China’s move to develop major urban infrastructure projects will enable its economy to achieve sustainable growth in the long-run. A stimulus package worth US $113 billion (800 billion Yuan) has been unveiled as Beijing remains strong to its belief that greater infrastructure spending will help to shore up its growth.
One major infrastructure project that China is keen to kick-start in 2019 is expanding the South-to-North Water Diversion Project. Since 2016, China has been dependent on infrastructure development as a means to revitalize strategic sectors such as its construction and machinery sector.
Figure 1 China’s construction industry recorded 4 % growth: in 2018
China’s preference in developing public infrastructure such as the South-to-North Water Diversion Project was for its immediate impact on the economy (refer Figure 1 above). . China is rather unique as the economic impact from any mega-project is felt immediately in the real economy. The “multiplier effect” will then contribute towards the resurgence of its construction and machinery sector. Thus, China’s policy to develop public infrastructure projects such as expanding the current South-to-North Water Diversion Project remains an important tool to promote growth in other sectors such as its construction and industrial equipment industry.
Significance of the South-to-North Water Project
Figure 2. China’s Mega Water Diversion Project
Source: Asian Business Review
Since becoming operational in late 2014, the South-to-North Water Diversion Project is so huge that it stretches almost 4,350-kilometer in length (roughly the distance between the two coasts of the US-refer Figure 2 above). Over the last few years, a significant achievement from this project was the pivotal role it played in effectively supplying Beijing with an estimated almost 450 million cubic meters of water.
The scale of this ambitious project is truly remarkable. II involves drawing water from China’s southern rivers and supplying it to the dry north. When completed in 2030, the South-to-North Water Diversion Project is expected to cost the staggering US $62bn (428 billion Yuan) – more than twice as much as the country’s controversial Three Gorges Dam!
Furthermore, when compared to other global construction projects, it suffices to say that the South-to-North Water Diversion Project has achieved the status of being the largest project of its kind ever undertaken. The sheer size of this project is indeed an engineering feat by itself For example, if quantified, an estimate of the distance the water consumed in Beijing has had to travel is almost equivalent to flying from New York to Orlando, Florida.
China has a vision. When fully constructed, the South-to-North Water Diversion Project is forecasted to provide Beijing with 4.2 billion cubic meters of water and would benefit more than 12 million people. Thus, China remains hopeful that in the long-run the South-to-North Water Diversion Project will be able to efficiently divert 44.8 billion cubic meters of water per year from the south all the way to Beijing, China’s political center with a population of 1.5 million in the north,
Though not fully completed, the South-to-North Water Diversion Project has already achieved a remarkable feat. This project has already quenched the thirst of 100 million people – roughly the combined population of Germany plus the Netherlands – mitigating an alarming water crisis and reaping rich economic dividends in 18 of China’s industrial, agricultural-powerhouse cities and capital Beijing.
 Wang, Yuen (2018-02-20). "Chinese Minister Speaks on the South-North Water Diversion Pro9 March 2018  Bloomberg  Asian Business Review  South-to-North Water Diversion Project, 2007  The South-to-North Water Diversion Project Construction Committee Report, 2018
China’s Growing Equipment Rental Market
Figure 3: Growth in China’s Construction Equipment Rental Market (2016-26)
Source: Global Market Research
Without doubt, public infrastructure projects such as the South-to-North Water Diversion Project have been instrumental in developing China’s construction equipment rental market.
Based on recent statistics, China’s machinery rental market size is expected to reach USD 174.52 billion by 2026, registering a CAGR of 5.06%, during the forecasted period of 2019-2026 (refer Figure 3 above). A major factor driving the growth of the equipment rental market is the growing construction projects of tunnels and pipelines to expand this waterway projects.
Thus, among the numerous growth opportunities that the South-to-North Water Diversion Project has to offer to the real economy, one notable contribution has been the resurgence of China’s construction industry. The current upward trend in infrastructure development in China has also stimulated the demand for various construction equipment needed to facilitate this mega-projects.
As technology evolves, innovation and automation have become important elements that have shaped the future of the construction sector. To remain competitive, Chinese construction firms have adapted remarkably well to technological innovation and the current growing trend toward innovation and automation is also expected to drive the future growth of China’s construction equipment rental market.
 PwC, Global Construction Report, 2018  Asian Business Review  Chang, Gordon G. (8 January 2014  PwC Global Construction Report 2018  Chang, Gordon G. (8 January 2014).
Figure 4: Growth in China’s excavator Rental Market (2018-20)
Source: Mordor Intelligence
When analyzing China’s construction equipment rental market by product, it’s clearly evident that earthmoving equipment remains dominant. Based on PwC Global Construction Report 2018, the excavator’s segment is expected to remain as the dominant product in China (refer to Figure 4 above). For example, excavators demand in China’s remains robust that even its rental market is forecasted to be valued at USD 28.07 billion by 2020.
Generally, excavators are typical of two types, namely wheeled excavators and crawler excavators. Among them, crawler excavators occupied a major share of more than 70% of China’s excavator rental market by 2020. To keep up with this trend, most rental companies in China have purchasing low-cost crawler excavators over high cost wheeled excavators. The rationale for renting low-cost crawler excavators is solely for the fact that this equipment offered high stability for digging operations on rough or uneven terrains especially across rough China terrain.
To conclude, the various multi-billion dollar, infrastructure projects such as expanding the South-to-North Water Diversion Project has been the preferred strategy of China. These projects are being decided in Beijing and facilitated through large financial commitments, The Chinese government remains committed ted to complete these megaprojects as a means to spur growth,
Currently, both the Chinese construction and equipment industry remain fiercely competitive but for now enjoying higher revenue due to China’s construction boom. The current trend of firms operating in China’s construction or industrial equipment market is to focus on technological innovation to capture a larger chunk of the market share.
 Global Market Insights  Industrial Equipment Market Review, 2018  PwC, Global Construction Report , 2018  PwC, Global Construction Report , 2018