Manufacturing News

China's construction sector in high gear as infrastructure investment expands

China's construction sector kicked into high gear as the country doubled down on infrastructure investment to spur economic growth.

As a barometer of the country's infrastructure and fixed-asset investment, the latest excavator index, showed accelerated pace of construction activity.

During the Jan-Aug period, the average monthly operating rate of construction machinery in China was 61.45 percent, with the monthly rate for August alone standing at 63.99 percent, sustaining growth momentum since the second quarter, showed the index, jointly tracked by the state broadcaster CCTV, the leading construction gear maker Sany Heavy Industry Co Ltd, and the industrial internet service provider ROOTCLOUD.

The index, by observing the operating rate and working hours of various types of heavy machinery, offers a full picture of the projects under construction across the country.

Among the equipment surveyed, four types of equipment, including crane trucks, excavators, pump trucks and pavers, all necessary for infrastructure projects, saw their operating rate exceeding 60 percent.

In another sign of improvement, the production and prices of construction materials, such as steel and cement, also saw rises.

Data from the China Iron and Steel Association showed that the average daily output of crude steel from the country's major steel mills increased 2.23 percent in mid-September from that in early September.

Due to growing demand, prices of cement across the country has steadily increased since the beginning of August, with the price index for cement expanding 2.12 percent at the end of August from a month earlier, data from industry information provider 100njz.com showed.

The industry data, which pointed to an acceleration in construction output, was in line with the growth of fixed-asset investment, which went up 5.8 percent year-on-year in the first eight months of this year.

Meanwhile, investment in infrastructure gained 8.3 percent year-on-year, official data showed.

Behind the upbeat reading is the country's channeling of more support for infrastructure construction amid national efforts to catalyze domestic demand and sustain economic recovery.

The State Council executive meeting announced last month that the quota of "policy-backed and development-oriented financial instruments" would be expanded by another 300 billion yuan ($42.7 billion) to better fund major infrastructure projects.

Prior to this, 300 billion yuan in total had already been allocated via such instruments, namely two funds operated by the China Development Bank and the Agricultural Development Bank of China, respectively.

Meanwhile, more capital has been tilted to the sector by expediting the issuance of special-purpose bonds to spur investment. During the first eight months of the year, such bonds worth a total of 3.52 trillion yuan were issued nationwide, with those issued for project construction basically hitting the annual quota, according to the Ministry of Finance.

The country will continue to leverage the role of the special-purpose bonds in boosting effective investment, with a focus on new infrastructure and new energy projects, assistant finance minister Ou Wenhan told a media conference earlier this month.

Looking ahead, the total infrastructure investment in 2022 may grow by 10 percent to 12 percent, lifting the nominal GDP growth rate by 1.2 to 1.4 percentage points, as estimated in a recent research report by the China International Capital Corporation.

Infrastructure investment will likely give a stronger boost to the economy in September, and its multiplier effect will also increase, the report added.

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