China’s engineering & construction industry will continue to grow in the next three years, however the pace of growth will be more subdued than the last five years. China is striving to re-calibrate its economy to be more domestic & environmentally sustainable model. China is undergoing a construction slowdown as we move into the 2nd half of 2017, bulk & engineered material prices are flat or increasing by 1% to 2% per year. Labor costs are a different matter – wage rates for Construction Professionals & Skilled & Unskilled Workers are increasing between 5% & 10% per year in some of the major coastal cities. China’s GDP is set to slow down further in the 2nd half of 2017; the latest forecast is 6.2%. However, economic experts continue to have reservations on the reliability of China’s Government statistics, these percentages could be overstated. China & other Asian emerging construction markets are starting to slow down compared to a year or two back; construction costs are (for the most part) moving at restrained rates, this is forecast to be the case for the next six months in most of Asia. In the last decade, Chinese EPC companies have improved their share of the global EPC market from approximately 6% in 2008 to19% in 2017, look for this percentage to grow in 2018 & the coming years as Chinese EPC firms aggressively chase international construction work especially in Africa, Asia & North & South America. Infrastructure construction is anticipated to experience strong growth, highways, bridges, electrical transmissions & railroad construction are expected to lead this growth.
The Chinese private property market is still overvalued by at least 25% to 35% according to industry writers; this has impacted the spending habits of the Chinese consumer & will have a knock-on effect for the Chinese construction sector in the 2nd half of 2017. Average Chinese escalation / inflation for 2017 is expected to be between 1.6% & 1.9%.
The Indian construction industry continues to expand, this growth is sustained by India’s evolving economy, consumer spending, foreign direct investments (FDI) & higher government spending on large & 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 “Asia Tiger” economies. Infrastructure accounts for between 50% & 70% of India’s construction sector, this will possibly increase due to the Indian Governments recent proclamation to invest & improve highways, electrical transmission systems, railways & other forms of transport. India’s GDP is forecast to grow 7.2% in the 2nd half of 2017. Indian Engineering & Construction worker wage rates have increased between 6% & 10% in 2016, look for this trend to continue in the 2nd half of 2017. Foreign investment continues to move into India as major US, European & Japanese companies eye India as a major growth country. Look for this trend to continue in 2017 & beyond. India is now considered the # 1 growth market for construction related services followed by China the # 2 & Vietnam # 3.
Japan recently announced that their Government stimulus policy has not appeared to work. Japan’s GDP is forecast to grow in the unsatisfactory 1.1% to 1.3% range in the 2nd half of 2017. The Japanese unemployment rate is forecast to be 3.0% for the next six months, Japanese inflation is forecast to be in the 0.3% in the 2nd half of 2017.
South Korea’s 2017 GDP is forecast to see 2.7% growth, inflation will be in the 1.8% to 2.2% range & unemployment is forecast to be 3.3% to 3.7% in 2nd half of 2017. The Indonesian construction sector is performing especially well in & around Jakarta. GDP is forecast to grow in the 4.5% to 4.9% in the 2nd half of 2017. Vietnam & Singapore are all expected to see decent growth in the 3.3% to 5.3% range in 2017. Malaysia’s construction sector will continue to thrive in 2017, some large office buildings, shopping malls, hotels, roads, oil & gas facilities together with rail facilities are driving this growth.
Other potential Asian construction growth markets include, Thailand, the Philippines, Laos & Singapore – all countries are demonstrating decent construction related growth potential for the 2nd half of 2017 & beyond.
Chinese & South Korean large Engineering & Construction firms continue to aggressively “chase after” & successfully win & execute large EPC projects around the world, pushing out or making life more difficult for the once “dominant” major US, Japanese & European EPC firms.