Since Caterpillar entered Chinese market, the company had formed force competition with the domestic construction machinery enterprises on one side, and also brought in advanced operation concept and marketing thoughts on the other side, bringing along the rapid growth of the construction machinery market in China.
　　
However, the merging and acquisition mode for development that the foreign enterprises chose in the past years should be alerted by the professionals in the construction machinery industry. Beginning from the 1980s, Chinese manufacturers signed contracts on technology transfer and started to produce licensed products from Caterpillar, mainly including the technology transfer of loaders and bulldozers. At present, this still benefited LiuGong and XGMA as the leading enterprises in China. Since 1990s, Caterpillar speeded up the business expansion in China, and established co-funded enterprises with Chinese companies successively. Co-funded enterprises were just the prelude of Caterpillar to enter Chinese market, and the company had more plans and strategies in the future.
　　
The experts from Institute of Industrial Economy, Henan Provincial Academy of Social Sciences offered an explanation. “Many foreign-funded enterprises would apply strategies for merging and acquisition when entering Chinese market, and they moved toward their goal of holding the stocks through increasing the investment and expanding their shares,” they said.

In 1994, Caterpillar and Shangchai established an engine company, which finally turned out to be bankrupted after the loss in successive three years. Later in 1995, Caterpillar worked together with the largest construction machinery manufacturing enterprise in China—Xuzhou Xugong to establish Caterpillar Xuzhou Co., Ltd., but finally Xugong was forced to withdraw the business at the end of 2008.

The spokesperson of Xugong explained the reason. “When Caterpillar began to earn money on spare parts, the co-funded company had a great deficit for three years. Caterpillar asked to increase the investment, while Xugong that had no money to invest had to sell their 24.4% of the stocks. Caterpillar then had the co-funded company by nearly 85% of the stocks, and Xugong was forced to withdraw their business after losing their product line of excavators with the highest profits.”

Moreover, the remanufacturing technology of Caterpillar was more noticeable. They considered the return and reuse of the products when designing, and resumed the products to a “new” state in the factory, reducing the demand on the raw material to be minimum, which not only saved the costs of the customers, but also was good for environmental protection.
　
“Remanufacturing business had become one of the core competitive advantages of Caterpillar, which could make use of 45.4 million ton of scrapped irons. During the emergence of Central China, Caterpillar would cooperate with more companies in Henan to search for win-win during the transformation progress,” Lin Jian’an, the professor from Tsinghua University Teaching Center, Henan.

About Caterpillar:

For more than 85 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2009 sales and revenues of $32.396 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services.