Freedonia: Construction expenditures in China to grow over 8 percent annually through 2013

Construction expenditures in China are forecast to grow 8.1 percent annually in real terms through 2013, a deceleration from the 2003-2008 period, according to a May 27 Freedonia release. In the short term, construction activity will benefit from government spending packages designed to offset the effects of the global economic downturn. Stimulus measures include the construction of affordable and low-rent houses, physical infrastructure, and utilities; alterations of dilapidated farmhouses; and reconstruction of buildings and infrastructure damaged in the May 2008 earthquake in Sichuan. In the long term, a growing domestic economy, ongoing industrialization, continuing efforts to expand and upgrade physical infrastructure, rising income levels, and further population and household growth will fuel construction expenditures in China. These and other trends are presented in Construction Outlook in China, a new study from the Beijing office of The Freedonia Group Inc., a Cleveland-based industry research firm.

Nonbuilding construction expenditures will increase at the fastest pace, averaging 9.0 percent per year in real terms through 2013. The government remains the predominant source of funding for infrastructure-related construction. To address imbalances in development between urban and rural areas, as well as lessen the impact of the recent global financial crisis, the government has invested heavily in physical infrastructure in recent years. Nonbuilding construction activity will benefit from government efforts to modernize the country’s highways, railways and subway systems. In addition, the government continues to increase the country’s power generation capacity and improve electricity transmission networks, as well as expand and improve municipal water supply coverage and natural gas distribution, further boosting nonbuilding construction expenditures.

Nonresidential building was the largest construction sector in China in 2008, reflecting the nation’s emergence as an economic powerhouse over the last decade and its position as the largest producer of manufactured goods in the world. Real nonresidential building construction expenditures are projected to rise 8.0 percent per annum through 2013, moderating from the 2003-2008 period. Residential building construction expenditures are expected to increase 7.5 percent annually in real terms through 2013. Growth will be bolstered by rising income levels and further urbanization. Government efforts to improve living conditions for low-income earners will also bolster residential building construction spending.