Do you think war-ravaged regions like Iraq and Afghanistan offer opportunities for equipment makers?

There are moderate opportunities in those countries. In the short term, I would not be so optimistic. On the other hand, even with low oil prices, I still believe the core oil-producing markets to be the major investment areas, like Kazakhstan, Azerbaijan, Turkmenistan and also some of the other Middle East countries. I am hopeful energy markets can return to some improving of infrastructures.

In a flat market, is it possible for construction-equipment companies to move into military hardware?

I looked at this over 10 years ago. We also acquired a company in the Czech Republic. I believe the military business requires certain standardization, and I think construction companies should look into specific military products where they have engineering talent. But we don’t believe we can build the core business around it because it is so specialized. For example, I am happy to be in the crane business and compete for military crane applications, but I won't call myself a defense contractor. As a specialty provider, yes, but as a core business strategy, I think it is very difficult.

But some Chinese companies seem to be capable of handling military business?

Chinese companies' parentage tends to be linked to military. Many of the companies are state-owned enterprises. They come from a history in which, 30 years ago, that was their core business, and construction machinery was their side business. Now, perhaps, it is a bigger business. So, it is a matter of history, and, in China, of course, such a large portion of the economy is still with state-owned enterprises.

How do you rate the quality of R&D coming out of China?

It is improving. Over the long term, I am confident that the Chinese R&D would be quite competitive. In the short term, there are still a lot of performance questions. Chinese have focused a lot on copying and not enough on designing. And I think this is a bit of a challenge. Because markets around the world lean toward the life expectancy of an asset. So, if you buy a piece of equipment at 30% below price, it has no residual value because it has no secondary market. Smart asset buyers still see that as a negative.

Don't the Chinese makers compete very well by providing easy financing?

This is what got their crane and construction products in trouble. There are companies that have receivables that are one and half times their revenue. They have huge debt problems. Most Western companies would be bankrupt with that kind of debt problem.

What was your experience at Bauma China in Shanghai?

Our Bauma experience was very positive. I was not there, but my team tells me it was good for us. The mood in the market was mixed, depending on what business or category you are in.