Japanese construction machinery manufacturer Kato Manufacturing Co., Ltd. recently announced the dissolution and liquidation of its subsidiary in Kunshan City, Jiangsu Province, China, which is engaged in the manufacturing and sales of hydraulic excavators. The subsidiary, Kato Chuun (Xiamen) Construction Machinery Co., Ltd., will also begin the liquidation process in August. After the closure of these two companies, Kato Manufacturing Co., Ltd. will withdraw from the Chinese market.
According to an announcement on the official website of Kato Manufacturing Co., Ltd. in Japan on July 12, they will dissolve and liquidate their subsidiary in Kunshan City, Jiangsu Province, which is involved in the production and sales of hydraulic excavators. Kato (China) Construction Machinery Co., Ltd. confirmed this information to the Chinese media outlet “Huaxia Times” on the morning of July 26.
On the morning of July 26, employees of Kato (China) Construction Machinery Co., Ltd. confirmed the dissolution of the company to “Huaxia Times,” stating, “The specific reasons have been publicly announced and are available online.” However, they did not provide responses to inquiries regarding the exact dissolution timeline, employee arrangements, and other related issues. Employees of Kato Chuun (Xiamen) Construction Machinery Co., on the other hand, suggested referring to the official website of Kato Manufacturing Co., Ltd. for accurate information.
Kato Manufacturing Co., Ltd. disclosed on its website the reasons for exiting the Chinese market, citing factors such as the downturn in the Chinese real estate sector, a decrease in demand for construction machinery, intensified competition with local low-cost manufacturers, and a more challenging sales environment, making early profitability improvements extremely difficult.
However, according to revelations by mainland Chinese self-media personality “Huoshan Shihua,” Kato Manufacturing Co., Ltd. had indicated in an announcement in March of this year that its marketing operations in China would continue, including the sale of inventory products. Yet, after just four months, the company ultimately proceeded with dissolution.
Public records indicate that in 2004, Kato Manufacturing Co., Ltd. invested in establishing a plant in Kunshan primarily focused on producing hydraulic excavators. By the end of 2023, the company had 75 employees, and its factory occupied an area of 27,977 square meters.
Additionally, on May 14 of this year, Kato Manufacturing Co., Ltd. announced that following the expiration of the joint venture agreement with Kato Chuun (Xiamen) Construction Machinery Co., Ltd. in June, there would be no renewal, and all shares held were transferred.
Currently, Kato Manufacturing Co., Ltd. announced that it will pivot its focus to the surrounding markets with India as the center to replace the Chinese market. However, the company plans to establish a new office in China to carry out post-maintenance and other related work.
According to Kato Manufacturing Co., Ltd.’s financial reports, in the nine months after 2022, Kato’s revenue in the Chinese region was 1.884 billion yen, with a loss of 589 million yen, equivalent to approximately 30 million yuan. For the same period in 2023, its revenue reduced to 1.489 billion yen, with a larger loss of 888 million yen, indicating an expanding deficit.
Not only has Kato Manufacturing Co., Ltd. incurred losses in the past two years, but the Chinese construction machinery market has also experienced a downturn due to the sustained low performance of the real estate market. According to statistics from the China Construction Machinery Industry Association, excavator sales in mainland China from January to December 2023 totaled 89,980 units, a 40.8% year-on-year decrease.
Many netizens expressed regret over another Japanese-funded company leaving China.
For example, “Bo Lan Bu Jing” commented: “No wonder there were online videos mentioning that this company was leaving; it’s very sad and distressing, and it’s another Fujian-based company.”
Furthermore, based on this incident, more netizens analyzed and indicated that the bottom-line price competition of Chinese companies is a form of “Gresham’s Law” – bad money driving out good money behavior.
“Ren Ruo Ran Wang Ji Lian” remarked: “The quality of Japanese excavators is still good! But unfortunately, domestically produced prices are too low to compete with!”
“Lu 15222155597” stated: “The bottom-line price handling of domestic machinery is severe, causing internal turmoil. If things don’t work out, we should rent out our own equipment and establish our leasing company to compete against you!”
“★Meng Xing/mg Shi Zhong” shared: “Both are in China, why can’t foreign-funded companies surpass local enterprises? How much do foreign-funded companies pay their employees, how many hours do they work, is it the same for state-owned enterprises in terms of working hours, wages, and benefits?”
“Sheng Lin” raised a question: “If all foreign-funded companies are driven away, is it really beneficial?”
A netizen from Hebei Province, “You Tai Du Wang You 003sLt,” bluntly said: “What real estate? It’s all about Kunshan’s layoff incidents. You can’t whitewash it!”
Public records show that Kato Manufacturing Co., Ltd. was founded in 1895 and is a well-known Japanese construction machinery company, specializing in various types of cranes, excavators, and more. According to the “2023 Top 50 Global Construction Machinery Companies” list, Kato Works ranked 48th with a revenue of 483 million USD.