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China Expected to Outperform other National Construction Markets through 2016

Construction expenditures in China are expected to increase 8.8% per year in real terms through 2016, according to a new report from the Beijing office of The Freedonia Group Inc. Although growth will decelerate from the rapid 2006-2011 pace, the country is predicted to continue to outperform other major national construction markets. Ongoing urbanization and industrialization, rebounding foreign investment funding, rising personal income levels, and further population and household growth will all work to drive gains. However, further growth will be prevented by a slowdown in the Chinese economy through the forecast period, especially in fixed asset investment.

Construction expenditures in China are about equally split among the residential building, nonresidential building, and nonbuilding construction segments, each of which accounted for around one-third of total construction spending in 2011. Nonbuilding construction will be the fastest growing segment through 2016, with expenditures climbing 9.5% annually in real terms.  Growth will benefit from state-led efforts to expand and upgrade the country’s transportation infrastructure, which includes a national high-speed railway and the “7918 Network” national highway system. Construction of utilities, including power generation and water supply facilities, will also contribute to nonbuilding construction spending gains.

Residential building construction will advance at an 8.5% annual pace in real terms through 2016, primarily spurred by rising personal income levels, household growth, and continuing urbanization. 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 help drive gains in residential building construction spending. 

Nonresidential building construction expenditures are forecast to rise 8.3% annually in real terms through 2016. Advances will be driven by robust increases in consumer spending, both in China and abroad, for Chinese manufactured goods and services. These increases are expected to spur domestic and foreign direct investment in plants, warehouses, commercial buildings, and shopping complexes.

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