The construction industry in India, China, Vietnam, Indonesia and other South East Asian countries is thriving and appears to be on a sustained growth cycle for the next two to three years. China and South Korea’s share of global construction will continue in the next two or three years.
The Chinese economy is very reliant on exports, 15% to 20% of its exports go to the US. China sold $510 billion in goods and services to the US in 2017, the US sold $135 billion in goods and services to China, a trade gap of $375 billion. 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 US and China and is a distinct possibility with the US continuing to ratchet up its rhetoric on this issue and the Chinese responding in a similar way on this topic.
Continuing industrialization coupled with a growing population are the main drivers fueling growth in China. 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 two to three years, however the pace of growth will be more subdued than the previous five years.
China’s GDP is forecast to be 6.4% in the 2nd half of 2018. Inflation will be in the 2.4% to 2.7% and unemployment is forecast to be 3.8% at the conclusion of 2018. 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. 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 2nd half of 2018.
Across the board, engineering and construction activities are now ongoing in all regions of India; infrastructure, power, industrial, manufacturing and residential construction are the five main categories that is propelling the Indian construction market, look for this activity to continue for at least the next three to five years. 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 7.1% in the 2nd half of 2018. Indian Engineering and Construction worker wage rates have increased between 5% and 10% in 2017, look for this trend to continue in the 2nd 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. 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.
Japan’s recently announced Government stimulus policy has not appeared to work. Japan’s GDP is forecast to grow in the disappointing 1.1% to 1.3% range in the 2nd half of 2018. Japanese unemployment rate is forecast to be 2.6% for the next six months. Japanese inflation is forecast to be in the 1.2% in the 2nd half of 2018.
South Korea’s 2018 GDP is forecast to see 2.6% growth, inflation will be in the 1.8% to 2.5% range and unemployment is forecast to be 3.3% to 3.6% in 2nd 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 2nd half of 2018. Vietnam and Singapore are all expected to see decent growth in the 3.8% to 5.7% 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 positive construction growth potential for the 2nd 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.
View Details of our 2018 Global Construction Costs Yearbook
This publication includes Cost Data for 101 Countries. Data Covered in this publications includes: • Labor Rates • Material Costs • Construction Practices • Square Feet/Meter Unit Costs • Engineering/Architectural Rates • Import Duties • Location Factors • Transport Costs • Exchange Rates • Local Taxes ... and much more!