14 April 2016

China's 13th Five Year Plan: Infrastructure

To achieve the stated goal of becoming a ‘moderately prosperous society’, China’s 13th Five Year Plan increases the government’s focus on innovation – with particular emphasis on infrastructure development. Infrastructure development will facilitate the opening up of China, including through the One Belt, One Road initiative.

The Plan also focusses on the upgrading of existing infrastructure: railways will be constructed that traverse China east to west, and south to north, and improve access to Xinjiang and Tibet; the national highway network will be upgraded, with a particular focus on regional highways and the connectivity of regional airports; within cities, parking facilities and public transport capacity will also be improved.

As the country transitions to a more sustainable growth rate, and shifts from manufacturing to consumption, green development is a key priority. The Plan proposes the development of low carbon transportation, stronger infrastructure energy standards, and the use of modern, green technologies to upgrade China’s transportation systems to be more energy efficient. The Plan also focuses on the setting up of uniform national pilot zones for ecological progress, as well as creating a catalogue of main farming areas and key eco-friendly functional zones.

Targets

Specific targets in relation to infrastructure include:

  • Constructing 3,000 kilometres of new urban rail lines
  • Expanding the high-speed rail network from 20,000 to 30,000 kilometres, covering 80% of major cities
  • Building or upgrading 20,000 kilometres of rural roads
  • Constructing and operating 30,000 kilometers of new expressways – 7 of which will start in Beijing, 11 which will go from north to south, and 18 of which will go from west to east
  • Building over 50 new civilian airports and upgrading airports in Harbin, Kunming, Urumqi, Shenzhen, Chongqing, Chengdu and Xi'an, so that they can become international hubs.
  • Constructing 152,000 kilometres of cement or bitumen roads in rural villages
  • Investing over 800 billion yuan in railway construction and 1.65 trillion yuan in road construction
  • Carrying out 20 water conservation projects.

The land of opportunity?

Opportunities for international businesses in China

The ambitious targets outlined above offer significant infrastructure, construction and green development opportunities for businesses wishing to do business in China. In addition, the Plan reinforces the government’s desire to promote its ‘One Belt, One Road’ initiative, a policy set to expand China’s trans-continental trade routes, assisted by the establishment of the Asian Infrastructure and Investment Bank (AIIB). This includes construction of regional transport passageways and ‘international economic cooperation corridors’.

Construction of the trade route will renew demand for iron ore and raw materials, opening up opportunities for overseas commodity exporters. Businesses with strength in construction, engineering, environmental management, design and logistics will find opportunities during the construction process. We also expect to see an increase in public-private partnerships emerging as a growth area as the Plan progresses.

Opportunities for local businesses in China

The sheer scale of the government’s planned infrastructure projects will require labour – both skilled and unskilled – which will benefit local businesses with experience in supplying and managing talent.

With sustainable development and green infrastructure highlighted as one of the Plan’s key goals, local entrepreneurs with green technologies, products and services, as well as businesses with experience in the non-fossil fuel area will find opportunities in the design, production and operation of sustainable infrastructure.

In addition, as the government plans to transform local financing platforms, there may be opportunities for local businesses with expertise in raising funds. As is the case for international businesses, we also expect to see growth in the number and scale of public-private partnerships at the local level.

From planning to implementation

To achieve the Plan’s objective of significantly improving China’s infrastructure, the government will need to introduce further investment and financing systems reforms. Funds for specific projects will continue to be raised through market-based mechanisms, and the government will require local financing platforms to transform themselves towards market-based financing platforms too.

To reach its goal of increasing green, sustainable infrastructure, the government may need to pass legislation setting out energy efficiency standards and controls applicable to new infrastructure projects.

The government is also likely to enact additional laws and regulations to improve both the standards of energy efficiency and their enforceability.

Please contact one of our China experts to understand how the Plan is likely to impact you or to discuss new developments as its implementation progresses.


For an in-depth analysis of opportunities and implications for other key sectors, please see China’s 13th Five Year Plan: the land of opportunity.

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