Development
While the development of China’s economy has been stalling, with headline growth reaching its lowest level for 24 years in 2014 at 7.3%, the infrastructure construction sector has sustained a relatively rapid rate as the government is increasingly turning back to infrastructure investments as a major tool for boosting the economy. Fixed asset investments grew by a much more hefty 20% for the same year and all signs from the first half of 2015 are indicative of the government’s further leaning on infrastructure for achieving its economic targets.
From all segments, investments in water conservation, environment and utility management experienced the highest growth at 23.1% in 2014, followed by transport, storage and postal services at 18.8% and electricity, gas and water production and supply at 16.1%. Not unlike previous years, investments in railway infrastructure have been the top priority for Beijing, with early data from 2015 showing that they have grown by as much as 22% y/y for the first five months of 2015, comparable to a 3.2% decline for the same period in 2014.
Perspectives
China has been investing heavily into infrastructure ever since its opening-up in the early 80s, yet many regions, especially in its central and western part, as well as rural areas across the country, remain underdeveloped. Meanwhile cities are bracing to accommodate the incoming waves of new inhabitants as urbanisation is proceeding at a hectic rate, with the number urban dwellers only surpassing that of rural ones for the first time in 2011, yet the government is targeting a 60% urbanisation rate by the year 2020, coupled with a further improvement of the living standards. All of this is pointing toward a great potential for further development in the sector waiting to be
tapped.
Going Out
Following decades of intensive development on the inner market, companies in the sector are increasingly looking for overseas opportunities, with the broad support of the nation’s government. Infrastructure construction technologies and know-how have reached a stage where they can be globally competitive, and meanwhile demand is likely staying strong both in developing countries where new infrastructure is badly needed in many places and in developed nations where it is ageing and upgrades and replacement are imminent. Beijing has been extremely active in helping local companies exploit such opportunities and has launched a number of initiatives in this direction, most notably the Belt and Road which is to involve a multitude of infrastructure projects in the Asia-Pacific region, Central Asia and Europe.