Building materials to China
(Last updated: 12 Aug 2013)
Trends and opportunities
The market
The building materials industry is a key industry sector in China due to its contribution to the construction and infrastructure sectors and the importance of these sectors to China’s ongoing development. The Building Materials industry comprises three major areas:
- construction material and products
- non-metal mineral and products
- inorganic materials
China is the world's largest building materials producer and consumer. In 2012, China produced building materials with a total industrial output value of approximately RMB3800 billion (A$644 billion), 12 per cent higher than that in 2011. The total profit was RMB280 billion (A$47.5 billion) which was a decrease of 8 per cent from 2011.
(Source: China Building Materials Federation)
In 2012, the structure of import and export of building materials and industrial products was optimised. The total exporting commodity value was around RMB225 billion (A$38 billion), an increase of 7.9 per cent. The main export products included sanitary ceramics, technical glass, glass fibre and cement. The main imports were special purpose machinery, high value-added products and stone products.
Urbanisation will be the key driver of the building and construction industry’s growth for the next two decades. According to Business Forum China, China’s urban population outnumbered its rural one for the first time in 2011, marking a milestone in its massive urbanisation programme. Urban dwellers account for 51.27 per cent of China's entire population of nearly 1.35 billion (Source: China National Bureau of Statistics). This urbanisation program will continue to require the development of new, and growth of current, cities.
In addition to urbanisation driving demand, rising income and industrialisation will also support ongoing demand for a diverse range of building material. The key message from the China Building Material 12th Five-Year Plan for the industry has been greater adoption and investment in green products and technologies. This will result in greater import demand for related products and technologies but also support for the development of a local green industry.
Major areas of interest include:
- High quality light-weight materials
- High quality water-proof, sound-proof and thermal insulation materials
- Environmental protection, recycled and recyclable products, ‘green’ buildings
- Energy-saving building materials and systems
- Hi-value/technical materials
For further information on market trends, please see:
Opportunities
Opportunities for Australian suppliers vary across China but they include the following:
- Light building materials – raw materials (eg. timbers), fabricated products, chemical applications (eg. sealants, paints), interior decoration products
- Intelligent building systems – energy saving technologies (eg, smart home systems, Lighting control systems, LED lighting) 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 (radiata pine), rough sawn flooring tiles, finished flooring tiles
Challenges
The Building materials market is large in China. The number and size of industry players and the volume required to meet demand does create some challenges which include:
- low awareness of Australian image and brands in the sector - new entrants need significant promotional and educational investment
- Local presence is crucial to lower transport costs and ensure reasonable delivery times
- High demand but short supply (eg. timber products)
Tariffs, regulations and customs
The accession of China to the World Trade Organization (WTO) has resulted in a reduction of tariffs over the past 10 years. 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. It should be noted that the China building material market is still highly regulated with tariff around 10-20 per cent. Imports are often checked by customs to identify any ‘under valuation’ of product price.
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.
Industry standards
There are two commonly applied standards in China:
- The Chinese National Standards known as ‘GB’ for mandatory or ‘GB/T’ for voluntary or recommended. A standard number follows GB or GB/T, eg. GB/T 9966.2-2001 for natural facing stones.
- The quality assurance system for building materials manufacturing – ISO 9001 and ISO 9002.
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 yet 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
There are four 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.
- 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 importers/distributors for imported building materials.
- 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.
- Wholly owned foreign enterprises (WOFES) – many foreign manufacturers operate 100 per cent owned operations in China, Some of these are focused on domestic and export market. There are over 40 Australian building and material companies with operations in China.
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. Some Australian companies are already in China manufacturing a wide range of building products including sandstone, steel and aluminium roofing, plasterboard, architectural paint and coatings.
- Development of a strong in-market presence is important to support market development, particularly where products and technologies require service support.
- 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.
- Developers and main contractors are equally critical target customers for marketing building products depending on various stages in tendering process.
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 important to visit the market regularly
- It is important to have Chinese language translated marketing material/brochure/website available
- Promotional, technical and after-sales service support for both distributors and end users
- Intellectual property protection is highly recommended and enforcement strategies may be required. Austrade can provide list of service providers to those who are seeking advice on IP issues.
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 and this is not an issue. 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 and different customer/government networks required 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 hypermarkets such as B&Q are growing rapidly to meet consumer and commercial market demand in the home improvement market and also becoming a major supplier to project builders, and commercial tradespeople. These outlets provide market potential for Australian related retail and commercial products.
Links and industry contacts
Building material–related resources
China Building Material Info (bilingual) – www.cbminfo.com/tabid/303/Default.aspx
China Online – www.chinaonline.com
Global Sources – www.corporate.globalsources.com
Government, business and trade resources for China
China customs – www.customs.gov.cn
China 12th Five-Year Plan for Building Material Industry (Chinese only) – www.miit.gov.cn/n11293472/n11293832/n11293907/n11368223/14335483.html
Media
CCPIT Building Material Sub-Council (bilingual) – www.ccpitbm.org/
China Building Materials E-Commerce (Chinese only) – www.c-bm.com
China Daily (general industry news) – www.chinadaily.com.cn
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes 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.