- Published: November 2011
China Infrastructure Report Q2 2012
- Published: February 2012
- Region: China
- 103 Pages
- Business Monitor International
BMI View: Our view on the unwinding of spending on railways is playing out, with the latest figures emerging from China suggesting an 80% reduction in high-speed rail spending year-on-year (y-o-y).In BMI’s latest Special Report China 2012: From Miracle to Meltdown, it is clear how much the infrastructure and macroeconomic dynamics in the country are intrinsically tied and how the unwinding of the former is corroborating our below-consensus view on the latter and vice versa. Key themes for China’s infrastructure sector this quarter include:
- In light of steep falls in the residential and commercial construction front we have revised down our 2012 China construction industry value forecast to 5% real growth. We are maintaining our forecasts for infrastructure and its sub-sectors as we see the trend that we have in place since June 2011 playing out. We anticipate moderation in the transport infrastructure industry value growth and growth in energy and utilities.
- Notwithstanding major changes to regulations and pricing, we anticipate that there will be an increase in natural gas power plant construction in the coming years given growing Chinese energy demand and Beijing's desire to shift energy consumption away from coal and towards natural gas. Natural gas related infrastructure (pipelines and LNG) will flourish as a result, hence our bullish outlook for the sector.
- We maintain our muted forecasts for railways and expect to see a deceleration in industry value growth starting this year and running to the end of our forecast period. New data from the Ministry of Railways corroborates this view, indicating a steep unwinding of spending.
- Our forecasts for a revival in airport construction are supported by the announcement of a new mega-airport project – to replace the Beijing Nanyuan Airport – should be completed by 2017.
- In the housing sector, the government has pledged the construction of another 50mn low cost housing units between 2011 and 2014. While this will drive construction, our concerns over the ability of indebted local governments to meet their share of the funding requirements mean we see risks to the timely implementation of the ambitious scheme.
China offers scale – measured in terms of total construction industry value – and high levels of growth, combined with a high level of capital investment as a percentage of GDP. The combination of these three factors plays strongly in China’s favour in our infrastructure risk/reward ratings.
However, the strength of its infrastructure market often masks the high barriers to entry, the opaque regulatory and legal framework and the uncompetitive environment, which have shaved points from the country’s overall ratings. Consequently, we have revised down the component scores in these categories this quarter. In BMI’s Infrastructure Business Environment Ratings, China receives a score of 65.8 out of 100, with its strong infrastructure market propelling it to near the top of the regional table.
Business Monitor International's 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. SHOW LESS READ MORE >
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