Can the Consumer Market Keep Pace with Planned Infrastructure Expansion?

Published on 2011-04-16

This was the fundamental question raised at the Construction, Environment and Investment (CEI) event on 12 April, where David Gregory, head of the Chamber's CEI focus group, kicked off CEI's first event of the year by introducing [Richard Martin](http://www.imaasia.com/about.php), managing director of [IMA Asia](http://www.imaasia.com). "You guys are probably bored to death of hearing about the [12th Five Year Plan](http://en.wikipedia.org/wiki/Five-Year_Plans_of_the_People%27s_Republic_of_China#The_Twelfth_Five-Year_Guideline.2C_2011.E2.80.932015)," said Martin, "but they're talking about a pretty dramatic restructuring of the economy."

With the growth and sustainability of the construction sector hinging in many respects on the ability of the consumer market to keep apace of China's planned infrastructure expansions, Martin highlighted three key issues, addressed by the 12th FYP, that will prove vital to the growth of the construction and property industries over the next 5-10 years.

1. **Controlling Inflation**
* New loan creation has been low, with newly started projects seeming to be the ones turned down by the banks in the first quarter of 2011
* Food prices have been going up more than 10% per annum and, along with other rising costs of living, encourage conservative spending habits among consumers

2. **Shifting Policies on Housing**
* Must cool growth in medium to high-end housing and boost growth in social housing to provide for the emerging lower middle-class
* There are still very few viable places for Chinese households to put their savings other than the property market

3. **The One-Child Policy and Improved Education**
* China's labour force is declining when measured against a country like India, BUT the quality of education is increasing
* Demographics affect how many people will be in the market and subsequently how much your average worker will earn
* Improved education leads to improved productivity, living standards, household income and consumption

After a round of discussion, guests returned to the bar for a few last drinks and a chance to discuss these and other points raised during Martin's talk.