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Chinese Building Technologies Industry: Moving Toward Better Integration and Greener Concepts

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A presentation focusing on: Segments in the Building Technologies Industry, the economic slowdown and impact on the industry, policy backdrop and incentives for the industry, design and construction …

A presentation focusing on: Segments in the Building Technologies Industry, the economic slowdown and impact on the industry, policy backdrop and incentives for the industry, design and construction standards in China, Integration of systems leading to intelligent buildings, green buildings and green cities in China, and growth opportunities and a future roadmap of the industry.

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  • 1. Chinese Building Technologies Industry: Moving Toward Better Integration and Greener Concepts Archana Amarnath Team Leader, Economic Research and Analytics Division Environmental and Building Technologies Industry
  • 2. Focus Points Segments in the Building Technologies Industry Economic Slowdown and Impact on the Industry Policy Backdrop and Incentives for the Industry Focus Points Design and Construction Standards in China Integration of Systems Leading to Intelligent Buildings Green Buildings and Green Cities in China Growth Opportunities and Future Roadmap of the Industry 2
  • 3. Segments in the Building Technologies Industry For the purpose of the briefing, the building technologies industry is divided into two segments of controls and equipment and services. Building Technologies Industry Controls & Equipment Services • HVAC & Refrigeration • Integrated Facilities • Building Automation Systems Management • Fire & Life Safety Equipments • Performance Contracting • Lighting Controls and Products 3
  • 4. Economic Turmoil and Emerging Economies Russia Poland Drop in oil prices due to slower growth in European banks withdrew investments from Europe and US eastern Europe, diminished exports Mexico Slowdown of funds remittance from US China Fall in exports, reduction in trade and investment Brazil Brazil Withdrawal of Foreign Institutional Withdrawal of Foreign Institutional Investors (FII) inflows, currency Investors (FII) inflows, currency depreciation, slowdown in export of oil depreciation, slowdown in export of oil and other commodities and other commodities India Industrial production slowed down, fall in demand and exports 4
  • 5. Way to Recovery - Stimulus Measures and Current Economic Outlook Russia Poland $58 billion package –tax breaks, loans, cuts in Fiscal measures- Additional fiscal spending, interest rates. June 2009- Unemployment falling, additional credit. June 2009- Unemployment investment and retail sales rising dropping and overall industry growth and trade Q1 2009 – (9.5%) improving Q2 - expected between 1.3 – 2.8% Q1 2009 - 0.8 % Q2 – maintain 0.8% China Mexico Stimulus package-$586 bn – targeted toward Lower interest rates are less effective in jump- infrastructure development and post quake starting economy. Dramatic fall in tourism. reconstruction Q1 2009 decreased by (8.2%) Economic Growth Q2 2009 decreased by (10.4%) Q1 2009 - 6.1 % Q2 2009 - 7.9 % Brazil India Total $22 billion package- auto industry and Stimulus packages with tax cuts, Cut in Reserve Bank of India repo rate and fall in Cash Reserve Ratio. exports- Increased lending by state banks, Central Bank support for corporate foreign debt June 2009 - Business and investment improving. Economic and monetary easing to partly offset impact of growth to gain momentum in second half of 2009 Q1 2009 - 5.8% global slow down Q2 – 4.7% Q1 2009 – 1.7% Q2 2009 – 2% 5
  • 6. Impact of the Economic Recession on the Building Technologies Industry GLOBAL IMPACT OF RECESSION GLOBAL IMPACT OF RECESSION • • HVAC&R – Most impacted HVAC&R – Most impacted Eastern Europe • • I- FM – Least Affected I- FM – Least Affected • Decline in segments in equipment viewed discretionary such as HVAC, North America refrigeration • Decline in new construction decreased North America growth of fire and life safety • Fall in construction output European Union and consumer confidence in 2008 • Demand from refurbishment of old buildings decreased in 2008 to increase gradually China in 2009 China: China: Relatively Higher potential in the construction Relatively Higher potential in the construction sector in China –– driven by government support, sector in China driven by government support, energy saving incentives, investment and energy saving incentives, investment and ongoing and proposed PPP projects. ongoing and proposed PPP projects. Australia Latin America • Postponement of investments in new construction projects • Less demand for BT products, services that are viewed discretionary 6
  • 7. Chinese Building Technologies Industry An Insight into Key Trends and Green Initiatives in Buildings in China 7
  • 8. Performance of Construction Sector in China in 2009 Economic Growth, China (2004-2010) 14 Government Support to Rejuvenate the Government Support to Rejuvenate the 11.9 Construction Sector in 2009 Construction Sector in 2009 12 11.1 10.1 10.4 •• A long-term development scheme -- provide housing at A long-term development scheme provide housing at 10 9.0 9.0 8.0 affordable prices, issuing of loans for real-estate businesses affordable prices, issuing of loans for real-estate businesses In Percent 8 and other financial products for property developers has and other financial products for property developers has been proposed by MOHURD been proposed by MOHURD 6 •• Property tax (for first time buyers for properties smaller than Property tax (for first time buyers for properties smaller than 4 90 square meters) reduced from 3 percent to 1 percent in 90 square meters) reduced from 3 percent to 1 percent in 2 2009 2009 0 •• The percent for down payment reduced from 30 percent to The percent for down payment reduced from 30 percent to 2004 2005 2006 2007 2008 2009 2010 20 percent in 2009. 20 percent in 2009. •• Stimulus plan -- the development of 5.2 million low-rent Stimulus plan the development of 5.2 million low-rent Newly Built Residential Buildings, China (2004-2008) properties from 2009 to 2012 and housing at subsidized properties from 2009 to 2012 and housing at subsidized Floor Space of Newly Built Residential Buildings in 100 Million Square Meters 9.0 8.1 rates for 7.5 million poor families from 2009 to 2011. rates for 7.5 million poor families from 2009 to 2011. 7.75 8.0 6.80 6.67 6.84 6.88 6.95 7.0 6.61 6.30 Signs of Recovery for the Construction Sector Signs of Recovery for the Construction Sector 6.0 5.69 Since May 2009 Since May 2009 5.0 •• Drivers -- the $585 billion stimulus plan and issuance of Drivers the $585 billion stimulus plan and issuance of loans for real estate businesses. loans for real estate businesses. 4.0 •• Real estate sales have increased by 45.3% from January to Real estate sales have increased by 45.3% from January to 3.0 May 2009 as compared to the same period in 2008. May 2009 as compared to the same period in 2008. 2.0 •• Investments in the construction sector increased by 6.8% Investments in the construction sector increased by 6.8% 1.0 during the same period. during the same period. 0.0 •• Housing prices have increased by 0.6 percent month-on- Housing prices have increased by 0.6 percent month-on- 2004 2005 2006 2007 2008 month in May 2009. month in May 2009. Urban Rural 8
  • 9. Stimulus Package and Impact on the Chinese Building Technologies Industry Breakdown Of $585 Billion Stimulus Package, Potential for Building Technologies Industry China (2008) Key Sectors Future Plans Public Post Quake Infrastructure, Reconstruction, $219.56 billion, • Infrastructure Around 38% allocated for roads, railways, $146.37 billion, 38% airports and power grids 25% • Property Sales volume showing 29% growth in Market Beijing, Shanghai, and Chongqing as of April 2009 Technology Rural Advancement, Development, $54.16 billion, • Sustainable Around 5% of plan allocated for energy $54.16 billion, 9% Development conservation and emission cuts 9% Educational & Sustainable Cultural Projects, Social Welfare, Development, $21.96 billion, $58.55 billion, $30.74 billion, 4% 10% 5% • Housing and Construction of low-rent properties, Commercial subsidized housing for the poor and Buildings investment in post quake reconstruction. Reduction in property tax and the Note: percent of down payment to encourage Conversion Rate: 1 RMB = 0.146374 USD housing sales. 9
  • 10. Design and Construction Standards Driving Energy Conservation in China Number Name of Design Standard Other Legislations Driving 1 Design Standard for Energy Efficiency of Residential Buildings in Hot Energy Efficiency in Buildings Summer and Cold Winter Zone National Energy Strategy for Buildings 2 Standard for Energy Efficiency Inspection of Heating Residential Buildings • Targets to reduce energy consumption by buildings by 50% by 3 Technical Code for Renovation of Existing Heating Residential Buildings 2010 and by 65% by 2020 as compared to 1980 levels of energy 4 Energy Conservation Design Standard for New Heating Residential consumption has been set Buildings Targets Under Eleventh National Five 5 Energy Conservation Design Standard on Building Envelope and Air Year Plan Conditioning for Tourist Hotels • A target to reduce energy per of 6 Energy Conservation Design Standard for New Heating Residential GDP by 20% has been set. Buildings • Emphasis is on on energy efficient solutions for buildings Number Name of Construction Standard Other Laws • China Building Code 1 Thermal Design Code for Civil Building • Energy Saving Law 2 Lighting Design Code for Civil Building • Product Quality Law (Amended 2000) 3 Design Code for Heating, Ventilating and Air Conditioning • Standardization Law (1988) 4 Design Code for Tourist Hotels 10
  • 11. Government Initiatives for Energy Efficient Equipment in China • Safety standard • Performance standard National CFL Standard • Energy efficiency standard • Electromagnetic Compatibility (EMC) Light Emitting Diode standard (LED) Lighting Research & Development Fund (2008) China Energy Label Program (2003) Energy Efficient Equipment Certification Programs China Green For Controls and Lights Project Equipments (2001-2005) (Demand Pull and Technology Push Strategies) Program to Promote • Compulsory Certification CCC (2002) Efficient Lighting Products in China (2008) • RoHS Compliance Certificates • Energy Star Certificate 11
  • 12. Technology Development Driving Intelligent and Green Buildings in China China BAS: From Proprietary Communication Green And Intelligent Buildings Protocols to Open Systems in China Closing the Gap Between IT and BAS In te Integration of Building Services with A gr at BAS Single IT Platform (Open Systems) io n 20 of 00 Bu 05 Wireless Technologies with P2P 5 ild Architecture in 2005 IT g Increasing Convergence of IT and Se rv 20 BAS ic 00 es 00 “Energy Efficiency in 0 an BACnet and LONWorks Revolution d Existing Buildings” Fu (EEEB) Project (2006- nc 19 19 tio 2010) – Propagation of 80 Direct Digital Controls and Personal ns advanced technologies 0 Computers w and energy efficient ith End-users with large IT solutions Multiplex Control Systems In complex building fra facilities are demanding st Electronic Controls ru integrated systems. ct ur Opportunities lie in e airport, government Electric Controls and Pneumatic Transmission buildings, healthcare and R&D facilities 12
  • 13. Green City and Green Buildings Projects: Taking the LEED in China Green Buildings Green Cities Evaluation Standard for Green Number of Green Buildings Drivers Buildings (2006) • Three Star (2009) • Government Support, Legislation and • Three Star System - Green Investment 8 Certified and 4 at Three buildings rated on three Star Level • Investment from Private sector and in R&D grades, 1 star, 2-star and 3- star. • LEED • High Oil and Electricity prices pushing green 161 registered and 12 measures and investment • Similar to the LEED program. certified Opportunities: 3 Star Rating System In China – Comparison with LEED • Green Supply Chain - eco-friendly materials, construction parts, and knowledge Category 3 STAR LEED v2.2 • Community Waste Management Sustainable Site 9 14+1 • Water Treatment and Purification Energy & Atmosphere 14 17+3 • Combined Heat and Power Systems Water Efficiency 7 5 Materials & Resources 10 13+1 Indoor Environmental Quality 9 15+2 Operations and Maintenance 8 Innovation 5 Total 57 69 13
  • 14. Opportunities for Building Automation Systems Companies in China – End User Demand Industrial Sectors (18% in 2008) • Factories and other production buildings • Warehouses • Other industrial buildings 18% 52% 30% Commercial Sectors (52% in 2008) Other Non-residential Sectors (30% in 2008) • Offices • Educational buildings • Retail and wholesale trade buildings • Health and aged care facilities • Entertainment and recreational facilities • Other commercial buildings • Public facilities 14
  • 15. Growth Opportunities in the Building Technologies Industry – On the Rebound from 2010 GLOBAL IMPACT GLOBAL IMPACT CEE Period of Recovery (Q1 2010 -2011) Period of Recovery (Q1 2010 -2011) • High replacement demand would drive refrigeration and lighting. • • Design, R&D and value added services to improve Design, R&D and value added services to improve • Continued growth of IFM due to small • • Emphasis on low cost green products Emphasis on low cost green products specialized packages • • Construction related demand to increase Construction related demand to increase European Union • Catch up with Western Standards due to EU funding EU • Legislation to drive energy efficient lighting. North America • IFM providers to focus on performance contracting China North America • Green technology to increase in 2010 • Investment in construction Opportunities in Segments of: to improve demand Opportunities in Segments of: Home Automation, BAS, CFLs, Integrated Home Automation, BAS, CFLs, Integrated Systems, Open Platforms and Standards Systems, Open Platforms and Standards Latin America Australia • Rising Government infrastructure spending in 2010 -2011 to improve demand for BAS • Energy saving standards to increase demand for CFLs and HVAC 15
  • 16. Future Roadmap of the Building Technologies Industry in China Level 4: 2012 Level 4: 2012 Numerous Green and Intelligent Numerous Green and Intelligent China World Matching International Matching International Standards in China Standards in China Level 3: 2011 Level 3: 2011 Emergence of High-Tech Emergence of High-Tech Green Cities and More Green Cities and More ‘Intelligent Green’ Buildings ‘Intelligent Green’ Buildings Level 2: 2010 Level 2: 2010 Continued Growth of Energy Saving Continued Growth of Energy Saving Technologies with Custom Technologies with Custom Interfaces for BAS Interfaces for BAS Level 1: 2009 Level 1: 2009 Focus on Energy Conservation in Focus on Energy Conservation in Buildings and Infrastructure Buildings and Infrastructure Development Development 16
  • 17. Next Steps Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth, September 13-16 2009, Hyatt Scottsdale Resort & Spa at Gainey Ranch, Scottsdale, AZ (www.gil-global.com) Register for the next Chairman’s Series on Growth: The CEO's Growth Team™: The CEO’s Growth Survey and its Economic Outlook for 2010 (September 3, 2009) (http://www.frost.com/growth) Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 17
  • 18. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 18
  • 19. For Additional Information T.J. Sivan Jake Wengroff Industry Manager Global Director Economic Research and Analytics (ERA) Corporate Communications Division + 001 (210) 247-3806 +91 (044) 420-44502 jake.wengroff@frost.com jsivan@frost.com Sandeep Maheshwari Vice President Economic Research and Analytics (ERA) Division +001 (210) 326-0456 smaheshwari@frost.com 19