China ousts US as investments into construction soar
March 3, 2011

After becoming the world’s largest manufacturing base and recently overtaking Japan as the second largest economy, China has managed to pull another first. Statistics released today show China for the first time in history overtook the US in investments in construction. Also owning to growing input costs, China ploughed in US$1,100 billion into new building projects last year, as compared to the US that poured in US$983 billion last year, down from US$1,500bn in 2005 due to the crash in the real estate sector. By 2020, China is expected to account for a fifth of the world’s building industry, compared with 14 percent today. China’s ascendence to the top again, further reiterates the shift of the global economic axis from West to East.

While China will account for the lion’s share of an expected US$97,700bn in global construction spending during the next decade, India will also invest heavily and is forecast to overtake Japan to become the world’s third largest.

Fueled by the government stimulus package and the vision of the 11th five year plan, China has been increasingly spending to improve the social welfare and social security of its citizens. Fearing the spread of the jasmine revolution to China, the nation has further upped its spending, raising salaries, provinding for housing, healthcare and education for all Chinese people. Investments into constructing new houses ate 57 percent into the total amount spent by Beijing last year, the rest – construction of new railways, roads and power infrastructure projects, consumed the remaining 43 percent.

“This is the real tipping point in the history of the construction industry,” Graham Robinson, director at Global Construction Perspectives, which produced the report with PwC and Oxford Economics told the Financial Times.

“The old powers have been swept aside and it will be many decades before China comes close to ceding its position as the biggest spender on construction, whether on residential, commercial or infrastructure projects,” Mr Robinson added.

The growth in construction activity in both countries has provided a boon to domestic building groups, while international cement and aggregate companies have invested heavily in increasing their exposure.

Holcim of Switzerland and France’s Lafarge, the world’s largest and second-largest cement producers by output respectively, both generate more than half of their sales from China, India and smaller developing economies.

Meanwhile, China’s three largest construction equipment makers are set to post record full-year sales and profit jumps for 2010 and are also quickly becoming global players on the back of the country’s continued construction boom.

Xugong, Zoomlion and Sany Heavy, which between them make most of the country’s cranes, cement mixers and earth movers, expect to report profit rises for last year of between 60 and 100 per cent when they publish their full-year earnings in the coming weeks.

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