The industrial output value of China's largest agricultural machinery manufacturers has reached $7 billion (48 billion yuan) in the first quarter of 2009, up about 21% from one year prior, stimulated by the government's 10 billion yuan subsidy.

Large- and mid-size tractors led the growth, with output soaring 71% and 33% from the previous-year's period to 11,534 units and 30,678 units, respectively.

Output of crop harvesters and field working machines grew by 44.1% and 37.6%, respectively.

Gao Yuanen, chairman of the China Assn. of Agricultural Machinery Manufacturers, predicted the gross industrial output value of China's agricultural machinery industry will hit 220-230 billion yuan in 2009, up 15-20% from the previous year.

China's subsidy going to agricultural machinery in the first quarter of this year alone has equaled the entire year of 2008, according to information from the Ministry of Agriculture. By April 15, all Chinese provinces gave out 5.28 billion yuan in subsidies to over 1.05 million farmers for the purchase of 1.12 million sets of agricultural machines, accounting for 52.8% of the 10 billion yuan subsidies appropriated by central finance.

Changzhou Dongfeng Agricultural Machinery Group reported sales revenue of 382 million yuan in the first quarter, up 40.87% from last year's quarter. Total profits reached 20.73 million yuan, compared with 16.18 million yuan for the whole year of 2008.

Beiqi Foton's sales revenue climbed 47.6% to 4.3 billion yuan in the first three months, with harvester sales up 122.2% to 18,649 units and sales of large and mid-size tractors up 44.7% to 14,532 units, according to an official from Foton Lovol International Heavy Industry Co., Ltd.

YTO Group Corp. achieved both an output value and sales revenue growth over 40% in the first quarter, with sales of large tractors, mid-size tractors and diesel-engine vehicles respectively up 82.8%, 59.7% and 52.1%.

Industry experts believed that the hefty rises of farm machinery sales is fueled by the government subsidy policy and demand release in advance. They predicted sluggish sales in the second half of the year.

An industrial insider said that most enterprises weren't well prepared for the sales surge, defensively shielded from the financial crisis and sluggish 2008 fourth quarter demand. As a result, they now face a high hurdle in meeting market demand in the short term, and dealing with a possible fund shortage upon massive production.

Zhang Guanghua, deputy director of the China Agricultural Machinery Distribution Assn., considered the sales surge a premature release of demand.

Gao echoed the idea, warning enterprises of market uncertainties including slowdown in exports.

Agricultural machinery enterprises should not depend on subsidies only, but rather upgrade themselves with R&D for new products, expand into overseas markets, conduct mergers and acquisitions and restructure enterprises.