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Review and future prospect of China’s construction industry in 2020 From Deloitte Consulting

The following is the Review and future prospect of China’s construction industry in 2020 From Deloitte Consulting recommended by recordtrend.com. And this article belongs to the classification: Chinese economy, Deloitte Consulting , research report.

By scanning the general situation of the global construction industry, this report focuses on the development and future prospects of China’s construction industry in 2020, so as to help you understand and evaluate the relevant challenges and opportunities of China’s construction industry in the next few years. In 2020, the total sales volume of the world’s top 100 construction enterprises increased by 3.7%, while the market value decreased by 7.4%. From the development trend of relevant enterprises in China’s construction industry in recent years, we are concerned that “internationalization” and “diversification” are the two key words of Chinese construction enterprises.

The report makes an overall analysis on the diversified operation and key areas of 10 listed companies in China’s main construction industry. In addition, the official introduction of public REITs also has a far-reaching impact on the construction industry. Under the new development pattern of paying attention to ecological civilization during the 14th Five Year Plan period, where will the construction industry go? Under the vision of realizing the “double carbon goal”, how can China’s construction industry achieve emission reduction and promote the green development of multi industry and whole value chain?

Global construction industry overview

Ranking of Listed Companies in the global construction industry

The total revenue of the top 100 global construction enterprises in 2020 was US $1.51 trillion, an increase of 3.7% over 2019. By geographical region, the companies with the highest income are from China, Europe (especially France and Spain), Japan, the United States and South Korea. As in previous years, CSCEC led the list with reported revenue of about $234 billion in 2020. The second and third places are covered by China Railway and China railway construction, accounting for about 34% of the total revenue of the top 100 global construction companies.

Top 30 global construction companies by market value

In 2020, the market value of construction companies decreased by 6% as a result of uncertainty generated by COVID-19. Among the top 30, Chinese and Japanese enterprises showed significant shrinkage compared with 2019, and the total market value decreased by 16% and 14% respectively. In 2020, among the top 30 global construction enterprises, the market value of Chinese enterprises ranked by sales fell. Since 2021, the market value of construction enterprises has remained stable, and the market value of China’s major construction enterprises has not rebounded significantly.

Development trend of Chinese construction enterprises in recent years

International Business

In 2020, China novel coronavirus pneumonia affected the impact of the new crown pneumonia outbreak and the imbalance of foreign policy in western major economies. The internationalization process of Chinese construction enterprises was greatly affected, and the uncertainty risk of external environment increased. According to the statistics of the Ministry of Commerce, in 2020, the turnover of China’s foreign contracted engineering business was US $155.94 billion, a year-on-year decrease of 9.8%; The newly signed contract amount was US $255.54 billion, a year-on-year decrease of 1.8%. At present, although China’s domestic epidemic has been effectively controlled, the epidemic situation is still severe in other countries and regions in the world. Nevertheless, investment and infrastructure development are still important solutions to boost the economy of major countries in the world.

In terms of the proportion of overseas business income, as China’s largest international engineering contracting company, CCCC’s overseas income is in a leading position among Chinese construction enterprises in both absolute value and proportion. In 2020, the scale of overseas income is close to 100 billion yuan, accounting for more than 15%, which is mainly due to the construction of roads and bridges Competitive advantages in ports and other fields.

10 listed companies in China’s major construction industry

Diversified business development

Chinese construction industry enterprises, especially large construction central enterprises such as CSCEC, have been committed to diversification. On the one hand, it uses its own resources and capabilities to realize vertical integration in investment, design, operation and service. On the other hand, it also realizes diversified horizontal development in real estate development, resource development, equipment manufacturing, logistics and other fields.

Impact of public REITs on construction industry

On June 21, 2021, the first batch of infrastructure public offering REITs pilot projects were officially listed in Shanghai and Shenzhen Stock Exchange. Since the national development and Reform Commission and CSRC issued the notice on promoting the pilot work of real estate investment trusts (REITs) in infrastructure field in April 2020, it took more than one year, and China’s public offering REITs finally ushered in a historic moment. Major construction enterprises in China have infrastructure projects with a complete chain of “investment, financing, construction and operation”. The launch of public raised REITs for infrastructure has realized the closed-loop investment and financing in the field of infrastructure, which will help Chinese construction enterprises form a virtuous investment cycle, broaden the capital source of infrastructure project investment and construction and the reinvestment capacity of Chinese construction enterprises.

Analysis of enterprises in China’s construction industry

In 2020, 10 major Chinese construction enterprises achieved a total operating revenue of RMB 5.5 trillion, an increase of 13% over 2019. Among them, CSCEC achieved an operating revenue of RMB 1.6 trillion, which is the only enterprise in China with an operating revenue of more than RMB 1 trillion. In terms of the proportion of income of 10 enterprises, CSCEC is far ahead. From 2016 to 2020, the realized income accounts for more than 27% of the total income of 10 major construction enterprises. From the change of market value, the total market value of 10 Chinese construction enterprises in 2020 decreased by about 14% compared with 2019, and the market value of each enterprise was in a downward trend compared with 2019. From the perspective of overseas income, CSCEC and CCCC have always maintained a leading position in this field. Affected by the epidemic, although the total output value of the world’s construction industry declined in 2020, China still achieved a positive growth of 1.3%.

One belt, one road, overseas practice of overseas mergers and acquisitions in China’s construction industry has been stable. At the same time, the “30.60” carbon peak and carbon neutralization initiatives put forward by the Chinese government will bring new challenges and opportunities to China’s construction engineering industry. In the 14th five year plan, the Chinese government emphasized the concept of environment, society and Governance (ESG) and the development of high technology, focusing on the policy of sustainability and the application of cutting-edge technology. These will encourage construction engineering practitioners to seek new technical solutions or buy more environmentally friendly advanced materials, and will also promote enterprises to change through mergers and acquisitions.

Prospect of the 14th five year plan for China’s construction industry: grasp the general trend and follow the trend

Traditional construction enterprises are in the midstream of the construction industry chain, and their overall development is greatly affected by the rising cost of project elements represented by construction raw materials and labor. Under the influence of “COVID-19”, the duration of the project is further lengthened, and the capital is slowed down. Such challenges will force construction enterprises to focus on fine management and scientific and technological means to achieve cost reduction and efficiency, further enrich the existing business portfolio and seek higher profit value. Based on industry research and research, and combined with the experience we have accumulated in serving customers in the construction industry, we have summarized two core words for the development of the construction industry during the 14th Five Year Plan Period: “transformation” and “upgrading”.

“Transformation”

Transformation is not only the need of the market, but also the need of high-quality development of enterprises. Construction enterprises have gradually transformed from traditional “builders” to “builders + investors”. At the same time, industry benchmark enterprises will realize the great leap transformation to the role of “urban operator” on this basis, further enhance the optimal allocation and integrated operation capacity of urban comprehensive resources on the basis of investment and construction, provide urban comprehensive supporting services, and obtain sustainable profit value.

“Upgrade”

Upgrading is not only the upgrading of “products”, but also the upgrading of “technology”. Product upgrading is reflected in upgrading from projects with simple traditional technology, fierce competition and low profit margin to projects with complex technology and complex business model but relatively high profit margin and can give full play to the advantages of the industrial chain.

Technology upgrading is reflected in the “digital intelligence” level of construction enterprises“ During the 14th Five Year Plan period, under the general trend of intelligent construction, the wide application of various advanced technologies will bring about changes in construction methods. Through artificial intelligence and advanced data analysis, construction enterprises can build a more complete and efficient information system, realize timely information exchange and improve construction efficiency from the initial bidding process to the specific project management cost. Through the combination of BIM (building information modeling) technology and VR, it will be more efficient to reduce the project management cost and achieve the goal of cost reduction and efficiency increase through immersive accurate design.

Sustainable Construction: China’s construction industry and carbon neutrality

In 2020, the Chinese government announced its climate commitment to peak carbon dioxide emissions in 2030 and carbon neutrality in 2060. As one of the three major energy consumption industries, the construction industry has undertaken an important mission on the road to carbon neutrality.

The development of green buildings in China has experienced all-round development during the 13th Five Year Plan period. By 2022, the proportion of green building area in China’s new urban buildings will reach 70%. In terms of technology, the use of environmental protection materials, the combination of photovoltaic, photothermal technology and buildings, the development of prefabricated buildings, passive technology and energy digital technology to improve building operation energy efficiency, the combination of low-carbon buildings and low-carbon transportation and other new technologies promote building energy conservation and emission reduction. The real estate industry pays more and more attention to environmental benefits. It is becoming a trend to combine green development with high-quality buildings to create a new core competitiveness. The emission reduction actions of green buildings and real estate enterprises have laid a solid foundation for carbon neutralization in the construction industry. On the premise that the decarbonization process of energy system, industry and manufacturing industry continues to advance, the total emission of the whole value chain of the construction industry should also decline. Deloitte puts forward the following suggestions on how to accelerate the zero carbon development of the construction industry and help China achieve the goal of carbon neutralization ahead of schedule:

Make overall planning throughout the life cycle and deepen the emission reduction of the whole value chain

Multi system collaboration and technological innovation to build a zero carbon building

Strengthen ESG performance management and use green finance to help the development of green buildings

Promote green building certification and create high-quality green buildings

By promoting green building certification and supporting high-quality buildings with green concept, it will effectively improve the market recognition of green buildings and lead the development trend of real estate industry with safety, health, green and high quality as the wind direction.

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