Page 336 - 2021 White Paper
P. 336
1 White Paper on the Business Environment in China
to buy “land reserves” for future projects. That was that worldwide, the buildings and construction
banned and the central government is encouraging sector accounts for around 39% of carbon dioxide
local areas to use some of the money for high-tech emissions released from energy and industry.
projects such as 5G infrastructure. Many of these
projects rely on land sales to repay investors, but The industry's growth over the forecast period
a slowing economy will likely hit demand for land is expected to be driven by investments on new
and put pressure on prices, making it even harder infrastructure projects, which includes investments
to service these debts. With the budgets of China’s in the areas of 5G networks, artificial intelligence,
local governments already under pressure from Internet of Things and data centers. The country is
a combination of tax cuts and the need to raise expected to spend 10 trillion RMB (US$1.4 trillion)
spending to deal with the effects of the Covid-19 on new infrastructure projects between 2020-
pandemic, the higher debt levels from this 2025. The industry's growth will also be driven by
borrowing will just add to their problems in the investments on transport, renewable energy and
long term (Chen and Zhu). residential infrastructure projects. The outbreak
of the Covid-19 pandemic severely disrupted the
The building construction industry in China is country's construction industry in Q1 2020, with
expected to record a CAGR of 10.0% to reach 8681.3 projects being temporarily suspended in line
billion RMB by 2024. The residential construction with the lockdown restrictions. Subsequently,
industry in value terms increased at a CAGR of the industry's value-add recorded a double-digit
8.6% during 2015-2019. The commercial building contraction in the first quarter of the year. With
construction market in value terms is expected to the gradual resumption of construction activities,
record a CAGR of 12.7% over the forecast period. the industry picked up pace, and recorded an
Building construction industry in China is expected improvement in the second quarter; however, it
to record a period of negative / low growth over the contracted by 1.9% year-on-year in H1 2020. The
next eight quarters, driven by economic downturn Chinese construction industry still grew in 2020,
triggered due to Covid-19 outbreak. While impact despite the temporary slowdown in construction
across building construction sectors varies, activities. This is only be a marginal expansion
residential, commercial, and industrial segments compared to the performance in recent years.
are expected to be worst affected. Business and China's construction industry value-add grew by
consumer sentiment is expected to be on a slow 5.6% in real terms in 2019, following growth of 4.8%
track to recover due to pandemic, resulting in in the previous year, driven by strong growth in real
prolonged distress building construction sectors. estate investment, and an increase in fixed asset
In residential sector, affordable housing is investments. To mitigate the economic impact
expected to stay least affected, supported by a mix of the pandemic, the country fast-tracked the
of public and private spending. Mid-tier and luxury implementation of major infrastructure projects
residential construction segments is expected to (except the hard-hit Hubei region), resuming 89.1%
be severely impacted. Growth across commercial of major infrastructure projects as of mid-March
building construction in China, especially office, 2020. In another positive development, real estate
retail, and entertainment is expected to record and fixed-asset investments have regained growth
negative growth (R&M). momentum, following temporary disruption in the
first quarter of the year. Moreover, in the first seven
Infrastructure Construction months of the year, the National Development and
Reform Commission (NDRC) approved 65 fixed-
By some estimates, almost half of the world’s asset investment projects worth CNY532.8 billion
construction will take place in China this decade. (US$78.4 billion) (R&M).
The country already builds two billion square
meters of new floorspace each year – if laid out Residential Construction
over a single story, that would cover 1.3 times
the size of the entire footprint of London. It’s an Demographics in China is expected to continue
extraordinary figure, especially when you consider to spur the growth in residential construction. Rising
336
to buy “land reserves” for future projects. That was that worldwide, the buildings and construction
banned and the central government is encouraging sector accounts for around 39% of carbon dioxide
local areas to use some of the money for high-tech emissions released from energy and industry.
projects such as 5G infrastructure. Many of these
projects rely on land sales to repay investors, but The industry's growth over the forecast period
a slowing economy will likely hit demand for land is expected to be driven by investments on new
and put pressure on prices, making it even harder infrastructure projects, which includes investments
to service these debts. With the budgets of China’s in the areas of 5G networks, artificial intelligence,
local governments already under pressure from Internet of Things and data centers. The country is
a combination of tax cuts and the need to raise expected to spend 10 trillion RMB (US$1.4 trillion)
spending to deal with the effects of the Covid-19 on new infrastructure projects between 2020-
pandemic, the higher debt levels from this 2025. The industry's growth will also be driven by
borrowing will just add to their problems in the investments on transport, renewable energy and
long term (Chen and Zhu). residential infrastructure projects. The outbreak
of the Covid-19 pandemic severely disrupted the
The building construction industry in China is country's construction industry in Q1 2020, with
expected to record a CAGR of 10.0% to reach 8681.3 projects being temporarily suspended in line
billion RMB by 2024. The residential construction with the lockdown restrictions. Subsequently,
industry in value terms increased at a CAGR of the industry's value-add recorded a double-digit
8.6% during 2015-2019. The commercial building contraction in the first quarter of the year. With
construction market in value terms is expected to the gradual resumption of construction activities,
record a CAGR of 12.7% over the forecast period. the industry picked up pace, and recorded an
Building construction industry in China is expected improvement in the second quarter; however, it
to record a period of negative / low growth over the contracted by 1.9% year-on-year in H1 2020. The
next eight quarters, driven by economic downturn Chinese construction industry still grew in 2020,
triggered due to Covid-19 outbreak. While impact despite the temporary slowdown in construction
across building construction sectors varies, activities. This is only be a marginal expansion
residential, commercial, and industrial segments compared to the performance in recent years.
are expected to be worst affected. Business and China's construction industry value-add grew by
consumer sentiment is expected to be on a slow 5.6% in real terms in 2019, following growth of 4.8%
track to recover due to pandemic, resulting in in the previous year, driven by strong growth in real
prolonged distress building construction sectors. estate investment, and an increase in fixed asset
In residential sector, affordable housing is investments. To mitigate the economic impact
expected to stay least affected, supported by a mix of the pandemic, the country fast-tracked the
of public and private spending. Mid-tier and luxury implementation of major infrastructure projects
residential construction segments is expected to (except the hard-hit Hubei region), resuming 89.1%
be severely impacted. Growth across commercial of major infrastructure projects as of mid-March
building construction in China, especially office, 2020. In another positive development, real estate
retail, and entertainment is expected to record and fixed-asset investments have regained growth
negative growth (R&M). momentum, following temporary disruption in the
first quarter of the year. Moreover, in the first seven
Infrastructure Construction months of the year, the National Development and
Reform Commission (NDRC) approved 65 fixed-
By some estimates, almost half of the world’s asset investment projects worth CNY532.8 billion
construction will take place in China this decade. (US$78.4 billion) (R&M).
The country already builds two billion square
meters of new floorspace each year – if laid out Residential Construction
over a single story, that would cover 1.3 times
the size of the entire footprint of London. It’s an Demographics in China is expected to continue
extraordinary figure, especially when you consider to spur the growth in residential construction. Rising
336
