Subject: Construction in China

Within the next 10 years the World Economic Forum says that China will account for nearly half of new construction worldwide making it the world’s biggest building market…and some suggest as few as five years. Really? One-half! World-wide? Should I care about this?

Heads Up

Yes! Everything that happens across the world causes something else to happen that causes something else to happen and so on until it eventually comes to you and causes change in your world. A series of measurable events was originally called the domino effect. When the relationship between events in a series is invisible, it is referred to as the butterfly effect. Almost anything that happens causes something else to happen. Sometimes the original thing has nothing to do with us…it takes place outside of our sphere of influence. So that when it affects our world it is a complete surprise…We can’t identify the results until they happen.

It Matters

Let’s take a look at the potential impacts China’s growth might have on our domestic industry:

  • China’s expansion will attract investment…potentially away from other countries.
  • The demand for raw materials may create global shortages – inflating costs.
  • The demand for manufactured construction products may inflate costs.
  • China’s internal labor requirements may cause global shortages.
  • China will be less inclined to export labor.
  • Chinese manufactured construction equipment exports may be reduced…causing shortages and inflation.
  • When China’s boom subsides…a robust Chinese industry will be available to compete world-wide putting pressure on multi-nationals.
  • The Chinese construction boom may provide more work for U.S. multi-nationals.
  • Chinese manufactured construction equipment exports may be reduced providing market opportunities for US equipment manufacturers.

What Does This Teach Us?

 Whether you recognize it or not, your business environment is evolving continuously. We don’t often see it coming, or worse, ignore or resist it. We have to begin to recognize change, accept it, and even embrace it, if we expect to remain competitive and successful in a constantly evolving construction market. After 30 years of working with senior management throughout the construction industry, I find that we need to alter our focus to:

  1. Form a broader view of our business environment.
  2. Speculate about potential changes as they develop.
  3. Learn to be more flexible.
  4. React and respond to change as soon as we see it coming.
  5. Broaden our horizons about what affects, or does not affect, our business.

Let’s Discuss

In future blogs, we will be discussing our research on how construction market cycles and macroeconomic shifts can affect contractor profitability. We will look more closely at methods for assessing and evaluating major market trends and their potential impact on your company. Stick with this space.

Read More: Market Cycles and Recognizing Risk.