Industry Overview
Design and Engineering Services:
China is in the midst of a historic urbanization process. Coupled with the privatization of the real estate market, higher living standards, and the presence of multinational corporations in China, home ownership is increasing markedly and demand for residential housing will continue to be strong. High housing costs, poor construction quality, ever-changing Chinese government real estate-related regulations, and limited financing options continue to drag on the housing sector. China has the great market for US architectural designers to enter into the high level design market.
The Real Estate construction market is a major driver of China’s economy. During the 11th Five Year period (2006-2010), the plan for total real estate construction is estimated to reach 2 billion square meters each year. According to the Industrialization Report issued by the Ministry of Construction’s Promotion Center for Housing, by 2010, China will have built 80 billion square meters of new housing. By 2020, estimates are 205 billion square meters. Construction spending in China increased 165% in the last four years, according to the National Bureau of Statistics of China, and is still expanding at 25% annually. In addition, the recent Chinese government’s RMB4 trillion stimulus plan, will also speed up the development of the market.
More and more domestic real estate developers are looking for high-quality architectural services. This niche market offers foreign design firms good opportunities in the long term. While Chinese architects have rich experience in small and medium-sized buildings, they often lack experience with large-scale projects such as integrated projects. Other weak points include intelligent architecture and the integration of new technology and building materials.
Construction Equipment:
The Chinese construction equipment market presents many opportunities and challenges for American companies seeking to increase sales in China. Although the global economy has slowed, Chinese construction equipment imports increased 17% in 2008 compared with 2007. The China Construction Machinery Industry Association predicts that imports will increase 12% in 2009.
Many American companies have successfully entered the Chinese market. Some large U.S. companies are increasing production in China and have become the key players in China’s construction equipment industry. Chinese manufactures of construction equipment benefit from Chinese government support in the domestic and international market. U.S. companies face fierce competition from Chinese, Korean, Japanese, and German manufactures.
Rapid development of urban centers, China’s aggressive western region infrastructure development plans, Sichuan earthquake reconstruction plans and the 2010 Shanghai World Expo should provide more opportunities for the construction equipment market.
Building Materials
China is one of the world’s largest building materials producers and users. In the past decade, China's demand for building materials has grown at a fast pace. The recent Chinese government’s RMB4 trillion stimulus plan, will also speed up the development of the market. In the next five years, both production and demand will continue to grow.
Despite the huge output of China’s building materials, the quality of these materials is usually well below international standards. It is in the high-end, high-quality niche market that foreign building materials have found the most success. Also, any materials, products and technology related to clean and renewable energy, low emission, recycling and energy efficiency are urged by the Chinese government.
The total green building materials market in China is worth an estimated at USD15 billion for year-end 2008. This accounts for roughly 5% of the total building materials market, itself valued at approximately USD313 billion. Green building materials occupy a small portion of the high-end of the total market.
The market for green building materials are expected to grow by a compounded annual average of 6.6% through 2013, which is around a half a percentage point higher than the rate for non-green building materials.
Public sector and residential and commercial construction projects are driving much of this growth and will remain the primary sources of opportunities in the near future. The concept “green” has recently gained popularity in China. Also, given that the vast majority of China’s construction boom is in new projects, opportunities are limited for retrofit sales.
Influential participants in this market are green building materials suppliers, contractors, engineering contractors, real-estate developers, and system integrators. These companies are able to specify the technical and budgetary requirements of each of these materials, including how to optimize its energy efficiency and green marketability.
HVAC & Refrigeration
China now has the largest HVAC&R market in the world. At the same time, it is also the largest manufacturer of HVAC&R products. The top three Chinese manufacturers, Haier, Midea and Gree, can supply 50% of the world’s demand for HVAC&R products.
Although the market maintains a 10% growth for the last three years, the domestic manufacturers are going through the stage of merge and re-adjustment, due to the increase of cost, the over capacity of production, the rise in inventory and the price war among themselves.
China’s demand for commercial refrigeration equipment is projected to increase nearly six percent annually through 2010. As the fastest growing market in the world, China is benefiting from favorable economic conditions, urban population growth, rising income, fast growing retail industry and busy lifestyles. China is recognized as one of the best commercial refrigeration equipment markets with strongest potential in the world. There are more than 1000 frozen foods producers in China with total sales of 15 million tons annually, averaging 15 percent increase per year. Development of commercial refrigeration equipment manufacturing started in late 2000. As the rapid development of retail industry, there is a high growth in demand for cold retail chains. The total output of China commercial refrigeration equipment is approximately 60,000. Most of them are joint-venture entities.
The Chinese market for green HVAC (heating ventilation and air conditioning) systems is worth approximately USD 1.6 billion as of year-end 2008. This is around 20% of the total HVAC market and 35% of the HVAC equipment market. Together with light green products (which have an indirect impact on energy consumption or are not specifically designed to be green), this rises to 63% of the total equipment market.
The market has grown by a compounded annual average of 15% since its inception a decade ago, which is a little slower than non-green HVAC products. Commercial construction is driving much of this growth and will remain the main source of opportunities in the near future. Virtually all HVAC sales are to new (as opposed to retrofit) projects.
Influential participants in this market are green HVAC OEMs, central air conditioner (CAC) suppliers, HVAC engineering contractors, design companies and real-estate developers. These companies are able to specify the technical and budgetary requirements of an HVAC system, including how to optimize its energy efficiency and green marketability.
In order to obtain a decent share of this huge market, U.S. manufacturers are targeting at the high-end market by introducing the best and most advanced technologies and products into China. To differential themselves from the local competitors, the U.S. products are benefited from their innovative design, cutting-edge technology and the up front concepts of environmental protection and energy efficiency. These features are very advantageous to U.S. manufacturers as few of their local rivals are in the position to boast of.
Regulations
On January 5, 2007, the Ministry of Construction issued implementing regulations for foreign-invested design enterprises (FIDEs) to apply for architecture, engineering and design licenses in China under Decree 114. With the issuance of implementing rules for Decree 114, American firms can now apply for engineering and design licenses in China and pursue related opportunities. There are still considerable barriers to licensing in China and US firms should approach the market as consultants to Chinese firms first before considering licensing.
Market Entry
Domestic design institutes dominate the middle and low-end market. Their strengths are understanding the needs of the local market and knowledge of government policies. However, they lack quality control, exposure to international standards, and professional management experience. Foreign building products and foreign design services are perceived as superior to local substitutes.
Most of the clients of foreign engineering firms active in China are foreign invested enterprises. These projects are mainly infrastructure projects, factories, hotels, luxury housing, offices, and malls as the requirements for these projects are more sophisticated and clients usually demand premium engineering services and consulting work.
Despite the huge opportunities in China’s market, foreign firms will find that China is not an easy market. American companies have to recognize the need for a special approach to a market with such a contrasting cultural, political and economic landscape. The most successful businesses in China are those that take the time to build strong relationships, become recognized in the industry, and develop products and services that cater to Chinese buyers.
Building good local relation is crucial to foreign firms seeking to provide their products and services in China. Forming a close relationship with a local partner can help navigate the opaque regulatory system, as well as provide a strong local presence with local contacts. Most of China’s large projects need to go through an open tender system, and all the bids will be accepted on a competitive basis. The winning bidders and new venue owners have a great deal of autonomy in deciding how to construct and operate the project and how to award this work.
Industry Trade Events
This section provides a listing of upcoming architecture, construction and engineering-related events in China and in the US, including industry shows and trade missions. While FCS China is directly involved with some of these events, the majority here have no direct relationship with the FCS and are listed solely as a convenience to our users.
For more information, please contact the organizing group as listed in the event description. Verify the information before making any commitments - we are not responsible for accuracy of information or changes in events' schedules.
•US Architectural Design and Planning Roadshow 2009 (Sep. 21-25, 2009 Guangzhou, Xiamen, Xi'an) Download Flyer
•Bauma China 2010 will be from November 23-26 at Shanghai New
International Expo. Center.
Bauma China 2010 is where Chinese and international professionals
meet to initiate business and to establish and cultivate
contacts. Last year Bauma China attracted 113,000 trade visitors
from all regions of China and all continents, making it the most
successful and important trade fair for the construction and
building materials industry in China and Asia. In total 1,608
exhibitors from 30 countries took part in this event, showcasing
the full spectrum of construction machinery and building material
machines on 210,000 square metres of exhibition space
Show Website: www.bauma-china.com
Fair organizer: Munich Trade Fairs (Shanghai) Co. Ltd. 438 Pudian
Road, Pudong New Area 200122 Shanghai, China
Tel.: +86 (0)21 50580707
Fax: +86 (0)21 50583337
email: info@mmi-shanghai.com
Market Research in China
The following research reports authored by FCS are available for free on our market research library. To access them, you must register and then copy paste the following topics into the "keywords" section on the search engine.
Information for Used Equipment Exports to China:
Purchasing used equipment often makes good economic sense.
Depending on the situation, it can make sense on a number of
levels...
more...
Architecture, Construction & Engineering (ACE) Service
Market 2007:
A brief introduction of Architecture, Construction &
Engineering (ACE) Service Market in China...
more...
Commercial Refrigeration Equipment:
This Industry Overview provides information on the following
tips: market demand, market demand, market data, best export
prospects, key suppliers, market entry, trade events, and
contacts...
more...
Architectural Design Services in South China:
China is recognized as potentially the largest architectural
market in the world. It has strong architect expertise, with
11,000 architectural design organizations generating estimated
revenue of US$11.28 billion with annual construction value
amounting to US$200 billion...
more...
Overview of Energy Saving Building Materials in Sichuan
Province:
China continues to show dramatic growth in its domestic
construction industry. Currently, China’s completed new housing
has reached 1.6 billion to 2 billion square meters, which is the
equivalent total for completed new housing areas for all
developed countries combined worldwide...
more...
Useful Websites
Links to non-Commercial Service organizations are provided solely as a convenience to our users. The Commercial Service makes no representations about the accuracy or suitability of the information provided on the following web sites. The FCS is not responsible for the content of the individual organization webpages found through these links, and their inclusion here should not be understood as an endorsement of these organizations.
American Planning Association (APA) China Program:
http://www.planning.org/china/project.htm
(These plans can be an excellent resource for U.S. planning,
design, architecture, engineering and construction firms
interested in how forward-thinking Chinese municipal governments
are looking to the U.S. for ideas on development of their cities
and regions.)
Beijing:
Beijing
Investment Platform
Beijing Municipal Commission of Urban Planning
Beijing Organizing Olympic Committee for the XXIX Olympiad
Ministry of Housing and Urban-Rural Development of PRC
China National Association of Engineering Consultants
China Building Materials Industries Association
American Chamber of Commerce – People’s Republic of China
Shanghai:
Shanghai
Municipal Government Urban Construction Website
Shanghai Building Materials Science and Technology Institute
Shanghai Urban Construction Group
Shanghai City Development Law Firm(Specialized in Construction and Real Estate)
Hong Kong:
Architectural Services Department
Electrical and Mechanical Engineering Department
Environment Protection Department
Territory Development Department
American Institute of Architects
Hong Kong Institute of Planners
Hong Kong Institution of Engineers
