Construction booming in China

Construction expenditures in China will increase 11.6 percent annually through 2010, reaching approximately $723.6 billion according to “Construction Outlook for China,” a new study from The Freedonia Group, a Cleveland-based industry market-research firm.

In real terms, spending will grow at a 9.7 percent annual rate. Although growth in Chinese construction expenditures will moderate from the pace set from 2000 to 2005, the country will continue to outperform other national construction markets through 2010. An expanding domestic economy, sustained strength in foreign investment funding, a healthy demand for Chinese manufactured goods, and population and household growth will drive the demand for construction in China.

Nonbuilding construction will be the fastest-growing sector, with expenditures climbing 10.5 percent annually in real terms through 2010. Government funding for large-scale infrastructure construction such as the Beijing-Shanghai High Speed Railway, the West-East Oil Pipeline, the South-North Water Diversion and the “7918 Network” national highway system will drive growth.

Residential building construction activity will advance at a 9.1 percent annual pace in real terms though 2010, spurred by government efforts to boost average per capita living space and private ownership. The privatization of home ownership has been a dramatic trend in this sector. As a result of government reform efforts — which culminated in a 1998 decision to stop providing apartments to public employees at subsidized rental rates and to sell state-owned residential buildings — the percentage of privately owned homes has climbed from 72 percent in 1995 to 87 percent in 2005. By 2015, privately owned housing will account for more than 95 percent of all units.

In 2005, the nonresidential building market accounted for more than 40 percent of construction spending in China, reflecting the nation’s emergence as an economic powerhouse over the last decade and its position as the largest producer of manufactured goods in the world. Nonresidential construction expenditures are forecasted to rise 9.4 percent annually in real terms through 2010, stimulated by increased consumer spending, pro-business government policies and direct investment by foreign industry.