Multiple Factors to Drive Construction Expenditures in China
Construction expenditures in China are expected to increase 7.8% per year in real terms through 2019, according to the Freedonia Group’s “Construction Outlook in China” study. Gains will be driven by ongoing industrialization, an increasing urban population, expanding foreign investment funding, rising personal income levels, and further population and household growth in China. The government’s effort to sustain growth in the manufacturing sector, improve the country’s infrastructure, expand municipal utilities, and balance regional economic disparity will also help growth in construction spending. However, further growth will be restricted by a slowdown in the Chinese economy, especially in fixed asset investment.
Residential building construction, which accounted for 31% of construction spending in China in 2014, will advance at a 7.5% annual pace in real terms through 2019. “Rising personal income levels, population and household growth, and population migration from rural to urban areas will drive advances,” said Toni Niu, analyst. Government efforts to improve living conditions for low-income earners (including the construction of affordable and low-rent houses in urban areas and subsidies for alterations of dilapidated farmhouses in rural areas) will also spur gains in this segment.
Non-residential buildings represented the largest segment of the construction market in China in 2014, accounting for 40% of construction spending. Spending on non-residential construction is forecast to rise 8.1% annually in real terms through 2019. Increases in consumer spending for manufactured goods and services, accommodative government policies, and foreign direct investment will all work to drive gains. Government efforts to improve standards of living in China will also spur the construction of schools, hospitals, and other institutional structures.
Non-building construction, which accounted for the remaining 28% of construction spending in 2014, is expected to grow at an annual rate of 7.9% in real terms through 2019. State-led efforts to expand and upgrade the country’s transportation infrastructure, especially in the less developed western regions, will support gains, as will government efforts to expand municipal facilities, such as water, power, and heat supply systems, to serve a growing urban population.
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