O
ver the last 10or 15 yearsChina has proved tobe one of themost
dynamic and sometimes surprising construction markets in the
world. Its meteoric rise in the 2000s, and the even greater boom
from2009 to2011on thebackof the government’s stimulus efforts have
made it second only to theUS in terms Dollar terms, and probably the
largest in the world in terms of volumes ofmaterials being placed.
But since the stimulus boom came to an end it has been a difficult
market to reador predict.There has always been the reassurance that the
central government will not allow a crash – toomany Chinese jobs rely
on the industry.What’smore, it is an exportablebusiness for contractors,
materials producers and equipment makers which are pushing-out
overseas, so is a valuable currency earner and contributor to the economy.
But while we can be fairly safe in the knowledge that there won’t be
a catastrophic industry collapse, the golden days seen in the last decade
aren’t about to return either. The path for the Chinese construction
industry lies somewhere between these two extremes, but it has become
harder to predict as the country’s needs have changed and policy has
becomemore nuanced.
Take the residential sector as an example. The problems of a real
estate boom in cities like Beijing and Shanghai are well reported, with
rocketingpropertyprices puttinghome ownershipout of reach formany
and dangerous speculative pressures building up. At the same time, the
Chinese government has a policy of building state-funded affordable
housing which will see work onmaybe 7million dwellings started this
year.
Similarly, the bold nation-spanning road and rail projects of the last
decade are winding-down. But at the same time, the infrastructure
market looks fairly vibrant, with a focus moving to building metro
systems in cities, upgrading or replacing old airports and filling a few of
themissing links in the traditional road and rail segments.
The overall effect is that construction growth is slowing, but that
statement needs context.
During the 2000s, themarket was expanding at anywhere from +10%
to +20% ormore per year. Now that rate is down around +6% to +8%.
If those sort of growth levels were seen in Europe, Japan or the US,
contractors would be breaking out the Champagne, but in the context
of China this is low growth.
But it is a level of growth that themarket is going to have to get used
to. There is no new boom on the horizon, so business models that were
predicated on the +10% to +20% annual growth rates of the last decade
need to change.
And for all the dynamism of the market, this type of change is
something China seems to be struggling with. There is still too much
capacity in the supply chain – equipment manufacture being a prime
example, as was clear from many of the comments made to
iC
at
November’s Bauma China exhibition – andmargins among contractors
are still poor.
The state’s influence in these industries aswell as thebanks that finance
them may be one reason why the problems in China’s construction
industry remain as it enters a fourth slowdown year. The danger is that
if they are not addressed soon, China will end upwith an industry of
zombie companies rather than the vibrant and exportable
sector it aspires to.
Chris Sleight
Editor
KHL OFFICES
UNITEDKINGDOM (HEAD OFFICE)
Southfields, Southview Road,
Wadhurst, East Sussex TN5 6TP, UK.
Tel: +44 (0)1892 784088
Fax: +44 (0)1892 784086
USA OFFICE
KHL Group Americas LLC
3726 East Ember GlowWay,
Phoenix, AZ 85050 USA
Tel: +1 480 659 0578
e-mail:
SOUTHAMERICA OFFICE
KHL Group Américas LLC
Manquehue Norte 151, of 1108.
Las Condes, Santiago, Chile
Tel: +56 2 2885 0321
e-mail:
CHINA OFFICE
KHL Group China
Room 768, Poly Plaza, No.14, South Dong
Zhi Men Street, Dong Cheng District,
Beijing 100027, P.R. China.
Tel: +86 (0)10 6553 6676
e-mail:
KHL SALES
REPRESENTATIVES
ADVERTISEMENTMANAGER and
USA/INDIA
Alister Williams
Tel: +1 312 860 6775
e-mail:
CORPORATE ACCOUNTMANAGER
David Stowe, UK Head Office
Tel: +44 (0)1892 786217
e-mail:
GERMANY/AUSTRIA/SWITZERLAND/
BENELUX/EASTERN EUROPE
Simon Battersby, UK Head Office
Tel: +44 (0)1892 786232
e-mail:
CHINA
Cathy Yao
Tel: +86 10 6553 6676
e-mail:
FRANCE
Hamilton Pearman
Tel: +33 1 45 93 08 58
e-mail:
ITALY
Fabio Potestà
Tel: +39 010 570 4948
e-mail:
JAPAN
Akiyoshi Ojima
Tel: +81 (0)3 3261 4591
e-mail:
KOREA
CH Park
Tel: +82 2 730 1234
e-mail:
NORDIC COUNTRIES
Peter Gilmore
Tel: +44 (0)20 7834 5559
e-mail:
TURKEY
Emre Apa
Tel: +90 (0)532 324 36 16
e-mail:
SPAIN
Mike Posener
Tel: +353 86 043 1219
e-mail:
UK
Lynn Collett, UK Head Office
Tel: +44 (0)1892 786219
e-mail:
USA/CANADA
Alister Williams
Tel: +1 312 860 6775
e-mail:
CLASSIFIED SALES
Paul Watson, UK Head Office
Tel: +44 (0)1892 786204
e-mail:
International Construction
(USPSNo: 021-895)
is publishedmonthly by KHLGroup and
distributed in theUS byDSW, 75AberdeenRd,
Emigsville, PA17318-0437. Periodicals postage
paid at Emigsville, PA. Postmaster: send address
changes to
International Construction
,
POBox 437, Emigsville PA17318-0437.
ISSNNo: 0020-6415
USPSNo: 021-895
© Copyright KHL Group 2015
COMMENT
3
january-february 2015
international
construction
The paper in thismagazine originates from timber that
is sourced from sustainable forests, managed to strict
environmental, social, and economic standards. The
manufacturingmill has both FSC& PEFC certification,
and also ISO9001 and ISO14001 accreditation.
