11-13 May 2021
DARLING HARBOUR, ICC SYDNEY

Turning the page on ‘Made in China’

China’s shifting economic priorities are set to re-shape its construction industry.

If you’re keen to understand how China’s construction industry might evolve in the next few years, you should first look at the Chinese central government’s broad plan for the country’s economy.

Until recently, two main endeavours drove the economy in China: firstly, the labour-intensive manufacture of cheap goods for export; and secondly, domestic city building to accommodate a growing and urbanising population.

But, in 2015, the government changed course. It issued the ‘Made in China 2025’ strategic document, which laid out plans to move away from the ‘cheaply-made Chinese’ stereotype and start manufacturing higher-value products, such as advanced electronics.

“In previous decades, the Chinese economy benefited from its very large population,” explains Dr Xiao Han, a member of the Centre for Contemporary Chinese Studies at the University of Melbourne. “China had the opportunity to develop a lot of labour-intensive manufacturing industries. But now, the Chinese population is ageing, and the government is concerned. It wants to move up the global value chain and achieve more with fewer workers.”

This move away from mass production towards more specialised manufacturing means smaller factories and, therefore, less new commercial construction. At the same time, a slowdown in population growth has prompted the Chinese government to stop building new ‘megacities’ and to curtail other large projects.

According to the US Department of Commerce: “China is looking to shift away from large scale infrastructure projects toward more locally oriented projects, such as water supply and treatment plants, road improvements, urban metro systems, and public parks.”

The government’s new priorities are expected to constrain China’s construction industry in the years ahead. The US Department of Commerce is forecasting annual average growth in the construction industry of 5 per cent in real terms between 2019 and 2023, compared with the 9.9 per cent annual average recorded from 2008-2017.

And much of that growth may come from exports rather than domestic construction. According to International Construction, a growing number of China-based Original Equipment Manufacturers (OEMs) are now focusing on overseas markets to maintain expansion in the face of the slowdown at home.

One major OEM, Shantui, recently told International Construction it was hoping to double its exports within 12 months. “[In 2018] we sold around US$200 million for export,” said Chang Yang, general manager of Shantui overseas. “This year we are targeting sales of US$400 million.”

China’s export aspirations will mean more choice for Australian builders and developers, as the Chinese try to crack our market through events such as ChinaBuild.

Another indicator China wants to become more involved in non-domestic construction is its ongoing Belt and Road Initiative (BRI): a strategic plan that involves funding land and maritime transport infrastructure projects that connect China with Asia, Europe and Africa. Future BRI projects could be built using equipment and products manufactured by China’s domestic construction industry.

“So far, these projects have been built using the best-priced materials and equipment available, mostly from local or the closest foreign markets,” says Dr Han. “But there is room for Chinese companies – particularly hi-tech ones – to bid for these tenders.”

 

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