Construction work restarts in China as Covid-19 spread slows

26 March 2020 (Last Updated March 26th, 2020 16:01)

Construction work restarts in China as Covid-19 spread slows

As the spread of the Covid-19 coronavirus slows in China, major construction projects have been resumed across the country.

Drastic containment measures have been in place in China since mid-January to tackle the spread of Covid-19. However, with the latest news on recorded outbreaks showing a slowdown in new cases, and no new cases in Wuhan in Hubei province (the epicentre of the pandemic) since 18 March, steps are being taken to ease restrictions on movement. By mid-March there was anecdotal evidence suggesting that economic activity across China had gradually started to recover. Domestic trucking, for example, was reportedly back to around 80% of normal levels, enabled by the recent lifting of road blocks and traffic restriction across major cities.

Reflecting the latest effort by the government to boost the economy and mitigate the effects of the Covid-19 epidemic, major infrastructure construction projects have been restarted. According to the National Development and Reform Commission (NDRC), the country has restarted construction on 89% of 11,000 key construction projects, outside of Hubei province. Of the total, 521 key construction projects directly controlled by the NDRC have been resumed. Previously reported figures showed that as of the first week of February only 2.3% of these projects had been restarted. According to the NDRC, China has resumed the construction on 97% of key highway and waterway projects and 86% of water conservancy projects. China’s local governments have issued CNY1.4tn (around $198bn) in new bonds to support infrastructure projects, as well as the wider economy affected by the coronavirus outbreak.

The NDRC has also promised to speed up measures to solve supply of raw materials and labour shortage problems in a bid to carrying on key infrastructure projects. According to government, the construction work of data centres and 5G networks will also be accelerated.

To resume economic activities, the government has also gradually restarted rail network development projects. On 15 March, China State Railway Group (CSR) Company announced that construction on major rail infrastructure had gradually been stimulated, with construction works resuming on 108 major rail construction projects across China, representing 93% of the country’s railway projects under construction.

During the country’s fight against the coronavirus outbreak, the civil aviation industry is playing a major role in transporting medical professionals and key emergency medical supplies across the regions. As a result, the government is focusing more on the development of the country’s airport transport infrastructure. According to the Civil Aviation Administration of China, the government has resumed construction work on more than 80% of total airport projects, representing 65 airport projects across the country; of which, 27 airports are the national major airport projects. To stabilise international supply chains, on 24 March, the government decided to take further steps to increase the country’s air freight capacity. The annual air cargo capacity of Beijing Daxing International Airport is expected to increase to two million tonnes by 2025.

Assuming these trend holds, it is expected that work on construction sites will be ramped up quickly in the coming months, recovering some of the lost output since late January. It can also be expected that the government will accelerate the disbursement of funds for infrastructure investment to prop up the industry and support the economy, while the monetary authorities are set to loosen policy by cutting interest rates.

However, the damage inflicted on the overall economy, in terms of rising unemployment, combined with major challenges facing property developers amid a deterioration in investor confidence, means that the overall construction industry will struggle to return to healthy growth levels in the year as a whole.