Topics in this section: - China's emerging high-tech hub will stoke infrastructure demand - Manufacturing upgrades bring higher demand for energy - Guangdong's industrial power demand growth rate may double - Guangdong's power demand outstrips forecasts - Guangdong's fixed-asset investment tops out in China - Transportation projects key to higher cement demand
This analysis is by Bloomberg Intelligence senior analyst Francis Chan and contributing analysts Charles Shum and Denise Wong.
China's Greater Bay Area development push is likely to fuel substantial growth at Guangdong province's power suppliers, cement makers and airport operators over the next decade. Creating an advanced manufacturing hub will boost the region's industrial power demand by 60% over the next 10 years. Greater industrial output and vehicle traffic will stoke highway investment, a potential boon to building materials suppliers such as CR Cement. The region's three major airports -- especially Shenzhen's Bao'an airport -- are also likely to benefit from higher intercity and outbound traffic volume, and are likely to specialize in serving specific passenger groups and cargo types.
Manufacturing upgrades bring higher demand for energy
This analysis is by Bloomberg Intelligence senior analyst Francis Chan and contributing analyst Charles Shum.
Beijing's vision of Guandong's Greater Bay Area as an advanced manufacturing center will reshape the province's economic geography. Industry must transform from labor-intensive to energy-intensive such as semiconductors, pharmaceuticals. There will also be higher application of automation and robotics in production. These will all create a surge in electrical demand over the next 10 years. According to the U.S. Department of Energy, a semiconductor factory can consume 22 times more power than a textile factory when both have the same output in dollars.
Hon Hai, Huawei and ZTE are some of the large advanced- electronics manufacturers with major business operations in Guangdong.
Guangdong's industrial power demand growth rate may double
Guangdong's industrial power usage may jump by more than 60% by the end of 2025 from 2018, following China's push for advanced manufacturing in the province. We expect the Greater Bay Area plan can lift output value growth of computers and communication devices, a core sector in advanced manufacturing, to 12% in 2020-25, from an average of 10% in 2015-18, and contribute more than 32% of total industrial GDP in the province in 2025. Power usage by the group will double to 117.7 terawatt hours, overtaking building materials and chemicals as the largest industrial power-user segment in the province.
Total demand growth can also be accelerated by faster migration into the region following the faster economic growth and job opportunities fueled by the Greater Bay Area development plan.
Guangdong's power demand outstrips forecasts
Guangdong's power supply shortage may worsen over the next five years following the provincial government's plan to build more smart factories which use a lot of energy. The province's total power consumption has consistently grown faster than the local government expected, 6% to date vs. 5% in the government's 2016-20 energy plan. The local power supply shortage jumped five fold to 17.56 terawatt hour(TWh) in 2018, from 3.4 TWh in 2016. Although the gap can be closed in the short term with power imported from other provinces such as Guangxi, it will not be sustainable as other regions also require more power to fuel their own economic growth.
Guangdong's fixed-asset investment tops out in China
This analysis is by Bloomberg Intelligence senior analyst Francis Chan and contributing analyst Michelle Leung.
A massive construction mandate in China's 13th Five-Year Plan, plus economic strength, will support Guangdong's fixed-asset-investment growth, which has one of the highest rates among all provinces. Infrastructure spending in the nine cities in Guangdong that form the Greater Bay Area should flourish, especially as railways and highways -- the heaviest cement consumers -- dominate at 93% of spending. The rest will target cruise terminals and navigation.
Shenzhen is likely to attract 44% of all investment, followed by Guangzhou's 30.5% and Dongguan's 6.4%. CR Cement's proximity to Shenzhen makes it one the biggest beneficiaries.
Transportation projects key to higher cement demand
This analysis is by Bloomberg Intelligence senior analyst Francis Chan and contributing analysts Michelle Leung and Carmen Lee.
Guangdong's aggressive investment in its highway and railway projects this year supports our expectation for a surge in cement demand among the province's leading producers. The province's urban fixed-asset investment expanded 10.7% in 2018, surpassing the national average of 5.9%. Guangdong should be one of the fastest-growing provinces in China amid the nation's aim to grow its railway construction target by 70% in 2019 to 6,800 kilometers. It's prioritizing construction of intercity projects in the Pearl River Delta, striving to reach 5,500 km of railway by 2020, of which high-speed railway will make up 2,500 km.
Leading producers of cement in Guangdong include Anhui Conch, China Resources Cement and Asia Cement.
