Annual China construction spending up 9 percent

Construction expenditures in China are expected to rise 9.1 percent per annum in real terms through 2014, moderating significantly from the pace of the 2004-2009 period.

Notwithstanding its deceleration in growth, China still represents the fastest growing major national market in the world, according to the report.

Increases will be bolstered by a growing domestic economy, ongoing industrialization, rebounding foreign investment funding, continuing efforts to expand and upgrade physical infrastructure, rising income levels, and further population and household growth. These and other trends are presented in Construction Outlook in China, a new study from the Beijing office of The Freedonia Group, Inc., a Cleveland-based industry research firm.

Nonbuilding construction will be the fastest growing sector, advancing 10.0 percent annually in real terms through 2014. Government spending initiatives are the predominant drivers of nonbuilding construction activity. Growth will benefit from state-led efforts to expand and upgrade China’s transportation infrastructure. Utilities construction will also contribute to nonbuilding construction spending gains, as the government continues to increase power generation capacity and improve electricity transmission networks.

Residential building is the largest market for construction services in China, accounting for 37 percent of total construction spending in 2009. Residential building construction expenditures are expected to increase at an annual pace of 8.4 percent through 2014, primarily supported by rising personal income levels. Government efforts to improve living conditions for low-income earners (including the construction of affordable and low-rent houses in urban areas and subsidies for alterations of dilapidated farmhouses in rural areas) will also bolster residential building construction spending. However, deceleration in the overall economy and household formation will constrain residential building construction activity to some extent.

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Nonresidential building construction expenditures are forecast to rise 9.0 percent per year through 2014. Growth will be driven by rebounding local and foreign investment in the manufacturing sector, following the sharp moderations associated with the global economic downturn of 2008 and 2009. Government efforts to improve public services such as health care and education will also spur gains.