Growth Markets for Construction
15 August 2017- by Laura Gifford
A recent report by Global Construction Perspectives in conjunction with Oxford Economics suggested that the global construction market is set to grow to $8 trillion by 2030. More than half of that growth (57%) will come from just three countries; China, India and the US. The report further notes that despite China’s construction growth stuttering in 2016, driven largely by a slowdown in housing, it will still maintain healthy growth as construction projects concentrate on healthcare, education and social infrastructures.
The same report identifies India as the new engine for global construction growth, estimating that it will grow at twice the rate of China. This may not be surprising considering India’s urban population is set to grow by 165 million by 2030.
Infrastructure projects to support growth in urban populations are vast. Recently the Indian minister of state for road transport and highways sanctioned over 110,000kms of highways across the country. Some estimates suggest that investments in Indian infrastructure projects will top $4.5 trillion by 2040, making it the second largest infrastructure investment market in Asia after China. Little wonder then that a recent KPMG report calculated that construction would be the second highest inflow of Foreign Direct Investment (FDI) into India.
Money is not only flowing into flagship infrastructure projects. The Indian government has also made policy announcement on investments into social housing, which is now to be classified as infrastructure to give it impetus. Investing is being made easier too with government plans to abolish the Foreign Investment Promotion Board (FIPB) and liberalise FDI policy.
China is at the beginning of their 13th Five-Year Plan (FYP) and with it comes opportunities in the construction sector. After more than three decades of high-speed growth China has begun a phase of relative maturity and transition into a high-income economy. However, contrary to more general economic trends, the Chinese construction industry outpaced Chinese gross domestic product growth in 2016.
Being a more mature emerging market than say, India has shifted China’s focus to improving the quality of life of its citizens. Little wonder considering China’s rate of urbanisation, which on a resident population basis is estimated to reach 60% by 2020. The latest FYP cites the need for investments, including FDI to produce outputs that provide ‘greenness’, openness and inclusiveness.
China’s emphasis may be subtly changing but it still knows how to do ‘big.’ Some estimates suggest that in excess of 14,000 large-scale infrastructure projects are currently underway in China. In April this year the Chinese government also announced the creation of a new city to be created 60 miles south of Beijing. Forming part of an integrated cluster of cities, to produce a megacity. China already has 15 megacities and expects several more urban centres to reach megacity status in the next few years.
Opportunities in emerging markets abound as countries seek to develop infrastructure to support and improve the lives of their citizens. Their markets are becoming more open and inward investment opportunities increasing. The environment looks bright for forward thinking construction companies looking to capitalise on their expertise and experience.
Construction is a core sector at Price Forbes; we offer risk advisory and transfer services to clients operating across the world, acting as both a retail and wholesale broker. The majority of our retail clients are project owners but also include contractors, original equipment manufacturers and lenders. Our wholesale clients are mostly overseas insurance brokers who require access to the (re)insurance markets in which we operate and in the majority of cases to our specialist expertise in the construction field. Download our Construction brochure or contact our specialist Construction team for more information.