Construction machinery leasing companies around the world are enjoying a comeback thanks to a boom in infrastructure projects in China. China’s infrastructure investment growth could accelerate to 7.5 % on the year in 2019 (refer Figure 1 above).
Beijing announced yesterday a 1.35 trillion Yuan (US $199.54 billion) special bond issuance for provincial governments’ infrastructure projects in 2018, disbursal for which is scheduled to be completed by September 2019. Analyst estimates this year’s special bonds issuance could be around 2.2 trillion Yuan.
Premier Li Keqiang delivered the report at the annual session of the National People’s Congress that China will expand effective investment and accelerate the implementation of a number of key project. The Premier said 800 billion yuan (US $119 billion) will be invested in railway construction, 1.8 trillion yuan in road construction and waterway projects.
One notable infrastructure development project that China plans to construct the ambitious 6,800km worth of new railway lines to be completed in 2019, a 40 % jump from the length of tracks laid last year amid a wider push to boost infrastructure spending.
At least 3,200km of this target will be high-speed rail. China had already invested in 4,683km worth of new rail lines last year, of which 4,100km were for high-speed rail. Furthermore, construction work has already started on a number of major water conservancy projects and the planning and construction of the Sichuan-Tibet Railway will be sped up.
Investment’s contribution to the growth of China’s gross domestic product will rise by 0.5 % to 2.6 %. In other words, about 40 % of the year’s China’s economic growth will be generated by a new economic driver-investment Investment plays a more significant role compared to consumption and net exports (refer Figure 2 above)
Hence, infrastructure facilities will continue to take a large portion of China’s GDP but the difference this time is that emphasis will be put into improving transportation infrastructure in less-developed areas across China, primarily its western region.
Thus, after a rough ride over the past couple of years, heavy machinery rental firms across the world are enjoying a comeback thanks to a rush of infrastructure projects in China.
Overview of China’s Equipment Rental Market
Since 2016, a series of favourable policies have prompted China’s industrial equipment rental industry is forecasted to develop rapidly. As of June 2017, there had been 8,218 rental and leasing enterprises in China, which conducted the transactions worth 5.6 trillion Yuan at the end of 2018.
In accordance with regulatory authorities, rental and leasing companies in China can be divided into rental companies, domestic-funded leasing companies and foreign-funded leasing companies; wherein, the foreign-funded rental companies accounted for as high as 96.5% of the total at the end of June 2017 (refer Figure 3).
With the number of nearly 8,000; but, equipment rental companies contributed 37.8% to the business volume at the end of June 2017 thanks to strong financial strength, outperforming the other two types of companies.
As for the region, China’s rental services are mainly available in Beijing, Tianjin, Shanghai and Guangdong which is the result of the rental advantages and policies (refer Figure 4)As of the end of 2018, the combined number of financial rental companies in the four places had exceeded 80% of the country’s total.
In China, the funds of rental companies chiefly source from capital, bank loans, interbank borrowing (lending) and shareholders’ deposits, among which shareholders’ capital and bank loans play the leading role, reflecting relatively simple financing channels.
China’s industrial equipment rental industry is still growing robustly (refer Figure 5). Although the sector is at its infancy, facing problems such as imperfect laws and regulations, incomplete tax policy, regional development imbalance, and monotonous financing channel, but with broad development prospects. In 2019, China’s equipment rental market is forecasted to grow.