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Construction will be the fastest growing segment in China

Press Release   •   Aug 09, 2012 13:56 IST

Construction Outlook in China to 2016
 Expenditures to increase 8.8% yearly through 2016
 Construction expenditures in China will rise 8.8 percent per annum in real terms through 2016. Although growth will decelerate from the rapid 2006-2011 pace, the country will continue to out-perform other major national construction markets. Ongoing urbanization and industrialization, rebounding foreign investment funding, rising personal income levels, and further population and household growth will all work to drive gains. However, further growth will be prevented by a slowdown in the Chinese economy through the forecast period, especially in fixed asset investment.
 Nonbuilding sector to remain fastest growing
 Construction expenditures in China are about equally split among the residential building, nonresidential building, and nonbuilding construction segments, each of which accounted for around one-third of construction spending in 2011. Nonbuilding construction will be the fastest growing segment through 2016. Growth will benefit from state-led efforts to raise and upgrade the country’s transportation infrastructure, which includes a national high-speed railway and the “7918 Network” national highway system.
 Residential building construction will advance at an 8.5% annual rate through 2016, primarily fueled by rising personal income levels, household growth, and continuing urbanization. Government efforts to improve living conditions for low-income earners (including the construction of affordable, low-rent houses in urban areas and subsidies for alterations of dilapidated farmhouses in rural areas) will also help spur gains in residential building construction spending. Nonresidential building construction expenditures will post the slowest gains in real terms through 2016. Advances will be driven by robust gains in consumer spending -- both in China and abroad -- for Chinese manufactured goods and services. These increases will spur domestic and foreign direct investment in plants, commercial buildings, warehouses, and shopping complexes.
 Northwest region to lead market gains
 Although China is a single country, it consists of numerous distinct regional markets characterized by different climates, populations, and levels of economic development. Construction expenditures in the Northwest region are expected to register the fastest gains of any region in China, benefiting from the government’s “Great Western Development” strategy, which will result in sizable increases in spending on infrastructure and manufacturing facilities in this area. However, the Central-East will remain home to about 30 percent of the country’s total population and 37 percent of its economic output, supporting a vast construction market that will account for 42 percent of overall spending on construction in China in 2016. Gains in the Central-East will be led primarily by growth in residential building construction, benefiting from the high personal income levels in the region.
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