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Construction Spending in China to Increase 9.4% Annually through 2015

July 25, 2011
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Construction expenditures in China are expected to rise 9.4% per year in real terms through 2015, moderating from the rapid pace of the 2005-2010 period. Gains will be bolstered by a growing domestic economy, ongoing urbanization and industrialization, rebounding foreign investment funding, continuing efforts to expand and upgrade physical infrastructure, and rising income levels, according to “Construction Outlook in China,” a new study from the Beijing office of The Freedonia Group Inc.

The three major construction segments-residential buildings, nonresidential buildings and non-building structures-each accounted for approximately one-third of total spending in 2010. The non-building construction sector will advance 10.1% annually in real terms through 2015.

Government spending initiatives are the predominant drivers of non-building construction activity. Growth will benefit from state-led efforts to expand and upgrade the country’s transportation infrastructure such as highways, railways and subway systems, and airports. Utilities construction is also expected to contribute to non-building construction spending gains, as the government continues to increase the country’s power generation capacity and improve electricity transmission networks, as well as expand and improve municipal water supply coverage and gas distribution.

Spending on residential buildings is projected to grow at an annual pace of 9.7% in real terms through 2015. Gains will be primarily supported by rising personal income levels and ongoing population migration from rural to urban areas. 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 bolster residential building construction spending.

Nonresidential building construction expenditures are forecast to rise 8.3% per year in real terms through 2015. Growth will reportedly be driven by strong increases in construction spending on commercial and office applications, spurred by a growing services sector and rising personal income levels. However, a moderation in growth in the manufacturing sector will restrain gains, and nonresidential building construction spending will increase more slowly than both the non-building and residential building segments.

For more information, visit www.freedoniagroup.com.

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