All Caterpillar Inc. said was that demand in China would be flat this year. That only scrapes the surface. 

The U.S. industrial bellwether blamed China for the 4 percent slide in its Asia-Pacific sales for the fourth quarter. The mainland market constitutes 10 percent to 15 percent of the company’s construction-segment sales and 5 percent to 10 percent of the total. Jittery investors dumped machinery stocks in Asia on Tuesday, following the American machinery giant’s 9 percent slump in New York.

Caterpillar executives did take the opportunity to remind investors that the last two years have seen strong excavator sales growth in China – up 40 percent last year and doubling the year before. Executives chalked up the slowdown to a high-base effect from 2017, saying it wasn’t “actually an overall view of China for the year.”  

The likes of Caterpillar may want to take a closer look at what’s happening on the ground in China, where the American machinery maker has more than 20 manufacturing facilities and around 13,000 employees. Large excavator sales, typically used in heavy infrastructure work, are slowing there; and while overall sales of hydraulic excavators rose 12 percent from a year earlier in December, that’s down from high double-digit growth for much of the past year. 

Against this backdrop, foreign makers are struggling more than local rivals. Caterpillar’s 20 ton-and-over sales fell 18 percent. Work volumes also have tapered off: Komatsu Ltd.’s operating hours slid 14 percent in December. 

The strong growth of the last two years has been partly thanks to replacing old machinery, bought during the last stimulus. The average lifespan of such equipment is usually about eight years, according to Nomura Research analysts. An uptick in property investment also helped. These factors have run their course.

Beijing is now trying to dig itself out of a slowdown, and that may give construction activity a short-term boost when stimulus measures fully kick in. But China’s problems run deeper this time, as we’ve explained here.  A slump in the construction-machinery sector, which accounts for approximately 0.4 percent of nominal GDP, could shave 0.2 percentage points off GDP growth this year, according to Nomura.

That whirring sound is getting fainter. Caterpillar should be listening carefully.

To contact the author of this story: Anjani Trivedi at atrivedi39@bloomberg.net

To contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal.

©2019 Bloomberg L.P.