China’s construction market growth to slow

The construction industry in China will see growth of approximately 4.5% over the next five years to 2023, according to information supplied by GlobalData.

In the fourth quarter of 2017 construction activity in China increased 6.1%, pushing growth for the year up to 4.5%. This is below the double-digit growth which the sector has previously enjoyed.

Investing in large-scale infrastructure projects has been a key part of the Chinese government’s strategy to boost growth. It is partly due to this reason that growth is expected to remain relatively level at 4.5%.

Danny Richards, lead economist at GlobalData, said, “With the authorities taking steps in recent years to rein in excessive debt-driven investment in infrastructure and urban development that had resulted in excess capacity in infrastructure and industry, and oversupply in real estate, the industry is not expected to return to the boom years of double-digit growth.”

Construction equipment sales in China increased dramatically throughout 2017 and 2018 in response to a series of new infrastructure contracts. However, specialist market research and forecasting company Off-Highway Research expect sales to decrease in the future. 

Chris Sleight, managing director, Off-Highway Research, said, “We believe the peak of construction equipment sales has now passed and the market will stabilise at a reasonable level.

“However, forecasting demand in China is always challenging as the government is inclined to intervene to stimulate or cool the economy as it sees fit. If economic growth slows, it may use construction investment as a tool to increase growth and that could trigger another surge in activity. Conversely, if the economy overheats and inflation starts to spike it may target the real estate and construction sectors with measures to slow down growth.”