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China Infrastructure Report Q1 2013 - New Market Research Report

Recently published research from Business Monitor International, "China Infrastructure Report Q1 2013", is now available at Fast Market Research


Boston, MA -- (SBWIRE) -- 01/19/2013 -- BMI View: We have revised up slightly our 2013 infrastructure real growth figure for China, which in turn has prompted an upwards revision in our entire construction industry value for 2013. Our revision comes on the back of the project details announced for the rail-heavy stimulus plan (as announced in September 2012). We were already pricing-in a small rise for 2012 railways infrastructure industry value real growth, and now we believe this will be followed by another rise in 2013, when the bulk of new projects are due to go into construction, according to our interpretation of government announcements and our Infrastructure Key Projects Database.

Key developments in China's infrastructure sector:

- Leading indicators, such as steel production and total fixed assets investments growth, clearly show that demand has cooled, corroborating and reinforcing our view of a slowdown in the entire construction sector over 2012 and 2013.
- Gas-related infrastructure will see a massive boost as the government focuses on re-aligning the energy mix away from coal and towards gas. This includes investment in gas distribution infrastructure, liquefied natural gas (LNG) terminals and gas-fired power plants.
- Airports remain high on the government's agenda, which is reflected in our bullish airports infrastructure value forecast. The Chinese government announced that it will build 82 airports and refurbish a further 101 by 2015. This will take the number of airports in the country to around 230.
- We remain bearish on China's residential and non-residential construction sector, as demand within the country's stalling economy continues to weaken significantly. Our 2012 estimate of 4.1% year-on-year (y-o-y) real growth also reflects the cooling of an investor boom that had inflated China's real estate sector and also represents the lowest level of sector growth since 1999.
- Whilst social housing builds have the potential to significantly drive construction, our concerns over the ability of indebted local governments to meet their share of funding requirements mean we see risks to the timely implementation of the ambitious scheme. A tightening in project funding is highlighted by the central government's announcement that social housing unit starts for 2012 were due to be 7mn - down from 10mn units in 2011.

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Our bearish outlook for China's construction industry is supported by a slump in the performance of domestic machinery producers. With a huge fall in fixed-asset investment in the Chinese economy, producers of heavy equipment are showing signs of weakness across the board.

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