img(height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=2939831959404383&ev=PageView&noscript=1")

Coming out of Covid-19 – can we learn from China?

Words:
Adrian Malleson

As people start daring to think about life after the lockdown, eyes are on those ahead of us on the coronavirus curve. How pertinent are China's experiences as a guide to our economic future?

Bejing spring.
Bejing spring. Credit: iStock

As April ends, it looks like the peak for Covid-19 has been reached. The number of cases and deaths may begin to fall. Although lockdown continues, our sight may turn to the form its easing may take, and how this translates to economic recovery. There may be some lessons from the first country to face the crisis, although looking at China won’t answer all our questions.

There are still many unknowns (of all Donald Rumsfeld’s infamous permutations). We don’t know how we will move out of lockdown; we don’t know when normality will resume, we don’t know what ‘normality’ will become. Thinking of our livelihoods, we don’t know the extent of harm done to the economy (though ‘very significant’ would seem to cover most possible outcomes), nor how long the damage will last. The construction industry and the architects’ market will, it looks safe to say, have the most difficult year in our lifetime.

Government must build

Perhaps looking at what has happened in other countries will illuminate what will happen in the UK. China was first; can looking at the course of events there (from infection to lockdown, to emergence) tell us what’s in store for the UK?

Well, no, but it might give us at least one pointer; government investment in construction is needed for post-Covid-19 recovery.

There are very significant differences between China and the UK. The scale of the Chinese economy combined with its rate of growth set it globally apart. It is an economy with an annual production of goods and services worth over $13 trillion (compared to the UK’s $2.85trillion), and an average annual growth rate in the last five years of over 6.5% (compared to UKs under 2.0%).  If this growth rate were to continue, China would soon become the world’s largest economy.

Another significant difference is that the UK is a high-income country, with a mature economy. China is a middle-income country that is going through a period of rapid growth. With growth comes urbanisation; in 1980 just 19% of the population in China were urban dwellers; by 2018 that had risen to 59% (compared to the UK’s figures of 78% and 83% respectively).

This rate of urbanisation has brought with it an unparalleled demand for buildings and infrastructure, a lengthy construction boom. China has been the world’s largest construction market since 2010 when it overtook the US; it now accounts for just over 20% of the global construction market; the UK accounts for just over 4%.

The path of Covid-19 has significant differences too. At the time of writing, towards the end of April, the UK had overtaken China in the numbers of both cases and deaths. The UK had 1,838 of Covid-19 cases per million of the population, whereas China had 57.

Different economic impacts

Covid-19 is having a direct impact on economies; the IMF anticipates that in 2020, the Chinese economy will grow, but by a historically very low rate of 1.2%, then rebound to over 9% growth in 2021. In comparison, the UK is set to contract by over 6% in 2020, before a 2021 rebound of around 4%.

Total construction in China in 2019 had a value of around $900bn (2015 $ value), of which around $640 bn was for the construction of buildings (so excluding civil infrastructure). In 2019 UK construction output was around $180bn, with around $150bn for buildings. China’s construction sector is growing much faster than the UK’s; in 2019 the Chinese construction sector was around 22% larger than in 2015, while in the UK the sector had grown around 12% in the same period.

As the virus took hold, China, most notably in the Hubei and Zhejiang provinces, saw site closures, construction delays and disruption to the supply of construction products (see the experience of Beijing-based MAD). All this created downward pressure on construction output. We are seeing this now. Nevertheless, the construction industry in China is still forecast to grow in 2020, with some commentators suggesting growth of around 6%.

The UK construction industry is going through a period of very rapid contraction. Based on a three-month lockdown, then another three months of partial restrictions, the Office of Budget Responsibility (OBR) has created an ‘illustrative scenario’ in which construction drops an unprecedented 70% in Q2 2020. The OBR is keen to point out that this is a scenario and not a forecast for prediction. We will only know the true extent of the contraction in construction once the ONS gives its construction output figures, and once they have been subject to the usual incremental increases in accuracy through revisions.

This brings us to a final difference we have seen in between the UK and China. In China, most building and infrastructure projects are controlled by local government or by state-owned enterprises. They tend to be centrally planned to help the country reach central targets. While the UK has a government construction strategy, and a common regulatory and standards environment, its sector is almost exclusively private; private companies competing to meet public and private demand.

What is the recovery plan?

So where is China looking to rebuild the economic momentum Covid-19 took away? With an economy reliant on exports and a strong trade surplus, China is particularly sensitive to a fall in global demand. But construction happens at home. It is likely to increase investment in infrastructure and buildings to mitigate pressures on the general economy. While an economy that relies on central ownership and planning has many problems, right now it has a distinct advantage; it can quickly mobilize investment and work on the ground to offset recessionary pressures.

This large-scale investment in public sector is an important one for the UK. After the 2008 recession we saw significant public sector investment, and, until austerity, this was instrumental in mitigating the effect of the crisis. Large scale investment in public sector work is required again. Pre-crisis, margins were already tight and contractors vulnerable; were significant contractors to go out of business, the government may need to step in, as it has with railway operation.

Finally, between the UK and China, and indeed all countries, there is the common shared challenge of creating a sustainable future. Times of crisis can be times of great change. In the rush to support the economy there will be demands for de-regulation and a loosening of standards. Let’s not. The crisis we see now is much smaller than the one we will see if we do not act on the climate emergency, and any economic stimulus we see delivered through construction must have a clear eye on a sustainable future. This requires strong regulation and standards. It also requires the design expertise architects can uniquely offer.

Adrian Malleson is head of economic research and analysis at the RIBA. Data for this article came from the World Bank, the International Monetary Fund, the Office for National Statistics, the Office of Budgetary Responsibility, Oxford Economics and Fitch

More on the coronavirus and architecture. Read about Hong Kong and Shanghai based practice Linehouse getting back to work. 

Latest

Microsoft experiment placing data centre 117ft deep in the sea reduces server failures and proves highly energy efficient

Project Natick puts Microsoft data centre 117ft deep of Orkney Islands

The mixed-use conversion of a derelict site in Sevenoaks, by Paper Architecture with Bethan Watson, was overall winner of this year's RIBA Journal/Norbord Europe competition

Mixed-use conversion of derelict Victorian site in Sevenoaks

Reimagining existing structures by adding layers to their fabric was the theme of this year’s RIBA Journal/Norbord Europe competition

Reimagining existing structures by adding layers to their fabric was the theme of this year’s RIBA Journal/Norbord Europe competition

Light-touch refit of Brutalist civil-service building

A derelict Brutalist civil-service building in Stroud is given a light-touch refit by Harriet Stride

A Shetland coastal structure has been resurrected as a dwelling by Colin Sim of Malcolmson Architects

Shetland coastal structure resurrected as a dwelling