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KEEPING up with the Joneses” is actually driving a whole economic sector: new housing construction and renovations. The first document issued by the Chinese government in 2010 said that effective measures shall be taken to promote rural home owners upgrading their residences. This is another program aimed at stimulating the vast rural market alongside programs discounting home appliances and auto/motorcycle purchases in the countryside, and in many respects rural home improvement outstrips typical urban renovations.
Handyman Specials:
Subsistence to Comfort
Hearing about the promotion of building materials in the countryside, Zhang Guowei, a rural lad in Majiayan of Chongqing Municipality, told this reporter: “Nowadays home improvement is all the rage in the countryside. We hope more building materials will become available locally. We don’t pursue luxury; what we need is economical and practical upgrades.”
“The program disseminating building materials in the countryside is popular among farmers,” confirms Qin Kaizhi, executive vice-president of Chongqing Dachuan Building Materials Market Group. He has conducted several investigations in rural areas such as Majiayan. “Building your own house has a long tradition among farmers. After accumulating some savings from farming and migrant work, they want to build houses and decorate their homes.”
In China’s rural areas, housing construction ranks second in rural consumption patterns, second only to food consumption. In relatively developed eastern rural areas, the boom in housing construction has basically ended, but in central and western areas, housing construction is still a matter of prime importance. The houses built in the construction boom of the 1980s need to be renovated now too, so building materials for home decoration are in great demand.
As a higher percentage of Chinese incomes approaches the global equivalent of middle class comfort, the average per capita area for urban housing has reached 23.7 square meters; though the figure for rural inhabitants is a bit higher at 27.2 square meters, their living environment and house conditions are far from satisfactory. Farmers’ needs are shifting from subsistence to comfort.
“For some time to come we expect to see steady growth in demand for building materials and interior finishes in the rural markets,” said Qin Zhanxue, vice-president of the China Building Materials Circulation Association (CBMTA). Support for his conclusion comes in the form of a prediction that in 2020 China’s urbanization level will approach 60 percent. The scale and architecture of central towns in rural areas tend to scale up to city proportions, and rural housing will also be upgraded by a big margin. No doubt, this will bring about unprecedented opportunities for expansion in the production and marketing of building materials.
What is the present size of market demand related to building and renovating rural housing?
The CBMTA did its part to provide accurate data upon which to base a feasible plan for promoting building materials in the countryside. In January 2010 it organized a field study in 14 middle-income level villages in Beijing, Hebei, Hubei, Jiangsu, Chongqing, Guangxi, Zhejiang and Heilongjiang, distributing questionnaires to 6,372 households. The results show that 580 households, or 9 percent of the respondents, plan to build new houses in 2010.
According to the National Bureau of Statistics, in 2008 China’s rural population was 721.35 million. If every household has 3.27 persons (in line with a 2005 survey), an estimate of 220.60 million rural households would be reasonable. Based on the picture painted by the CBMTA survey, nearly 20 million rural households intend to spruce up their residences in 2010.
“We have also discovered in the survey that the average cost of building a new house is RMB 106,000 per household, and the interior absorbs one third of the total investment,” said Qin Zhanxue. Projections for this year are that budgets for rural housing construction will be RMB 1.99 trillion. Even if only 5 percent of rural households are inspired to build new houses by the promotion, it will bring about RMB 100 billion in consumption (subsidies not deducted). “Furthermore, it will also bring about consumption in related commodities such as household electric appliances, furniture, lamps, andcurtains,” said Qin Zhanxue.
Keeping Up with the Chens
In his investigations Qin Kaizhi found that upgrading activities for rural homes are more extensive than urban home improvements. For instance, in urban areas improvements amount to redesigns of interiors. In the countryside, renovating the home generally involves exterior walls, roofs and even gardens and courtyards. Rural home renovation may not be luxurious, but it involves almost all aspects of home improvement.
The programs stimulating rural consumption of household electric appliances (2007) and auto/motorcycles (2009) have greatly benefited related enterprises. As of December 15, 2009, 34.30 million household electric appliances were sold in the countryside, generating sales figures reaching RMB 58.3 billion. In 2009 subsidies to 1.67 million automobiles and 4.16 million motorcycles sold in the countryside totaled RMB 8.68 billion. The auto subsidy policy will continue to the end of 2010 and is expected to stimulate demand in rural markets for more than 1 million auto/motorcycles. According to an estimate by the Chongqing Building and Decorative Materials Chamber of Commerce, rural market demand for building materials “is three times that of auto/motorcycles.” This good news excites building materials enterprises.
In fact, quite a number of prescient enterprises began their promotions in rural areas before the outbreak of the financial crisis in 2008. China National Building Material Group Corporation (CNBM) began to experiment with new types of domestic construction in 2009. Prefabricated units or components meant factory products could be assembled on site. Zhang Jianxing, executive director and executive vice-president of the CNBM Southern Cement Company, reveals his company’s focus for 2010 was to promote this new style of housing in the countryside.
Power Dekor is a listed company engaged in wood flooring and they are getting in on the act as well. “We will design new products especially for rural housing construction,” said Wang Xiaoyu, general manager of the Marketing Department at Power Dekor Group Co., Ltd. Wang Xiaoyu said that the “Metropolitan Life” series and “New Solid Wood” series flooring products are designed specifically for rural markets. Although targeting rural areas, the quality of these products is excellent, and they are produced in great quantities, so as to lower production costs.
Another promotional point for these products in this market is that it helps to eliminate backward building designs and construction and improve the quality of rural housing. Since building materials used in rural housing construction are mostly locally produced by factories untouched by modern advances, a welcome change is anticipated: “Subsidies popularizing certain building materials will create competition for factories whose products are not up to scratch... and they’ll be weeded out of the market by enterprises with brand name advantages and links to subsidies. This will benefit the market,accelerate the expansion of advantageous enterprises, and eliminate backward means of production,” said Qin Zhanxue.
He holds that the impact of 220 million households in China’s countryside translates into huge opportunities in the construction and related industries.
Enterprise Shake-Out
Where to buy good quality and reasonably priced building materials? During his survey in Dingzhou, Hebei Province, Qin Zhanxue found that farmers hope that beyond providing subsidies, the government will recommend good products and dealers.
“Building materials designed for farmers might be low-tech, but that does not mean they are of poor quality,” said Qin Zhanxue. For instance, ceramic tiles for urban markets may bear decorative patterns, while farmers may need tiles plainer in appearance and less expensive, but still of good quality. “Therefore, in the implementation proposal we submitted to the Ministry of Industry and Information Technology, we recommended two market access systems, one to license products and the other to license dealers.”
“We have set three standards for suppliers to the rural market. First is the standard for product quality, second is the standard for environmental protection, and third is their production capability. They must be large enough to meet the huge demand of the rural market,” said Qin Zhanxue.
It is impossible for farmers to obtain goods directly from manufacturers; most of them obtain goods from dealers. “Therefore, we will establish an evaluation system and a supervision system for dealers. The program’s official dealers must enjoy a good reputation,” specified Qin Zhanxue.
Besides product quality, Zheng Fengtian, vice dean of the School of Agriculture and Rural Development of Renmin University of China, worries about another problem: the support measures relating to the program, for instance, the source of funding for rural housing construction and home upgrades.
At present, China’s financial institutions provide a low level of support to the countryside. They cannot fully satisfy farmers’ demands for credit, and most of their loans to farmers are for developing agricultural production, not for consumption such as housing construction. In contrast, urban house buyers can obtain loans with a 30 percent interest rate deduction. “Limitations on farmers’ loans will stifle this program. Loans for farmers’ housing and renovation plans need to be sourced,” Zheng Fengtian concluded.
Handyman Specials:
Subsistence to Comfort
Hearing about the promotion of building materials in the countryside, Zhang Guowei, a rural lad in Majiayan of Chongqing Municipality, told this reporter: “Nowadays home improvement is all the rage in the countryside. We hope more building materials will become available locally. We don’t pursue luxury; what we need is economical and practical upgrades.”
“The program disseminating building materials in the countryside is popular among farmers,” confirms Qin Kaizhi, executive vice-president of Chongqing Dachuan Building Materials Market Group. He has conducted several investigations in rural areas such as Majiayan. “Building your own house has a long tradition among farmers. After accumulating some savings from farming and migrant work, they want to build houses and decorate their homes.”
In China’s rural areas, housing construction ranks second in rural consumption patterns, second only to food consumption. In relatively developed eastern rural areas, the boom in housing construction has basically ended, but in central and western areas, housing construction is still a matter of prime importance. The houses built in the construction boom of the 1980s need to be renovated now too, so building materials for home decoration are in great demand.
As a higher percentage of Chinese incomes approaches the global equivalent of middle class comfort, the average per capita area for urban housing has reached 23.7 square meters; though the figure for rural inhabitants is a bit higher at 27.2 square meters, their living environment and house conditions are far from satisfactory. Farmers’ needs are shifting from subsistence to comfort.
“For some time to come we expect to see steady growth in demand for building materials and interior finishes in the rural markets,” said Qin Zhanxue, vice-president of the China Building Materials Circulation Association (CBMTA). Support for his conclusion comes in the form of a prediction that in 2020 China’s urbanization level will approach 60 percent. The scale and architecture of central towns in rural areas tend to scale up to city proportions, and rural housing will also be upgraded by a big margin. No doubt, this will bring about unprecedented opportunities for expansion in the production and marketing of building materials.
What is the present size of market demand related to building and renovating rural housing?
The CBMTA did its part to provide accurate data upon which to base a feasible plan for promoting building materials in the countryside. In January 2010 it organized a field study in 14 middle-income level villages in Beijing, Hebei, Hubei, Jiangsu, Chongqing, Guangxi, Zhejiang and Heilongjiang, distributing questionnaires to 6,372 households. The results show that 580 households, or 9 percent of the respondents, plan to build new houses in 2010.
According to the National Bureau of Statistics, in 2008 China’s rural population was 721.35 million. If every household has 3.27 persons (in line with a 2005 survey), an estimate of 220.60 million rural households would be reasonable. Based on the picture painted by the CBMTA survey, nearly 20 million rural households intend to spruce up their residences in 2010.
“We have also discovered in the survey that the average cost of building a new house is RMB 106,000 per household, and the interior absorbs one third of the total investment,” said Qin Zhanxue. Projections for this year are that budgets for rural housing construction will be RMB 1.99 trillion. Even if only 5 percent of rural households are inspired to build new houses by the promotion, it will bring about RMB 100 billion in consumption (subsidies not deducted). “Furthermore, it will also bring about consumption in related commodities such as household electric appliances, furniture, lamps, andcurtains,” said Qin Zhanxue.
Keeping Up with the Chens
In his investigations Qin Kaizhi found that upgrading activities for rural homes are more extensive than urban home improvements. For instance, in urban areas improvements amount to redesigns of interiors. In the countryside, renovating the home generally involves exterior walls, roofs and even gardens and courtyards. Rural home renovation may not be luxurious, but it involves almost all aspects of home improvement.
The programs stimulating rural consumption of household electric appliances (2007) and auto/motorcycles (2009) have greatly benefited related enterprises. As of December 15, 2009, 34.30 million household electric appliances were sold in the countryside, generating sales figures reaching RMB 58.3 billion. In 2009 subsidies to 1.67 million automobiles and 4.16 million motorcycles sold in the countryside totaled RMB 8.68 billion. The auto subsidy policy will continue to the end of 2010 and is expected to stimulate demand in rural markets for more than 1 million auto/motorcycles. According to an estimate by the Chongqing Building and Decorative Materials Chamber of Commerce, rural market demand for building materials “is three times that of auto/motorcycles.” This good news excites building materials enterprises.
In fact, quite a number of prescient enterprises began their promotions in rural areas before the outbreak of the financial crisis in 2008. China National Building Material Group Corporation (CNBM) began to experiment with new types of domestic construction in 2009. Prefabricated units or components meant factory products could be assembled on site. Zhang Jianxing, executive director and executive vice-president of the CNBM Southern Cement Company, reveals his company’s focus for 2010 was to promote this new style of housing in the countryside.
Power Dekor is a listed company engaged in wood flooring and they are getting in on the act as well. “We will design new products especially for rural housing construction,” said Wang Xiaoyu, general manager of the Marketing Department at Power Dekor Group Co., Ltd. Wang Xiaoyu said that the “Metropolitan Life” series and “New Solid Wood” series flooring products are designed specifically for rural markets. Although targeting rural areas, the quality of these products is excellent, and they are produced in great quantities, so as to lower production costs.
Another promotional point for these products in this market is that it helps to eliminate backward building designs and construction and improve the quality of rural housing. Since building materials used in rural housing construction are mostly locally produced by factories untouched by modern advances, a welcome change is anticipated: “Subsidies popularizing certain building materials will create competition for factories whose products are not up to scratch... and they’ll be weeded out of the market by enterprises with brand name advantages and links to subsidies. This will benefit the market,accelerate the expansion of advantageous enterprises, and eliminate backward means of production,” said Qin Zhanxue.
He holds that the impact of 220 million households in China’s countryside translates into huge opportunities in the construction and related industries.
Enterprise Shake-Out
Where to buy good quality and reasonably priced building materials? During his survey in Dingzhou, Hebei Province, Qin Zhanxue found that farmers hope that beyond providing subsidies, the government will recommend good products and dealers.
“Building materials designed for farmers might be low-tech, but that does not mean they are of poor quality,” said Qin Zhanxue. For instance, ceramic tiles for urban markets may bear decorative patterns, while farmers may need tiles plainer in appearance and less expensive, but still of good quality. “Therefore, in the implementation proposal we submitted to the Ministry of Industry and Information Technology, we recommended two market access systems, one to license products and the other to license dealers.”
“We have set three standards for suppliers to the rural market. First is the standard for product quality, second is the standard for environmental protection, and third is their production capability. They must be large enough to meet the huge demand of the rural market,” said Qin Zhanxue.
It is impossible for farmers to obtain goods directly from manufacturers; most of them obtain goods from dealers. “Therefore, we will establish an evaluation system and a supervision system for dealers. The program’s official dealers must enjoy a good reputation,” specified Qin Zhanxue.
Besides product quality, Zheng Fengtian, vice dean of the School of Agriculture and Rural Development of Renmin University of China, worries about another problem: the support measures relating to the program, for instance, the source of funding for rural housing construction and home upgrades.
At present, China’s financial institutions provide a low level of support to the countryside. They cannot fully satisfy farmers’ demands for credit, and most of their loans to farmers are for developing agricultural production, not for consumption such as housing construction. In contrast, urban house buyers can obtain loans with a 30 percent interest rate deduction. “Limitations on farmers’ loans will stifle this program. Loans for farmers’ housing and renovation plans need to be sourced,” Zheng Fengtian concluded.