An escalator accident at a subway station in Beijing on July 5, which killed a 13-year-old boy, has had an increasingly negative impact on Otis (China), the company that installed the escalator.

According to sources close to the company, Otis's sales have suffered a serious blow since the accident as clients who had signed orders with Otis ask for refunds, while many contract negotiations are facing collapse. Otis has sent an American team from its global headquarters to China to evaluate the impact of the subway escalator accident on sales. At worse, Otis (China) will suspend operations and slash production.

What Otis is seeing now is a short-term negative impact. The Beijing Municipal Transportation Administration, which operates the city's subways, said it will suspend purchases of Otis escalators. In Nanchang, Jiangxi Province, which is currently building its first subway line, the subway operators have said they were no longer going to install Otis escalators.

"The Otis escalator accident made consumers aware that Class A brands also have security risks, which has been good news for domestic elevator companies," said a senior manager from China's Canny Elevator. Canny share prices have recently increased modestly.

The escalator accident has helped to change the perception that foreign brands are better than domestic ones, said Liu Buchen, an industry analyst. But whether domestic brands could have a place in China's elevator market depends on their product quality and after-sales service standard.

Statistics from the China Elevator Association shows that the national elevator output increased 40 percent in the first half of 2011 over the same period last year, while growing only 20 percent annually over the past 10 years.

In the wake of the booming industry and the recent escalator accident, the central government is expected to issue a new national standard for elevators based on European standards implemented at the end of 2009.