Editor's Comment: What next for China?

By Chris Sleight01 February 2013

International Construction editor Chris Sleight.

International Construction editor Chris Sleight.

The Chinese construction market continues to be a tough one to call. After the stimulus-driven boom of 2009 and 2010, followed by the slowdown of the last two years, the question remains, ‘What next for China?’
One point that everyone agrees on is that when the market comes back to health, we will not see the kind of +10% to +20% growth figures that were a feature of the 2000s. Growth is expected to come back, and may well be in the high single-digit range over the coming years, but people use words like ‘measured’ and ‘targeted’ to qualify their predictions.
Infrastructure spending remain a key driver, but perhaps with more emphasis on urban systems aimed at reducing traffic congestion and improving living conditions. Metro systems, water & wastewater infrastructure and improving urban roads are likely to feature more and more, although inter-city high speed rail and highway construction will still be significant.
China’s growing middle class augers particularly well for the residential sector, as people move to cities and seek a higher standard of living for themselves. But at the same time, authorities will be wary of creating another bubble in the real estate market. These problems not only impact on boom towns like Shanghai and Beijing. At the other end of the spectrum, rows of vacant apartment buildings in the country’s second- and third-tier cities, and even the famous modern Ghost Towns of China are testament to how badly directed investment has been in the past.
And one area of construction that definitely does not look as promising as before is the non-residential sector linked to industry and manufacturing. With world trade slowing and China seeking to rebalance its economy away from exports and towards internal consumption, there are few prospects for a new boom in factory construction.
But for all the caution about the future, most of those who follow the Chinese market remain upbeat. Growth may not reach the levels we saw in the 2000s, but talk to a contractor in Europe about ‘only 8%’ growth, and the response might not be particularly polite.
That bullishness was reflected in the Bauma China Exhibition, which was held at the end of last year and is reported on in-depth in this month’s regional report. Despite the body blow of a -40% or so downturn in construction equipment sales this year, there was no shortage of new machines at the exhibition, and some striking innovations.
As a result of these, I wouldn’t be surprised if China isn’t the home of the highest population of hybrid and alternative fuel (mostly Liquefied Natural Gas - LNG) construction machines anywhere in the world. But perhaps this is a sign of the times. As margins shrink, the pressure on contractors to find cheaper ways of operating increases.
Still, it was hardly an exhibition where the market felt distressed, but now there is a recovery on the horizon there may be fallout among the manufacturers, with mergers or even bankruptcies.

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