Editor's Comment: BICES will be a barometer for China

By Chris Sleight13 October 2011

International Construction editor Chris Sleight.

International Construction editor Chris Sleight.

This month's BICES exhibition in Beijing, China, will be an important litmus test for the health of the country's construction industry. You can tell a lot about how well business is going in any country by how busy trade shows are and from the mood of exhibitors and visitors.

China has of course seen almost unbelievable growth over the last decade. Ten years ago it accounted for about 10% to 15% of the world's construction equipment market by volume, but for the last three years, more construction equipment has been built and sold in China than the rest of the world put together.

Part of this has been due to the massive slump in developed markets during the financial crisis. But at the same time, the Chinese government's stimulus plan has seen the country's construction output and its demand for equipment go through the roof. According to Off-Highway Research, more than 400000 pieces of construction equipment were sold in the country last year, compared to less than 100000 in both Europe and North America.

But over the summer there have been concerns that the break-neck growth of the last few years may be coming to an end, or at least taking a temporary pause for breath.

One of the reasons for this is that there is concern about bubbles building up in the Chinese economy. Inflation is currently above +6%, and if nothing else, the interest rate rises that have crept in since the end of last year have had an impact on growth. There are also worries that the real estate market in high-growth cities like Beijing and Shanghai is heading for a sudden and damaging correction.

More specific to the construction sector are the various controversies surrounding China's high-speed railway construction programme. Building this network was a central part of the stimulus plan and a major long-term goal for China, which has set a target of having a 16000 km high-speed rail in place by 2015. A breath-taking achievement when you consider that it had only about 1500 km of such track in 2008.

Although much of this has been achieved, the project took a heavy blow in March when Liu Zhijun, secretary general of the Ministry of Railways, was arrested on suspicion of taking more than US$ 100 million in bribes. A further setback came in July when a train crash in Zhejiang province killed 39 and left another 200 needing hospital treatment. The authorities were quick to blame this on a lightning strike, but it later emerged that faulty signalling equipment had caused the crash.

The incident - which smells of an attempted cover-up - has been a public relations disaster for the Government, with even China's placid state-run media being critical of the way the government handled the tragedy. It led to a two-month safety review of the network, and a reduction in train speeds.

This has of course all damaged the credibility of the rail building programme, and it will be interesting to see whether manufacturers that tooled-up for the expected construction bonanza - several major players developed rotary drill rigs specifically for high-speed railway construction - are now feeling the pinch.

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