Abstract
China has literally been building its way out of the global financial
recession the past quarter. Asia’s giant
has gotten down to business
on the infrastructure spending plan and as a result the activity in
China’s
infrastructure sector has been one of the highest globally.
The breakdown of the funds earmarked for
infrastructure is as follows:
45.0% of the CNY4trn package to be spent on railways, highways, airports
and power grids, 25.0% to be spent on post-disaster reconstruction and 9.3% on
rural development and
infrastructure. The announcement of more specific
details has also prompted a revision of our assessment
to a more positive
tone and we anticipate that the momentum in the infrastructure sector will be
sustained
in 2009 and 2010.
In BMI’s Q209 China Infrastructure
Report we maintain our forecasted growth levels for 2009 and 2010
at 7%
and anticipate that the growth rate in the industry value will decelerate
thereafter as the stimulus
expires and the government focuses on
rebuilding its savings, leaving the industry to its own devices. Had
it
not been for the infrastructure-geared stimulus plan, we would have revised
our data downwards for
2009 and 2010. Our outlook for the actual effects
of the stimulus plan is in line with the local industry
view as expressed
in various press reports over the past quarter. Accordingly, the situation
will normalise
and effects will be felt towards the end of Q409. In
tandem, the demand for raw materials will also rise
(steel and cement),
though huge stockpiles of iron ore for instance will mean that there is plenty
supply
domestically to sustain the initial phases of the infrastructure
plan and thus demand for building material
imports is expected to rise in
H110.
Among the issues that are of concern, are issues of financing
– specifically how much will come from the
Beijing’s coffers
and how much will come from provincial governments, or even rely on a
multiplier
effect take place. Of more concern are issues of
time-effectiveness and of channelling the funds through
to projects and
sectors, especially as corruption within the vast bureaucracy of China remains
high.
The major new change in our China report is that we have
incorporated new historical data from the
national bureau of statistics.
This has altered historical growth forecasts and nominal values between
2000-2006. The new data show that although the real rate of growth maintained
the same trend, the
industry value was being overestimated for 2007
onwards, thus our nominal forecasts for construction
industry value have
gone down. For 2009 BMI forecasts that the industry value will be CNY1,770bn
and
will rise to CNY1,882bn in 2010.
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