Construction Outlook in China

Freedonia Group Inc
July 1, 2013
235 Pages - SKU: FG5090961
Countries covered: China

Demand to grow 8.5% per year through 2017
Construction expenditures in China are expected to increase 8.5 percent per year in real terms through 2017. Ongoing urbanization and industrialization, rising income levels, further population and household growth, and the government’s continuing efforts to expand and upgrade physical infrastructure in the country will support healthy growth in construction spending. However, growth will moderate notably from the 16 percent annual gains during the 2007-2012 period, when gross fixed capital formation was boosted by the government’s stimulus program to counter the global financial crisis in 2009.

Construction expenditure markets nearly evenly split
Construction expenditures in China are nearly equally split among residential buildings, nonresidential buildings, and nonbuilding structures. Each of these segments accounted for around one-third of the total construction market in 2012. Nonbuilding construction will see the fastest growth (in real terms) through 2017. Increases will benefit from stateled efforts to expand and upgrade the country’s transportation infrastructure, such as the “7918” highways network, subway systems in major cities, and several airports. Utilities construction will also contribute to nonbuilding construction spending gains, particularly in fast growing urban areas, as the government continues to expand and improve access to such infrastructure as water supply, sewage treatment, rubbish disposal, and gas distribution. Further efforts to increase the country’s power generation capacity and improve electricity transmission networks will also drive spending on nonbuilding construction.

Nonresidential buildings to exhibit best annual gains
Inflation-adjusted nonresidential building construction expenditures are forecast to post the best annual gains through 2017. Growth will be led by strong advances in industrial building construction. The manufacturing sector in China will continue to expand quickly, benefiting from robust increases in consumer spending for manufactured goods, accommodative government policies, and foreign direct investment. Spending on residential buildings will be slightly less through 2017, with market gains primarily driven by continuing population migration from rural to urban areas and supported by rising personal income levels. Despite strong gains in housing construction over the last decade, living conditions remain poor for some residents due to uneven distribution of housing ownership in urban areas in China.

Central-East to remain largest regional market
The Central-East region, home to about one-third of the country’s total population and economic output, supports the largest regional construction market and will account for the majority of total construction spending in China in 2017. Construction expenditures in the Northwest region are expected to enjoy the fastest growth, benefiting from the government’s “Great Western Development” strategy and rising personal incomes, which will result in relatively stronger increases in construction spending on infrastructure and manufacturing facilities and housing.

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