2010-2016年中国建筑行业分析与预测 Building Completion in China.pdf

ibisworld and acmr china industry report 10 september 2010 building completion in china: 4900 disclaimer this product has been supplied by ibisworld inc. (ibisworld) solely for use by its authorized licenses strictly in accordance with their license agreements with ibisworld. ibisworld and all china marketing research co., ltd. (acmr) makes no representation to any person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use of, or reliance upon, the data or information contained herein. copyright in this publication is owned by ibisworld inc. and all china marketing research co., ltd. (acmr). the publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. in the event that the purchaser uses or quotes from the material in this publication - in papers, reports, or opinions prepared for any other person - it is agreed that it will be sourced to ibisworld inc. contents industry definition 3 activities (products and services)3 similar industries3 demand (2) formulating national standards for construction projects, as well as the requirements for market access, and supervising the implementation; and, (3) supervising the tender process to ensure its objectivity and fairness. china building decoration association (cbda) was established in september 1984. this administration has 126 branches all over the country and over 20,000 companies have joined this institution as members. cbda is mainly responsible for providing government advice regarding industrial standards, relevant regulations, and the development of the industry. regulations the regulation level in the industry has increased significantly in recent years with the development of the building completion industry in china. laws and regulations have been issued to regulate this industry. these laws and regulations include construction law of peoples republic of china (issued in 1998), regulation on the quality management of construction projects (issued in 2000), code for construction of decoration of housings (issued in 2001), code for construction quality acceptance of building decoration (issued in 2001), code for interior decoration and finishing management (issued in 2002), code for curtain wall construction (issued in 2007) and environment technical standards for decoration projects (issued in 2008). these regulations are mainly concerned with safety requirements, quality control requirements, environmental standards and the quality acceptance standards for decoration projects. all companies in this industry must comply with these industry conditions building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 19 regulations during the building completion and decoration process. projects failing to meet the quality acceptance standards may be required to re-construct. the industrys regulation level is expected to continue increasing in the future. the market access requirements and technical standards will also become more specific. more laws and regulations on building completion and decoration projects will be issued to regulate this industry. cost structure year: 2010 item cost % purchases 57.4%* wages 15.9%* management fees 3.0%* depreciation 2.5%* financial costs 2.0%* rent 1.7%* utilities 1.2%* other 8.3%* profit 8.0%* profit the industrys profit margin has not been significantly affected by increasing raw material prices in recent years. this is because most companies in this industry are able pass any price increases onto their clients. however, industry profitability decreased in recent years due to chinas increasing labor costs and intensive industry competition. in 2010, industry profits are expected to account for about 8% of industry revenue. profit margins for household decoration companies are lower compared with companies undertaking public building completion and decoration projects. household decoration companies are generally very small in scale and large in number. price is the key competitive factor as many services are relatively homogeneous, increasing the bargaining power of household clients. the industrys large-scale companies generally have higher profit margins as these companies often operate across a wide range of services, including design, which increases their competitiveness. in recent years, several large companies have established factories to manufacture fittings and fixtures, and other decoration and building materials, to their own specifications. this has become an important method for these companies to improve profit margins. costs industry conditions building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 20 purchases are the largest expenditure item for this industry, accounting for a forecast 57.4% of industry revenue in 2010. companies in this industry generally purchase materials before undertaking various building completion, decoration and construction projects. as a result, considerable funds are required to ensure the completion of projects. material prices have increased in recent years in china, which has led to the segment accounting for a larger proportion of industry revenue. for small-scale firms, purchases account for a larger share of expenses as it is more difficult for these firms to buy in bulk and gain trade discounts. total industry wages are expected to account for 15.9% of industry revenue in 2010, plus management expenses. labor costs in china are still low compared to many other countries, although they have been increasing in recent years. this industry is highly labor-intensive and requires large numbers of skilled workers to undertake a wide variety of decorative and completion processes. in addition, qualified architects and designers are also required for companies undertaking large-scale projects. wages as a share of industry revenue have increased from about 13.8% in 2006 due to increasing income levels in china. depreciation is expected to account for about 2.5% of industry revenue in 2010. this cost item mainly includes depreciation generated for related equipment used in decoration processes, office equipment and buildings. other costs include utilities, rent, financial costs and other miscellaneous expenses. capital and labor intensity the level of capital intensity is medium high level of expenditure on purchase large number of employees in the industry using wages and management expenses as an indicator of labor, and depreciation as a proxy for capital, the labor-to- capital ratio for this industry in 2010 is estimated to be 7.6:1, indicating the industry has a medium capital intensity level. companies in the industry have to purchase items needed before the project construction begins, receiving revenue upon the completion of the project. as a result, the industrys operations require significant investment in decoration material purchases, particularly for companies undertaking large-scale public building projects. a skilled workforce is crucial for companies in this industry, as most tasks during the building completion and decoration process require experienced workers. also, the quality of these tasks is closely related to the skills and experience of a companys workers. as a result, the proportion of total wages to industry revenue is larger compared with many other industries in china. however, average wages per person is still very low when compared with developed countries, although wages in china have begun to increase recent years. the industrys capital intensity level is expected to remain steady during the five-year outlook period to 2015. this is due to companies increasing their investment in fixed assets and related equipment. labor costs are also expected to increase in future years, which will offset the effects of an increasing share of depreciation in industry revenue. industry conditions building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 21 technology and systems the level of technology change is medium given that most building completion and decoration tasks and processes require manual work, companies in this industry employ a large workforce. technology advancements within the industry are therefore not directly reflected in the productivity and efficiency of building completion and decoration processes, but rather on various design processes, the quality improvement of decoration materials, and the application of new materials. many companies in this industry have started to provide decoration design services. the application of design software can provide a visual image of a potential design, enabling clients view the effects directly and make any changes required before work begins. in addition, manufacturing technologies of decoration materials has improved significantly in recent years, which has led to improvements in the quality of these products. new materials, such as a new type of daub, have been developed in recent years, which has stimulated the development of some segments in this industry. greater environment protection requirements have also promoted the upgrade of decoration materials. the industrys technology change level is expected to increase in future years as more technologies and systems will be utilized in the operations of the industrys companies. more new materials will be developed and the industry will face increasing requirements in quality and environment protection. industry volatility the level of volatility is medium industry revenue volatility has been moderate over the five-year period to 2010. chinas accelerated urbanization process and the rapid development of construction industries in china in recent years contributed to the significant increases in demand for building decoration and decoration services provided by this industry. the global financial crisis from late-2008 had a limited influence on the public building completion and decoration market in 2008 as existing projects were already underway. there was, however, a slight decrease in household clients. in 2009, many clients postponed their decoration plans due to concerns about the economic outlook for the year. in addition, house prices in china have increased significantly in recent years, particularly in 2009. rising house prices reduced demand for household completion and decoration services, with money being spent on the property itself rather than decoration. however, the central government issued policies to prevent the overheating of the real estate market in 2010. this is also expected to have negative effects on this industry due to lower private housing sales. chinas central government also increased investments in infrastructure to stimulate the economy in 2009. this is expected to increase demand for building completion and decoration services in future years when these projects are completed. globalization the level of globalization is low the trend of globalization is increasing industry conditions building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 22 in 2009, foreign-owned companies were estimated to account for 1.1% of total industry enterprise numbers, and these companies generated an estimated 6.6% of industry revenue. foreign companies have advantages in decoration design and high-end public building completion and decoration markets as these companies generally have better design capacity and higher decoration standards. therefore, the majority of revenue of foreign-owned companies is from design services and high-end public building completion and decoration business. the industry is still dominated by domestic companies, especially in the household completion and decoration markets. private firms are the major players in this industry, accounting for an estimated 77.8% of industry enterprise numbers and contributing an estimated 57.1% of industry revenue. large-scale domestic companies are beginning to develop foreign markets by undertaking building completion and decoration projects for foreign clients or in foreign countries. for example, the top five firms in this industry have undertaken building completion and decoration projects of foreign-owned hotels such as shangri-la hotels and hilton hotels. also, cdce, one of the top five companies in this industry, has completed many building completion and decoration projects in foreign countries, including the sheridan hotel in algeria and algiers international airport. with low foreign ownership levels and revenue in this industry, and with insignificant levels of imports and exports, this industry is subject to a low globalization level. shares based on ownership - 2009 ownership percentage enterprise share percentage revenue share stated-owned 1.0 2.8 collectively-owned 2.0 2.1 jece 0.9 0.6 shareholding 15.9 29.3 private 77.8 57.1 foreign 1.1 6.6 other 1.3 1.5 source: acmr-ibisworld estimate key factors building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 23 key factors key sensitivities the key sensitivities affecting the performance of the building completion industry include: domestic goods prices increasing building completion and decoration material prices reduce demand for this industrys services as house decoration costs increase. economic indicators - house price index increasing house prices in china will decrease demand for decoration and completion services as the number of people that can afford to purchase housing decreases. household disposable income higher household disposable income levels in china positively affect this industry by enabling consumers to invest more in home completion, decoration and renovation. household expenditure - by category higher levels of household expenditure on decoration and completion services stimulate demand for this industrys services. industry growth - construction the rapid development of chinas construction industries stimulates demand for building completion services by increasing the number of new commercial and domestic properties. number of households greater household numbers increase the number of potential consumers of the industrys completion and decoration services. key success factors the key success factors in the building completion industry are: ability to compete on tender this is vital for large-scale companies engaged in public building decoration businesses, as they are generally required to tender for projects in china. having a good reputation companies with a good reputation are generally perceived to provide high-quality services and therefore have an advantage over competitors. key factors building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 24 provision of a related range of goods/services (“one stop shop“) consumers generally prefer decoration companies offering a complete service, from project design to furniture purchasing, painting and installing fixtures, as this tends to be more convenient. effective quality control companies adopting effective quality control measures may have an advantage by ensuring high quality decoration projects. access to high quality inputs the quality of decoration materials is directly related to the overall quality of finished projects. the ability to access and install high quality fittings and fixtures is therefore important for companies in the industry. ability to accommodate environmental requirements companies in this industry are required to meet government environmental requirements as regulated by related laws. experienced work force an experienced workforce is necessary to ensure the high quality of building completion and decoration projects. key competitors building completion in china 10 september 2010 copyright 2010, ibisworld inc., all china marketing research co., ltd. 25 key competitors major players market share major player market share range gold mantis construction decoration co., ltd. 0.3% (2010) china state construction engineering corporation 0.1% (2010) shenzhen grandland decoration group co., ltd. 0.1% (2010) shenzhen hongtao decoration co., ltd. 0.1% (2010) zhejiang yasha decoration co., ltd. 0.1% (2010) other 99.3% (2010) player performance gold mantis construction decoration co., ltd. market share: 0.3% suzhou gold mantis construction decoration co., ltd. (gold mantis) is a private company established in january 1993 in jiangsu province. gold mantis has been ranked first in “top 100 building decoration enterprises in china” for seven consecutive years. in 2006, gold mantis was listed on the shenzhen stock exchange, and was the first listing company from this industry. by the end of 2009, the company employed 2,543 staff, 29.8% of which were designers, with 31.9% involved in project management. gold mantis mainly specializes in interior decoration. in addition, the company also undertakes curtain wall construction, furniture manufacturing, landscape design and construction, and electronics installation. the companys clients include government institutions, office buildings, hotels, real estate companies, and hospitals. well-known projects completed by golden mantis are the national stadium, national center for the performing arts, the capital museum, and various hotels, such as shangri-la hotel, hilton hotel and kempinski hotel. in 2009, 18 projects undertaken by gold mantis won the “china national building construction decoration awar