Transportation and Highway Construction
Since 2020, China's transportation industry has faced unprecedented tests and challenges. In 2023, China implemented a strategy to expand domestic demand, optimized and stabilized the industrial chain and supply chain. With the steady progress of resuming work and production, the transportation industry has gradually restored normal order. Under the guidance and support of China's transportation infrastructure policies, freight and passenger volume have achieved a stable recovery, providing strong momentum for the growth of transportation infrastructure investment. Driven by large development space for highway construction, recovery in transportation demand, national strategic support, and overseas 'major civil engineering' infrastructure development, China's transportation fixed asset investment market has great potential and will further boost the vigorous development of China's transportation infrastructure and highway construction fields.
01
Introduction to Transportation Infrastructure Construction and Highway Construction
Transportation infrastructure mainly refers to the infrastructure established for the transportation system, which is an important part supporting China's economic development and also a significant component of fixed asset investment. Transportation infrastructure can be divided into various types based on their main categories, including highways, waterways, railways, and civil aviation infrastructure. It is an important carrier supporting national economic development and the modern industrial system.
Among them, the highway infrastructure industry not only provides connectivity and support for other modes of transportation but is also an important factor in promoting domestic economic development and social progress. There are significant differences between highways and other transportation infrastructures such as railways and waterways. Highways have a wider range of applications, carry heavier freight and passenger loads, thus requiring coverage in a broader area and of more types. There are significant distinctions between different grades of highways.
Source: Analysis by Frost & Sullivan
Highway construction is divided into five grades based on usage tasks, functions, and the traffic volume it can accommodate: expressways, first-class highways, second-class highways, third-class highways, etc. At present, the proportion of high-grade highways and expressways in China is relatively small, leaving significant room for improvement in the future.
Source: Analysis by Frost & Sullivan
Source: Analysis by Frost & Sullivan
02
China's fixed asset investment in transportation and total highway mileage
As a key area of fixed asset investment in society, transportation infrastructure has the characteristics of sufficient project reserves and relatively less constraints from external economic environments. It can maintain a stable investment scale to support the smooth operation of the economy. China's fixed asset investment in transportation increased from over 3 trillion yuan in 2018 to about 4 trillion yuan in 2022, with an annual compound growth rate of approximately 4% during this period.
Among them, China's fixed asset investment in highway construction increased from about 2 trillion yuan in 2018, growing at a compound annual rate of about 7%, to about 3 trillion yuan in 2022. As the most fundamental and extensive transportation infrastructure, highways are the main support for connecting various modes of transport and for maximizing the overall efficiency of the comprehensive transportation network. They play an irreplaceable role in the comprehensive transportation system. Whether in terms of investment scale or growth rate, highway infrastructure construction has been an important pillar for the high-level operation and steady growth of fixed asset investment in transportation nationwide in recent years. In 2022, fixed asset investment in highway construction accounted for more than 60%.
As China accelerates infrastructure construction during the '14th Five-Year Plan' period, striving to build a modern highway transportation system that is safe, convenient, efficient, and economical, it aims to promote high-quality development of national highway infrastructure construction and support the needs of national economic development. It is expected that by 2027, China's fixed asset investment in highway construction will exceed 4 trillion yuan, with a compound growth rate of about 7% from 2022 to 2027. By 2027, it is estimated that the national highway mileage will be close to 6 million kilometers.
*The fixed asset investment in transportation includes investments in railways, highways, waterways, civil aviation, and other fields.
Source: Analysis by Frost & Sullivan
Source: Analysis by Frost & Sullivan
03
Analysis of the Industrial Chain in the Transportation Infrastructure Construction Industry
The upstream of the transportation infrastructure construction industry chain mainly includes raw material and engineering equipment suppliers, the midstream mainly consists of infrastructure construction companies focusing on highways, waterways, railways, and civil aviation, and the downstream mainly includes infrastructure construction operators and related maintenance and operation services providers. Among them, midstream infrastructure construction companies play an important role in the industry chain, connecting upstream and downstream suppliers and operation services providers, and directly affecting the quality, efficiency, and safety of infrastructure projects. The downstream highway maintenance business provides a favorable supplement to the highway construction industry chain. Highway maintenance refers to the process of keeping highways in good condition, preventing their quality from deteriorating, extending their service life, ensuring the safety of vehicles and travel, and playing a key role in the efficient operation of highway infrastructure construction.
Source: Analysis by Frost & Sullivan
04
Analysis of China's Transportation Infrastructure Construction Policies
With the country's policy support for transportation and highway construction during the '14th Five-Year Plan' period, small and medium-sized enterprises (SMEs) will have more opportunities to participate in highway infrastructure investment, construction, and operation. They will enjoy more preferential policies and services, working together to achieve new goals for the total length of the national comprehensive transportation network and highway construction. The China transportation fixed asset investment market has great development potential.
Source: Analysis by Frost & Sullivan
05
Driving factors of China's transportation infrastructure construction
As of the end of 2022, the density of highways and expressways in China has not reached its peak and there is still considerable room for improvement. Compared with countries such as Europe, America, and Japan, China's highway and expressway density is not high. With the support of relevant policies for transportation infrastructure construction during the '14th Five-Year Plan' period, the fixed assets for transportation and highway investment continue to grow. Moreover, the demand for highway freight and passenger volume will continue to rise, which will further promote highway construction in China and has great potential for future development.
Source: Analysis by Frost & Sullivan
During the period from 2019 to 2022, affected by multiple rounds of the epidemic, China's road transportation was hindered, and the national highway freight volume and passenger volume were impacted to varying degrees. In terms of highway freight, in 2023, with the optimization and adjustment of epidemic prevention and control measures, the overall situation of the epidemic has stabilized, and there is a strong expectation for a rebound in the highway passenger and freight markets. At the same time, with the rapid development of China's e-commerce industry, the demand for commodity transportation continues to grow, and the increase in highway freight volume will further promote the stable development of highway construction.
In terms of highway passenger transport, the tourism industry is one of the main demand areas for highway passenger transport in China. Due to regional epidemic prevention policies, travel has been hindered, resulting in a significant decline in passenger volume nationwide from 2019 to 2022. With the effective control of the epidemic, the number of tourist trips nationwide will gradually recover. Regional governments are accelerating the resumption of road passenger transport operations, and highway passenger volume will gradually return to normal. It is expected that by 2027, the national highway passenger volume will return to pre-epidemic levels.
China's fixed investment as a proportion of GDP is much higher than that of G7 member countries, indicating that China is still in an upward channel of infrastructure investment. The construction industry of transportation infrastructure in China still has broad development prospects, and 'major civil engineering' infrastructure enterprises will also have good opportunities for sustainable development. At the same time, actively responding to the national 'Belt and Road' strategic policy, leading Chinese infrastructure enterprises have increased their pace of 'going global', deeply penetrating overseas markets, and future business development in overseas markets will continue to improve.
Infrastructure construction is an important area for stabilizing economic growth. As a crucial link supporting China's comprehensive construction of a modern economic system and a strong socialist country, highway construction is expected to embrace high-quality development.
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In terms of the national expressway network, it is specified that the total planned mileage of the expressway network is about 162,000 kilometers, with future construction and renovation needs amounting to about 58,000 kilometers. -
In terms of the general national highway network, the total planned mileage of the network is about 299,000 kilometers, with a future construction and renovation demand of about 110,000 kilometers.
