worth of its equipment to China in the past five years.

Moreover, as more capacity at Caterpillar's Asian plants is devoted to supplying the Chinese market, the company has shifted some overseas assembly work back to the U.S.

"Some people have the misconception that trade is a zero-sum game," said Lavin. "Our experience in China has been outstanding. We've grown in China and our growth in China has spurred growth in the United States."