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China Infrastructure Report Q4 2010
Business Monitor International, Aug 2010, Pages: 95
China Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's infrastructure industry.
Authors View: In light of the still strong, albeit steadily declining, fixed asset investment growth we have revised upwards our forecasts for real infrastructure and construction industry value growth from 2010 onwards, but we maintain our core view that the infrastructure stimulus is now withering away and continue to anticipate a sharp slowdown in growth in 2011.
Major developments over the previous quarter included:
- The new GDP data for the second quarter of 2010 indicate a slowdown in headline GDP growth, which is in line with the core view of a pending sharp slowdown in the second half of 2010 and into 2011. The data also showed that growth of investments in fixed assets continued to fall in May and June 2010, reinforcing our view that the effects of the stimulus, especially for infrastructure, are gradually fading.
- The Bank of China (BoC) pledged a total of almost CNY14bn (US$2bn) in railway special purpose vehicles (SPVs), as the bank unwinds its exposure to the real estate sector through position capital in safer, long-term assets that are still endorsed by the government as an investment destination for its banks.
- The authors bearish outlook on China's property sector combined with our construction industry value forecasts, which indicate a moderation in growth in 2010 and especially in 2011 lend support to the view that demand-side fundamentals could be strong enough to put sustained downward pressure on building materials prices.
China offers scale, measured in terms of total construction industry value, and high levels of growth, combined with high levels of capital investment as a percentage of GDP. The combination of these three factors plays strongly in China’s favour on the Infrastructure Business Environment Ratings. However, the strength of its infrastructure market often masks the high barriers to entry in the market, the opaque regulatory and legal framework and the uncompetitive environment, which this quarter have shaved off points from the country’s overall ratings. In the Infrastructure Business Environment Ratings China receives a score of 68 out of 100, its strong infrastructure market propelling it near the top of the regional table.
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