China Sees a New Niche in Saudi Arabia's $100 Billion Construction Market.

 

Leave it to the Chinese to keep coming up with innovative ways to make money.doha property finder

The most recent example is Saudi Arabia, which, according to several Chinese media sources, aims to start a $100 billion infrastructure project by 2016.

According to the China Daily, much of the construction material required by Saudi developers will most likely come from China.

According to Saudi economist Jamal Banoon of Al Arabiya.net, cheaper Chinese materials will significantly help the construction boom in Jeddah.

"In the Saudi market, China's building material businesses will assist those with modest incomes in building their homes on less cost budgets," Banoon added. "If enterprises began to rely on Chinese building materials for future projects, they would also add to the entire market value of real estate in the Gulf region," says the report.

China's corporate and government representatives are anticipated to promote the country's building materials and other construction-related commodities during the Third China Commodities Expo-Saudi Arabia in Riyadh this December, according to Banoon.

"The fair will help increase brand awareness for made-in-China products and perhaps help us develop a future platform for suppliers and buyers," said Chen Feng, chairman of the China Chamber of Commerce of Metals, Minerals, and Chemicals Importers and Exporters.

More than 3,000 professional Saudi buyers are expected to attend the December exhibition, according to Chen.

According to Xie Zhongmei, director of China's Ministry of Commerce's Department of West Asian and African Affairs, commerce between the two nations increased about 30% year on year to $38 billion in the first half of this year.

Wie predicted that yearly trade between the two countries will reach $70 billion this year, with a 30 to 40% annual growth rate.

"In Saudi Arabia, the construction and infrastructure sub-sectors grew by 177 percent over the same time, accounting for 46 percent of the $448 billion MENA project pipeline in 2012-2013," said Mutashar Murshed, Merrill Lynch Kingdom of Saudi Arabia CEO.

"We expect this tendency to continue," said Philip Southwell, president and country executive for the Middle East and North Africa at Bank of America Merrill Lynch.

"In keeping with its general economic development goal, Saudi Arabia should remain the most buoyant market, with its young and increasing population," Southwell added.

.. "Furthermore, in response to the existing housing scarcity, the recent ratification of the mortgage law should help to fuel expansion in residential building."

According to Saudi Gazette.com.sa, a recent study predicts 9.3 percent real growth in construction in 2012, based on 11.6 percent real growth in 2011 and the sheer amount of projects in the pipeline. This follows a 140 percent year-on-year increase in contract awards in 2011.

Between 2012 and 2016, the sector is expected to increase at a rate of 5.6 percent on average over the medium term.

Power plants and transmission and distribution (T&D) have been one of Saudi Arabia's most dynamic sub-sectors, with the $80 billion, 10-year investment plan for electrical infrastructure (2008-2018) generating significant activity.

According to BMI, there are $30 billion worth of power projects underway or in the pipeline, with the majority of these involving the building of additional capacity.

According to Saudi Gazette.com.sa, the transportation sector is also flourishing, particularly in rail infrastructure, with $24 billion in projects now underway or planned.

According to Saudi Gazette.com, positive infrastructure and pipeline developments, along with a strong macroeconomic backdrop, will buffer the economy from global economic challenges.

Saudi Arabia's building sector, according to Tahir Rabani of Capital Projects Advisory, is likely to be one of the most vibrant in the world. Rabani believes that greater integration across the Kingdom will foster economic stability, employment creation, and, as a result, boost the real estate markets.