Concrete Analysis | Boosting asset productivity means doing more with less

The development of new buildings and infrastructure fuels national economic growth.

From an airport that can open up new transport routes, to a dam providing water, or creating thriving communities through new schools, hospitals and housing, infrastructure forms the building blocks on which a country generates its wealth.

China’s thundering economic development since 1980 has been powered in the main by its buildings and infrastructure, so it is no surprise to see the country rank number one in terms of absolute returns from built assets in this year’s Global Built Asset Performance Index from Arcadis. China’s infrastructure – its homes, schools, roads, airports, power plants, malls, railways, ports and all other fixed assets – contributes US$10.4 trillion to the economy while the US ranks second at US$5.4 trillion, followed by India and Japan.

While China’s economy is clearly experiencing a slowdown, its GDP is still forecast to grow at around 7 per cent, and the country is expected to continue investing in built assets at an unprecedented level. China is now looking to new avenues to sustain its appetite for growth, with the One Belt, One Road initiative being one of the most high-profile examples. The programme seeks to link up Eurasian countries with China, with a “new silk road” through Central Asia and a “maritime silk road” linking Southeast Asia, Oceania, and North Africa. This continuing investment in buildings and infrastructure is playing a crucial role in supporting China’s economic diversification agenda as the country gradually rebalances towards services and consumption, as opposed to manufacturing and investment.

While Hong Kong generates the second highest built asset income per person in Asia, at US$21,400 per capita, second only to Singapore, it faces significant challenges from its peers to be one of the world’s leading financial and business hubs. In order to maintain its competitive edge, it is vital that the Hong Kong government invests in infrastructure and building assets. Hong Kong also needs to make it a top priority to align itself with China’s One Belt, One Road programme. By doing so, Hong Kong will remain relevant to China’s economic development even as other cities in China come to the fore.

At the same time, investors, asset owners, asset operators, and policy makers across the region need to explore new ways to boost asset productivity and help resolve the growth and sustainability challenges that the world faces. In the future, China, Hong Kong and its fast-growth neighbours will need a renewed focus on quality over quantity.