Infrastructure Expansion Key for Economic Development

Corinne Abele from Germany Trade & Invest in Beijing, provides an overview of the current Chinese markent in an interview with bauma China organizers.

bauma China takes place from November 27 to 30, 2012 in Shanghai. Over 2,000 exhibitors are expected to take part in this “International Trade Fair for Construction Machinery, Building Material Machines, Construction Vehicles and Equipment.” And – for the first time – the event will be taking up the entire site at the Shanghai New International Expo Center (SNIEC), an area totaling 300,000 square meters of exhibition space. bauma China will certainly need all of this space, because the Asian construction machinery markets will again be putting in a very strong showing at the fair. In an interview with Messe München International, the organizers of bauma China, Corinne Abele, a representative of Germany Trade & Invest in Beijing, outlined the current situation on the Chinese market.

MMI: When looking at construction activity in China, attention focuses first of all on the large-scale projects that are in the media. In your view, which are currently the most prestigious infrastructure projects in the People's Republic?
Corinne Abele: A unique undertaking worldwide, because of its enormous extent, is the project to divert water from the Yangtze and its tributaries in the south of the country to the Yellow and Huai rivers and to Beijing and Tianjin in the north of China. This mega project, which consists in many sections of open canals, is due for completion by 2050. When planning started, the investment costs for this venture were put at an equivalent of around 57 billion euros.
Another prestige project is the Hong Kong-Zhuhai-Macao Bridge. This symbolizes the great technological expertise in the construction industry in the country, and the integration in the region. The offshore wind-energy parks which are being built or currently being planned have high prestige value.
MMI: In general the expansion of the infrastructure enjoys top priority in Chinese politics and industry. There are the roads, the airports, the power stations, the sewerage works – where do you see the main emphasis currently?

Abele: China is continuing to invest in its infrastructure as a way of boosting the economic development of weaker regions in Central and Western China. The goals set for the period of the Twelfth Five-Year Plan are ambitious: the highway network which at the end of 2010 extended to 74,100 kilometers, is to be expanded to 83,000 kilometers. Oil and gas pipelines are to be expanded from 78,500 kilometers in length to a total of 150,000 kilometers. In addition, according to press reports, roughly 200,000 kilometers of new transmission lines are being planned, plus the construction of 45 new airports, among them Beijing’s second airport in the south of the city. RMB 1.5 trillion, roughly 176 billion euros, are to be invested in expanding aviation infrastructure by 2015. Another big theme is still water supply, and especially waste-water disposal. According to the State Council, around RMB four trillion are earmarked for investment in the entire field of water management by 2020. For the treatment and disposal of sewage sludge alone, the China Urban Water Association estimates the investment requirement by 2015 to be around RMB 60 billion. Some experts believe this figure is too conservative. Also not to be underestimated is the determination of the Chinese government to introduce a comprehensive health system. Enormous investment in the construction of hospitals is required for this to be achieved. And finally the leadership in Beijing is aiming to modernize the energy sector, which should make a major contribution to reaching the national goals for reducing CO2 emissions.
MMI: An alternative to the coal-fired power stations which dominate energy supplies in the country is energy from renewable sources. Are there opportunities here, too, for the construction business?
Abele: In 2011 China authorized fixed feed-in tariffs for solar energy. With this support from the government, the domestic market should now develop faster, driven above all by large-scale projects. There is very strong competition from Chinese companies and pressure on prices is enormous. Possible openings could lie in offshore wind projects, particularly for suppliers of special technology and plant. Here the domestic market is not in a position to supply the demand.
MMI: What is the specific situation in the segment of construction vehicles and machinery?
Abele: There are indeed still opportunities here, even though competition from Chinese firms is growing constantly. Around one fifth of all construction machines worldwide are now produced in China. Any international company wanting to serve the Chinese market has to have at least one service centre in the country. And those who want to be competitive in the standard segment, have to have a manufacturing operation in the country. Special machinery of the kind that is not produced in China, is still being exported to China. For example in the first 10 months of 2011 imports to China of cutting, tunnel-driving and other heading machines rose overall by 52% to close on 190 million euros.