BEIJING - Analysts are sounding an alarm bell over irrational promotional strategies in China's engineering machinery industry, warning of huge risks for firms and the industry.

In the first quarter of 2011, the industry has seen rapid growth, with profits of a handful of companies more than doubling.

Hebei Xuanhua Engineering Machinery Co., Ltd was the brightest star, increasing its profits by more than 498 percent over a year earlier. Zoomlion Heavy Industry Science and Technology Development Co. Ltd, and XCMG Construction Machinery Co. Ltd also fared well, increasing their profits by more than 130 percent and 98 percent, respectively.

The government's preferential policies and huge investment in welfare housing, high-speed rail and highway would guarantee the brisk sales in the coming future, said analysts from cmb2b.com, a major online industry portal.

China plans to build 10 million government-subsidized apartments in 2011 and invest 4 trillion yuan in water conservancy projects in the next 10 years, which will be a huge boost to the engineering machinery industry.

As competition heats up, some companies resort to enticing promotional strategies, which have led to the irrational purchase of engineering machineries, sparking fears of unsustainable development.

Some renowned companies give lucky draws including big household appliances and cars to their clients, in efforts to promote their brand and win bigger market share. Some use lower down payment for market promotions, especially for companies in the excavator sector.

Typically, buyers have to pay 30 percent of the deal as a down payment. But some manufacturers are luring customers with 10 percent down payment plus 5 percent deposit on delivery of products. Namely, a buyer can drive home an excavator valued at 800,000 yuan ($123,440) after paying less than 120,000 yuan ($18,516).

Some crane manufacturers even allow for “zero down payment, one-year of use for free and mortgage payment starting from the second year”.

Those practices not only hurt market competition, but also pose great risks to manufacturers and distributors, analysts warned.

For example, if buyers are unable to repay the loan on time, they may simply return the machineries, alleging quality problems or unsatisfactory after-sales services, which will result in a lose-lose situation.

Qi Jun, president of China Construction Machinery Association, called zero down payment a suicide.

If the current situation is not brought under control, a price war will happen, he said, severely hindering fair competition, affecting the quality of products and service, and finally damaging firms’ brand value and reputation.

Qi urges companies to abide by industry regulations and maintain fair competition environment together.

In order to win a bigger market share, he said, companies should adopt more market-oriented strategies, improve product quality with technical innovation and provide timely and effective after-sales services.