According to second quarter gross domestic product (GDP) data released by China, the miraculous decades-long growth of the Chinese economy is continuing. In reality, though, China’s GDP figures range in the territory of unreliable to laughable. As publicly traded companies announce their second quarter earnings, a picture of a more stagnant Chinese economy is emerging, and for construction, that picture is bleak.
How Low Can You Go?
United Technologies’ share price tumbled on July 21 (before receiving a little bit more bad news) as net sales and net income fell and performance failed to meet analyst expectations. The company’s Otis elevator and escalator products were projected to experience a 5% increase in orders in China for the year. Instead, the company recorded a 10% decline. The fall in elevator orders is a direct result of the fall in Chinese construction.
Unfortunately, construction in China does not appear to have a bright future. China’s government-led construction drive gobbled up massive amounts of commodities. In 2014, the country accounted for 40% of the world’s copper consumption, despite having just 20% of the world’s population. In just 3 years, China used more cement than the United States did in the entire 20th century. But, commodity prices have dropped, highlighting China’s cooling construction market. The Bloomberg Commodity index has fallen to its lowest level since 2009.
Darkest before the Dawn
Despite these construction headwinds, there is hope in high-performance buildings. The Chinese government is pushing green buildings, in part as a response to the country’s urban air pollution problem. Even though the construction boom has faded, advanced controls and building energy management systems are still poised for growth. As the focus shifts from completing construction to ensuring efficient operation, there is an opportunity for wider adoption and more sophisticated systems.
Other players in the building space are viewing China as a growth opportunity. Johnson Controls noted increased revenue on market expansion in China. Indeed, the company is investing in the Chinese market in anticipation of significant growth opportunities. Honeywell’s Automation and Controls Solutions (ACS) experienced double-digit growth in China in the second quarter of 2015. As China’s construction market continues to mature, the break-neck growth that has been characteristic has slowed substantially. The focus is shifting from more buildings to better buildings, creating opportunities for solutions that improve operational efficiency.
Tags: Building Innovations, Construction Industry, Energy Efficient Buildings, Green Buildings
| No Comments »