China’s Government has recently decided to confront three major domestic problems in the next five years, (1) reduce poverty, (2) reduce pollution and (3) reduce domestic debt. The prospect of a trade war between the USA and China and is a distinct possibility.
Construction expenditures in China are estimated to increase by 7% over 2017 levels. Continuing industrialization coupled with a growing population are the main drivers of this growth. China is striving to re-calibrate its economy to be more domestic and environmentally sustainable model. Chinese bulk and engineered material prices are flat or increasing by only 1% to 2% per year, labor costs are a different matter, wage rates for Construction Professionals and Skilled and Unskilled Workers are increasing between 5% and 10% per year in some of the major coastal cities.]
China and India’s border dispute has risen to an uncertain level, this could seriously impact both the economies of both countries and the region if this situation is not resolved peacefully. China’s engineering and construction (EPC) sector will continue to grow in the next three years, however the pace of growth will be more subdued than the previous five years.
China’s GDP is set to remain static in the 1st half of 2018, the latest forecast is 6.3%. Chinese EPC companies have improved their share of the global EPC market from approximately 6% in 2008 to close to 20% in 2018, look for this percentage to grow in 2018 and beyond in the coming years as Chinese EPC firms aggressively chase international construction work especially in Africa, Asia and North and South America. Infrastructure construction is anticipated to experience strong growth of between 3% and 5% in 2018, highways, bridges, electrical transmissions and railroad construction is expected to lead this growth.
The Chinese private property market is still overvalued by at least 25% to 35% according to industry experts; this has impacted the spending habits of the Chinese consumer and will have a knock-on effect for the Chinese construction sector in the 1st half of 2018. Average Chinese escalation / inflation for 2018 is expected to be between 1.7% and 2.1%.
The Indian construction industry continues to expand, this growth is sustained by India’s evolving economy, consumer spending, foreign direct investments (FDI) and higher government spending on large and mid-sized infrastructure projects. Construction industry growth is expected to remain strong over the next three to five years, as a result of the government’s undertaking to augment India’s dilapidated infrastructure.
India will be the frontrunner of the “Asian Tiger” economies. Infrastructure accounts for between 50% and 70% of India’s construction sector, this will possibly increase due to the Indian Governments recent proclamation to invest and improve highways, electrical transmission systems, railways and other forms of transport. India’s GDP is forecast to grow 7.2% in the 1st half of 2018. Indian Engineering and Construction worker wage rates have increased between 6% and 10% in 2017, look for this trend to continue in the 1st half of 2018. Foreign investment continues to move into India as major USA, European and Japanese companies eye India as a major growth country, look for this trend to continue in 2018 and beyond. India is now considered the # 1 growth market for construction related services followed by China the # 2 and Vietnam # 3.
Japan recently announced that the Government stimulus policy has not appeared to work. Japan’s GDP is forecast to grow in the disappointing 1.1% to 1.4% range in the 1st half of 2018. The Japanese unemployment rate is forecast to be 2.5% for the next six months, Japanese inflation is forecast to be in the 1.1% in the 1st half of 2018.
South Korea’s 2018 GDP is forecast to see 2.6% growth, inflation will be in the 1.8% to 2.3% range and unemployment is forecast to be 3.3% to 3.6% in 1st half of 2018. The Indonesian construction sector is performing especially well in and around Jakarta, GDP is forecast to grow in the 5.1% to 5.7% in the 1st half of 2018. Vietnam and Singapore are both expected to see decent growth in the 3.5% to 5.5% range in 2018. Malaysia’s construction sector will continue to thrive in 2018, some large office buildings, shopping malls, hotels, roads, oil and gas facilities together with rail facilities are driving this growth.
Other potential Asian construction growth markets include, Thailand, the Philippines and Laos all countries are demonstrating decent construction related growth potential for the 1st half of 2018 and beyond. Chinese and South Korean large Engineering and Construction firms continue to aggressively “chase after” and successfully win and execute large EPC projects around the world, pushing out or making life more difficult for the once “dominant” major US, Japanese and European EPC firms.