(Last updated: 30 Mar 2011)

Trends and opportunities

The market

There are three types of enterprises in China's construction and building industry:

• State-owned enterprises – still dominant, although losing their traditional market advantage. They are usually more conservative in seeking out and adopting new products.
• Sino-foreign joint venture enterprises – users of new hi-technology adopted or transferred via foreign partnerships. They have advanced marketing and operational management expertise and invest heavily in technology innovation and marketing.
• Private enterprises – encouraged by government reform, private companies have gradually gained a foothold in this industry helped by their flexibility and market-driven ideology. They have become the major importer and distributor for imported building materials.

Building material industry is one of the most important aspects for China material development including three major areas: construction material and products, non-metal mineral and products and inorganic materials.

China is the largest producer of the building materials in the world and the largest consumer of the building material as well. China remains on the top of the list in the world in many primary building material production including cement, flat glass, construction ceramic and sanitary ware, stone and walling materials.

China has been focusing on improvement programs including production efficiency, energy saving, alternative and new building materials.

While there is a demand for a diverse range of building materials, major areas of interest include:

• Light-weight materials
• Water-proof, sound-proof and thermal insulation materials
• Environmental protection, recycled and recyclable products, ‘green’ buildings
• Energy-saving building materials and systems
• Hi-tech content of the materials
• Compliance with international standards

The timber market is large and very competitive in China. Imported sawn timber and veneer are mainly used in furniture, flooring, tile making and interior decorating sectors.

Imported logs are used for sawn timber, veneer slicing, plywood and paper pulp-making. Australian sawn timber such as araucaria and Victorian oaks, jarrah and radiata pine are already in China. Radiata pine logs have also been exported to the Chinese paper industry.

Brand, quality and price are the key factors for sawn timber exports to China. Due to price competition in China, Chinese buyers and traders are sourcing hardwood logs globally. It is also estimated that 50 per cent of paper pulp used in Chinese paper industry is made from imported logs and growing demand for foreign paper chip is expected.

There are a number of major developments and influences that are improving export opportunities and reducing threats for Australian exporters:

• An increasing demand for quality is opening new demand for imported products.
• There is strong growth in DIY ‘hypermarkets’ (OBI, B&Q) in major urban centres.
• The market for interior decorating has expanded due to the government’s incentives for private home ownership.
• China's World Trade Organization accession in December 2001 has resulted in ongoing tariff reductions and enhanced market transparency.
• The market for imported building materials is becoming increasingly competitive, especially in the eastern coastal areas.
• Many foreign companies are active in the market, either through direct export or local investment.
• Local customers have a strong demand for sawn timber and logs.

Opportunities

Opportunities for Australian suppliers vary across China but they include:

• Light building materials – raw materials (eg. timbers), fabricated products, chemical applications (eg. sealants, paints), interior decoration products
• Intelligent building systems – energy saving technologies, security, fire and access control
• Architectural and urban design
• Environmentally-friendly building materials – ‘green’ building materials
• Construction machinery
• Timber products – sawn timber, plywood, sliced veneer, fibreboards, woodchips, pulp logs, sawn logs and veneer (ie. radiata pine), rough sawn flooring tiles, finished flooring tiles

Tariffs, regulations and customs

The accession of China to the World Trade Organization (WTO) has resulted in a reduction of tariffs. However, duties are still imposed on the majority of imports into China.

Tariff rates on building materials vary from zero to 25 per cent, depending on the type of building material, its intended use, the specific tariff codes and the WTO accession requirements.

Value added tax (VAT) is applied to all imports at the rate of 17 per cent, except those specifically used in manufacturing for re-export.

Exporters are advised to contact Austrade in order to obtain the most up-to-date information on the relevant sector tariffs and regulations.

Industry standards

There are two commonly applied standards in China:

• The National Industry Standard or Industry Standard of the Ministry of Construction
• The quality assurance system for building materials manufacturing – ISO 9001 and ISO 9002

However, differences exist across China in the application of industry standards, with major urban centres more open to international practice than other areas. While all cities have the same standards, slow information distribution and poor implementation are common in inland areas. Companies who have project experience in large cities such as Shanghai can usually capitalise on this to realise opportunities in other areas of China.

Standards adoptions for new products – which have not been used in China – are based on those applied in the major supplying countries. For example, light steel pre-fabricated houses are mainly imported from Canada and the USA, and the standards adopted in China reflect those in use in these two countries.

Marketing your products and services

Market entry

China is a complex and difficult market. Australian companies can consider several possible options for market entry:

• Direct import via local agents or distributors.
• Local investment – joint venture, partnership, wholly owned.
• Manufacturing localisation, including technology transfer.
• Development of a strong in-market presence is important to support market development, particularly where products and technologies require service support.
• The establishment of an initial market presence in a major urban centre is recommended as other markets within China can then be ‘rolled out’ from this entry point.
• For supply to large projects, local governments sometimes require a local presence.
• The Chinese design institutes and architects often play a critical role in the approval, recommendation and assessment of new building products.

There are a number of key activities Australian exporters should consider when marketing products in China's building materials industry:

• Commercial and technical seminars to potential customers, architects and local authorities
• Participation in industry specific trade shows
• It is critically important to visit the market regularly
• Promotional, technical and after-sales service support for both distributors and end users

Many construction companies and building materials manufacturers have established their own websites. There are also a number of business-to-business (B2B) sites set up by industry associations and professional dot.com companies for e-business. Almost all of these sites are only in Chinese language. Some Hong Kong websites such as China Online and Alibaba.com provide Chinese industry information in English.

Distribution channels

Local agents and distributors are the most popular way for imported products to be distributed and marketed in China. The number of companies registered to import products is controlled in China. However, local agents or distributors who do not have import licences can import through an import–export trading company. Australian exporters should confirm with their potential business partners which import approach will be used.

As China is a geographically large country with varying levels of economic development in different parts of the country it is not recommended to have a single distributor. Multiple distributors and agents with geographically exclusive areas are more effective.

Building materials supermarkets (such as OBI and B&Q) are growing rapidly to meet market demand in the home decoration market. These outlets provide market potential for Australian retail decoration products.

The major distribution channels for sawn timber, veneers and logs are through traders and property developers.

Links and industry contacts

Building material–related resources

China Online – www.chinaonline.com
Global Sources – www.corporate.globalsources.com

Government, business and trade resources for China

China customs – www.customs.gov.cn

Media

CCPIT Building Material Sub-Council – www.ccpitbm.org/
China Building Materials Information Network (bilingual) – www.cbminfo.com
China Building Materials E-Commerce (Chinese only) – www.c-bm.com
China Daily (Industry news) – www.chinadaily.com.cn

Contact details

The Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency.

Through Austrade’s network of offices in over 50 countries, we assist Australian companies to succeed in international business, attract productive foreign direct investment into Australia and promote Australia's education sector internationally.

For more information on how Austrade can assist you, contact us on:

Australia ph: 13 28 78 | Email: info@austrade.gov.au

A list of Austrade offices (in alphabetical order of country) is also available.