Page 172 - 2018 White Paper on the Business Environment in China
P. 172
8 White Paper on the Business Environment in China
2.3 Construction Sector
Background infrastructure sector over the next two years, especially in the
transport, power and water segments, but the construction
According to statistics from China’s Ministry of industry’s share of GDP will gradually fall off from 6.6
Commerce, heated infrastructure investments in percent in 2017 to 6.0 percent in 2026 as the government
construction for the first five months of 2017 contributed attempts to shift nation’s economy toward a consumption-
to a year-over-year (YoY) increase of almost 89 percent led growth model. Concerns of overcapacity in steel and
in the sector. Almost 2,130 new contracts were cement production, as well as the supply of residential and
signed with 62 countries along the Belt and Road, the commercial real estate will dampen investment interest
development strategy proposed by President Xi Jinping across the industry (China Infrastructure).
that focuses on connectivity and cooperation between
Eurasian countries, for a total value of $38.47 billion, Australia and New Zealand (ANZ) Bank Chief China
accounting for 51 percent of new contracts with foreign Economist Raymond Yeung claims that the Chinese
companies from January to May, 2017. Chairman of China government has a tendency to rely on infrastructure
International Contractor’s Association Fang Qiuchen said development to sustain growth in the long term. “The
that infrastructure connectivity would be the priority question we need to ask,” according to Yeung, “is whether
of Belt and Road’s first five years of development. this investment-led model is sustainable as the authorities
Construction, as a pillar industry of China’s economy, have trouble taming credit” (Letts).
saw 3.4 trillion yuan of output value in construction
with a YoY increase of 10.8 percent as this industry Housing
continues to enjoy a steady growth (Mei). According to
BMI Research, infrastructure, including airports, water, Real estate investment is a major driver of the
rail, power and roads and bridges, will be the bright spot economy affecting more than 40 other sectors, but
in China’s construction industry. The two major driving worries over potential popping of the price bubble in
forces behind infrastructure value - power will account China’s largest cities have led to a bevy of governmental
for 45 percent of the growth and roads and bridges will cooling measures. Buyer demand proved more resilient
pitch in another 20 percent. China’s residential building than expected (China Property Investment). According
sector will continue to see growth as well as greater land to data released by the government in April 2016, real
supply is made available in an effort to rebalance supply estate was the fastest-growing component of China’s
and demand and dampen the overheating housing economy. In the first three months of the year, the
market (China’s Booming). Private capital is expected sector’s contribution to gross domestic product rose 9.1
to play a growing role in China’s infrastructure industry, percent from the level of a year earlier. Financial services,
with the government pushing for the use of public- by contrast, grew 8.1 percent — only half as fast as during
private partnerships in implementing or operating many the peak of the stock market boom in 2015 (Gough). From
upcoming projects (China Infrastructure). January to April 2016, housing sales rose 61.4 percent to
2.41 trillion yuan from the previous year, according to the
BMI Research claims that despite being the world’s National Bureau of Statistics. Property investment in the
largest construction market, China’s infrastructure first four months of 2016 rose 7.2 percent to 2.54 trillion
industry faces a number of challenges in the coming yuan. Construction starts gained 21.4 percent to 434.3
years. Declining economic growth rates will spill over million square meters (Fung).
into the construction sector, while high public debt will
limit the government’s ability to provide the same level of Naysayers began to claim the pace of growth in
fiscal support for infrastructure projects as in the past. The China’s housing sector was unsustainable and therefore
13th Five Year Plan will continue to provide support to the growth in residential building had to slow over the
172
2.3 Construction Sector
Background infrastructure sector over the next two years, especially in the
transport, power and water segments, but the construction
According to statistics from China’s Ministry of industry’s share of GDP will gradually fall off from 6.6
Commerce, heated infrastructure investments in percent in 2017 to 6.0 percent in 2026 as the government
construction for the first five months of 2017 contributed attempts to shift nation’s economy toward a consumption-
to a year-over-year (YoY) increase of almost 89 percent led growth model. Concerns of overcapacity in steel and
in the sector. Almost 2,130 new contracts were cement production, as well as the supply of residential and
signed with 62 countries along the Belt and Road, the commercial real estate will dampen investment interest
development strategy proposed by President Xi Jinping across the industry (China Infrastructure).
that focuses on connectivity and cooperation between
Eurasian countries, for a total value of $38.47 billion, Australia and New Zealand (ANZ) Bank Chief China
accounting for 51 percent of new contracts with foreign Economist Raymond Yeung claims that the Chinese
companies from January to May, 2017. Chairman of China government has a tendency to rely on infrastructure
International Contractor’s Association Fang Qiuchen said development to sustain growth in the long term. “The
that infrastructure connectivity would be the priority question we need to ask,” according to Yeung, “is whether
of Belt and Road’s first five years of development. this investment-led model is sustainable as the authorities
Construction, as a pillar industry of China’s economy, have trouble taming credit” (Letts).
saw 3.4 trillion yuan of output value in construction
with a YoY increase of 10.8 percent as this industry Housing
continues to enjoy a steady growth (Mei). According to
BMI Research, infrastructure, including airports, water, Real estate investment is a major driver of the
rail, power and roads and bridges, will be the bright spot economy affecting more than 40 other sectors, but
in China’s construction industry. The two major driving worries over potential popping of the price bubble in
forces behind infrastructure value - power will account China’s largest cities have led to a bevy of governmental
for 45 percent of the growth and roads and bridges will cooling measures. Buyer demand proved more resilient
pitch in another 20 percent. China’s residential building than expected (China Property Investment). According
sector will continue to see growth as well as greater land to data released by the government in April 2016, real
supply is made available in an effort to rebalance supply estate was the fastest-growing component of China’s
and demand and dampen the overheating housing economy. In the first three months of the year, the
market (China’s Booming). Private capital is expected sector’s contribution to gross domestic product rose 9.1
to play a growing role in China’s infrastructure industry, percent from the level of a year earlier. Financial services,
with the government pushing for the use of public- by contrast, grew 8.1 percent — only half as fast as during
private partnerships in implementing or operating many the peak of the stock market boom in 2015 (Gough). From
upcoming projects (China Infrastructure). January to April 2016, housing sales rose 61.4 percent to
2.41 trillion yuan from the previous year, according to the
BMI Research claims that despite being the world’s National Bureau of Statistics. Property investment in the
largest construction market, China’s infrastructure first four months of 2016 rose 7.2 percent to 2.54 trillion
industry faces a number of challenges in the coming yuan. Construction starts gained 21.4 percent to 434.3
years. Declining economic growth rates will spill over million square meters (Fung).
into the construction sector, while high public debt will
limit the government’s ability to provide the same level of Naysayers began to claim the pace of growth in
fiscal support for infrastructure projects as in the past. The China’s housing sector was unsustainable and therefore
13th Five Year Plan will continue to provide support to the growth in residential building had to slow over the
172
