Construction Industry Analysis

Overview of the Construction Industry in China

Construction Industry Overview

Owing to the booming macro economy and large investment in fixed assets, the total output value of the construction industry in China registered a robust growth in the past few years, rising from CNY 11,646.3 billion in 2011 to CNY 19,356.7 billion in 2016, representing a CAGR of 10.7%. In 2015, due to the decreased growth rate of investment in fixed assets and the arrival of “new normal” phase, the year-on-year growth rate of the total output value of construction demonstrated a downhill from 10.2% in 2014 to 2.3% in 2015.

However, China launched the 13th Five-Year Plan in 2016 with the goal to achieve well-off society in an all-round way by 2020 and to accelerate the increase of urbanization rate, which led to the recovery of the construction of social housing, resettlement housing, and infrastructure.

Meanwhile, benefiting from the advanced promotion of PPP mode, the growth rate rebounded to 7.1% in 2016. Going forward, driven by the continuous government investment in infrastructure construction and favorable policy on urbanization, especially the policy to promote the urbanization process in the Midwest area, the total outputConstruction Industry value of construction industry of China is expected to continue to grow and is estimated to reach CNY23,053.6 billion in 2021.

Building construction

The large population in China forms the giant market base for building construction. Tightening policy slows down the growth of the residential construction market. However, industrial upgrading still drives the dynamic growth of the commercial and industrial construction market.

Infrastructure construction

The surging population density especially in the first tier and second tier cities continuously increases the load of public facilities and resources, generating considerable demand for infrastructure construction and maintenance. Transportation infrastructure construction is a sub category of infrastructure construction. The flows of transport are the blood stream of municipalities, and the

transportation infrastructure plays the role of blood vessels. Increasing penetration rate of automobile and expanding economy scale in China’s cities lead to more investment to be pumped into transportation infrastructure to maintain the normal functions of cities.