Construction spending in China to rise +9.2% annually through 2012

Construction spending in China is expected to rise+ 9.2% per annum in real terms through 2012, according to the latest report by the Freedonia Group - Construction Outlook in China.

The report said a rapidly expanding domestic economy, continuing efforts to upgrade physical infrastructure, sustained strength in foreign investment funding, healthy demand for Chinese manufactured goods, ongoing urbanization, and further population and household growth will all contribute to a boost in construction spending in China.

Non-building construction, said the report, will be the fastest growing sector, rising +10.2% annually in real terms through 2012. Growth will be fuelled by government initiatives to expand and upgrade the country's physical infrastructure, especially its highways, railways and subway systems.

Utilities construction will also 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 natural gas distribution, it added.

Non-residential building, according to the report, accounted for the largest share of construction spending in China in 2007, 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. Non-residential construction expenditures are projected to increase +8.9% annually in real terms through 2012.

China's ongoing industrialization and modernization will also help to boost investment in manufacturing, office and commercial facilities.

Real residential building construction expenditures will grow at a +8.4% annual pace through 2012. Advances will be spurred by rising employment and personal income levels, further urbanization of the population, and increasing average per capita living space in both urban and rural areas.

However, added the report, government efforts to prevent the real estate market from overheating (for example, by raising the one-year lending rate and restricting second home purchases) and a deceleration in household growth will provide an offsetting influence, preventing demand from advancing at a faster rate.

Construction Outlook in China is available for US$ 5100 from The Freedonia Group, Inc., 767 Beta Drive, Cleveland, OH 44143-2326.

For further details, please contact Corinne Gangloff by phone 440.684.9600, fax 440.646.0484 or e-mail [email protected].

Information may also be obtained through www.freedoniagroup.com