China growth picture may dim, but for Caterpillar it’s a bright spot

Few US companies have had a harder time in recent months defending their enthusiasm for China than Caterpillar.

In January, executives acknowledged that accounting misconduct at a Chinese subsidiary would wipe out nearly half of Caterpillar’s expected earnings in the fourth quarter of last year. Last week, its China exposure was criticised by a top short-seller who warned China’s economic growth was essentially a state-sponsored bubble that was about to burst.

But on Wednesday, executives at the Peoria, Illinois-based maker of earth-moving equipment were unapologetic, not only defending the long-term wisdom of their China strategy but highlighting how the country had been a bright spot in an otherwise disappointing quarter.

“I am not one in the camp of a China implosion – that China will implode and drag the world down into a massive black hole,”

Caterpillar chairman and chief executive Doug Oberhelman told analysts during a call to discuss the company’s earnings miss in the latest quarter.

In an earlier appearance on CNBC, he was even more blunt: “We think China has bottomed” - referring to the moderation in that country’s GDP, which grew at 7.5 per cent rate in the second quarter, according to the country’s National Bureau of Statistics, down from 7.7 per cent in the first quarter and 7.9 per cent in the last three months of last year.