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Construction spending in China to rise through 2015

July 12, 2012

CLEVELAND (July 12, 1:30 p.m. ET) —  Construction spending in China is expected to rise 9.4 percent a year to 2015, moderating from the rapid pace of the 2005-2010 period, according to a new study by market research experts Freedonia Group Inc.

Freedonia said future expansion will be bolstered by a growing domestic economy, ongoing urbanization and industrialization, rebounding foreign investment funding, continuing efforts to expand and upgrade physical infrastructure, and rising income levels.

The three major segments — residential buildings, non-residential buildings and non-building structures — each accounted for about one-third of total spending in 2010.

These and other trends are presented in “Construction Outlook in China,” a new study from the Beijing office of Freedonia, based in Cleveland.

Non-building construction will grow 10.1 percent annually through 2015, with government spending the predominant driver, according to the study. Growth will benefit from state-led efforts to expand and upgrade the country’s transport infrastructure—highways, railways and subways, and airports, the study said.

Utilities construction will also add to non-building construction, as the government continues to increase power generation capacity, improve electricity transmission networks, and expand and improve municipal water supply and gas distribution.

Spending on residential buildings is projected to grow at 9.7 percent annually through 2015. Freedonia said gains will be primarily supported by rising personal income and ongoing population migration from rural to urban areas.

Non-residential building construction expenditure is forecast to rise 8.3 percent per year through 2015, according to the study. Growth will be driven by strong increases in spending on commercial and office building, spurred by a growing services sector as well as rising personal incomes, said Freedonia.

Moderation in growth in manufacturing will restrain growth, however, and Freedonia cautions that spending on nonresidential buildings will increase more slowly than both the non-building and residential building segments.