Translated by Andrew Vanburen from a Chinese-language piece in National Business Daily
MANY READERS out there will remember Kevin Costner’s character being thought a loon for listening to voices in the desolate Iowa cornfields that promised “If you build it, they will come.”
So in the film Field of Dreams, he went ahead and began construction of a baseball diamond in the dead quiet of the countryside.
Apparently, Chinese property developers and construction firms are of the same opinion as despite sluggish housing prices and weak unit sales, they are still likely to pump nearly eight trillion yuan into new projects this year, up nearly 20% from 2011.
“We’re striving to get all the major players onboard this year in terms of breaking new ground, redeveloping underutilized lots and projects and refurbishing or converting loss-making developments in order to maximize profitability for as many real estate and construction firms as possible,” said a high-ranking government official from Jiangsu Province at a recent industry forum.
April housing starts and new groundbreaking activities on original construction projects were down on a year-on-year basis.
However, with the weaker-than-expected manufacturing data of late, the real estate/construction sector is seeing a resurgence in popularity as a destination for investment capital, with the government once again hoping developers will become the “backbone” of the economy.
The well-to-do Eastern Chinese province of Jiangsu is getting a lot of attention from industry watchers these days as the rate of new major property project and construction approvals and starts there is outpacing most of the country.
The numbers from Jiangsu are impressive even in a thriving market.
Of the 62 major provincial-level projects already approved and funded there this year, 40% have already broken ground and are well underway.
Both the number of approved and funded property and construction projects in Jiangsu so far this year as well as the ground-breaking rates are both historical highs for the province, located to Shanghai’s north.
However, not just the relatively affluent maritime province of Jiangsu was jumping back into property development and construction in a big way.
The provinces and regions of Central and Western China were also seeing a flurry of construction activity recently.
Taking Hunan for example, major projects in the province attracting over 100 million yuan numbered 1,239 so far this year, with total property and construction investment in the province for the first four months rising 24.3% year-on-year to 2.45 trillion yuan.
Of this total, 359 billion yuan was for new construction projects, up 47.2% from 2011 levels.
There are two basic drivers behind this comeback for the property and construction sector.
First, it now seems quite clear that credit easing measures will become more and more commonplace this year as the Central Government attempts to maintain steady growth and employment levels, as the sector is a major source of jobs in the country.
Second, the slowdown in manufacturing and investment therein is helping shine a more positive light on the potential benefits of the property and construction sector, areas of the economy virtually immune to slowdowns overseas.
Investors either already involved in the sector or contemplating involvement on the sidelines would do well to follow credit moves and property regulations closely as the year moves progresses.
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