Housing Industrialization in Chongqing, China
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1 Housing Industrialization in Chongqing, China Authors Y.H. Pan, Francis Wong, and Eddie Hui, Department of Building and Real Estate, The Hong Kong Polytechnic University Hong Kong, China Rodney Howes Construction Industry Council, United Kingdom Abstract In recent years the housing industry has thrived in Chongqing, China. Living space of square metres per capita was provided in 2000 and this figure increased to square metres per capita by However, housing development in Chongqing is not without problems. The main difficulty in Chongqing s housing market has been a mismatch between supply and demand at different housing market levels, which is due to overwhelming housing demand and poor affordability. Sustainability is the primary trend of the local housing industry. To ease the pressure on the population, ecological environment, resources and environment, housing industrialization is one of the feasible options for Chongqing. This paper is based on a literature review and field research to collect primary data that is currently in progress. The paper analyzes existing problems, as well as confronting challenges and opportunities for the development of the Chongqing s housing industry, and it summarizes the manner in which to promote housing industrialization. It examines the viability of the development of industrialized housing in Chongqing with a special emphasis on localization, whereby full advantage can be taken by use of local resources. Particular emphasis is given to the establishment of a framework for the advancement of housing industrialization that expedites the development of housing technology, thereby improving housing contribution to science and technology. Keywords Industrialized housing, building components, material, technology, Chongqing, China 1
2 Problems with the development of the housing industry in China Technological background There are many limitations in the housing industry in China. The main problems including high material consumption, high energy consumption, low productivity and low contribution rate of science and technology advancement. Energy consumption is 3 to 4 times that of developed countries, and labour productivity is just 1/5 to 1/6 using the same comparison. The contribution rate of technology and science advancement of the housing industry is only 31.4%, as compared to 60% to 80% in developed countries (Shen, 2002). The term developing countries is referred to by the World Bank as Lower-Middle Income Countries, and these nations are defined with a per capita annual gross domestic product (GDP) of between $750 and $2,995 (U.S.). The World Bank distinguishes this group from what it calls Upper-Middle Income Countries. Less developed countries comprise about half of all developing countries. The least developed countries were defined by the UN with per capita annual GDPs of $800 (U.S.) or less (Moore and Pubantz, 2002). Developed countries were defined with per capita annual GDPs of $3,000 (U.S.) or over (Table 1 and Table 2). Table 1: Estimates of per Capita Gross Domestic Product in US Dollars by major area, region and country Major area, region and country (US Dollars / per capita) World 4,320 5,150 5,220 5,130 5,040 5,140 Developed 21,050 27,180 27,150 26,490 26,650 27,820 economies Developing 980 1,130 1,410 1,450 1,370 1,360 economies China Hong Kong 13,110 22,423 24,311 26,407 24,629 23,574 Japan 24,042 40,944 36,553 33,384 30,101 34,276 US 22,572 27,306 28,532 30,066 31,449 32,938 France 21,431 26,714 26,625 23,994 24,601 24,267 Germany -- 30,103 29,109 25,788 26,218 25,479 UK 17,158 19,226 20,063 22,361 23,854 24,336 Source: UN (1999), National accounts statistics: Analysis of main aggregates, 1998~1999, United Nations Publication, PP9~12. 2
3 Table 2: Annual average rate of growth of Gross Domestic Product by major area, region and country Major area, region and Average rates of growth Annual rate of change (percentage) country 1980~ ~ World Developed Economies Developing Economies China Hong Kong Japan US France Germany UK Source: UN (1999), National accounts statistics: Analysis of main aggregates, 1998~1999, United Nations Publication, PP101~104. The development of housing technology in China is mainly characterized by the application of traditional construction methods rather than the development of innovative construction technology. Integrated building systems have not been established. The concepts associated with system building that utilize modular coordination; integrated design and standardization have not been developed for housing, although there is some evidence of these techniques being applied to commercial and industrial buildings using foreign imported technology. Housing in China is predominantly provided by the construction of high rise apartments using on site production of reinforced concrete frames and walls, together with masonry load bearing and non-load bearing walls. Components and materials are produced locally where possible for delivery and installation on site. The lack of modular incorporation for housing components production hinders the form of housing standardization and general housing component system in China. Institutional background The working mechanism for advancing housing industrialization is not yet established, including a general decision mechanism and efficient working procedures, and there are insufficient specific goals, steps and measures. Current development for housing industrialization focuses on demonstration housing and trial projects. However the technology required and the supply chain for driving forward housing development have not been formed. 3
4 There is a general lack of economic and technical measures for developing industrialized housing, together with the necessary components system and technical supporting system, and the positive force for advancing housing industrialization is not stimulated. The market stimulating mechanism for self-development, self-renovation and selfperfection is not well established. Initial research indicates a lack of research in housing investment and policies, housing industrialization, and key housing techniques, intended to accelerate the pace of modernization for the housing industry and to meet the future demands for residential housing development in China. Given the current state of housing development in China, Li has proposed an industrialized housing model as shown in Figure 1. Key to the success of this model is the need to generate adequate demand for industrialized housing by convincing potential home owners that it offers homes of good quality and value. In order to achieve this objective it will be necessary to develop a house building system that incorporates sufficient and adequate new construction science and technology. This will not be an easy task given the traditional nature of the Chongqing construction industry and its supply chain, which is further complicated by a general lack of knowledge and expertise in advanced construction methods. Previous research has indicated that investment should be made in research and development to create new manufacturing processes based on integration and standardization of components, utilizing where possible existing facilities and expertise from other industries such as steel manufacturing and ship building. To accelerate the development of industrialized buildings there will need to be adequate performance testing of new components and assemblies. Prototypes will play a key role in refining design and improving performance from which specifications and standards can be derived. Only when the design for the whole system is approaching finalisation should attention be given to the implementation of a demonstration project that will scale up the system to a full project. Government policy Objectives of Housing Industrialization Housing Finance Market Demand Provide Support Provide Guide Base Key Advantage Guarantee Implement Demonstration Project Housing Industrialized Group Implement housing efficiency Technology Advancement Cognizance System Housing Construction Standardization Integration of Housing Production and Management Housing Cooperation Service Socialization Housing Construction Industrialization Housing Industrialization Figure 1: Development of Housing Industrialization Source: Li, (2002), Modern Housing Management, P35 (2002) 4
5 Chongqing as a key city in Western China Chongqing, which is located in the southwest part of China, in the upper stream of the Yangtze River, and it is one of the four municipalities under direct control of the Central Government. It occupies the largest area and the largest population among all the four municipalities in China. Covering an area of 82,400 square kilometres, and governing 14 districts, 26 counties (towns), it owns a population of 30,970,000, including 10,750,000 living in the town and 20,220,000 living in the countryside. The central area is a peninsula, located at the confluence of the Yangtze River and the Jialing River. In the midst of China s economic development and its western development, Chongqing plays an important and strategic role as it has the characteristics of the co-existence of big city and big countryside, industry and agriculture. The current favourable economic situation lays a good foundation for the development of Chongqing s housing market. Nowadays, the housing market is very active, which can be shown mainly in four different ways: (1) a strong record growth of GDP. In the recent years, the average growth rate of GDP in Chongqing has been 9 percent, which was higher than the national average level and was the highest among the western provinces. (2) The strong increasing trend of investment, (3) the improvement of financial situation, and (4) the improvement of peoples general living conditions. The strong demand for housing in Chongqing tripled the available total residential area between 1996 and 2001 and the floor space per capita has risen from 6.94 to sq. m. (Table 3). Table 3: Building Construction and Housing Conditions in Chongqing (1996 to 2001) Item Population Density of Urban Districts (persons/sq. km) Year-end Total Floor Space of Buildings ( sq. m) Year-end Total Residential Floor Area ( sq. m) ,967 16,537 19,539 18,564 20,297 21,510 6,556 8,785 9,777 10,669 11,820 13,127 5
6 Managed by Housing Management Institutions ( sq. m) Private Housing ( sq. m) Year-end Residential Area ( sq. m) ,351 3,623 4,692 4,149 5,877 8,096 3,377 4,446 4,975 5,524 6,120 9,806 Per Capita Residential Area (sq. m) Source: Chongqing Statistical Yearbook, 2001, p.300 and Chongqing Statistical Yearbook, 2002, p.215. Present situation of the real estate sector in Chongqing Real estate development has increased since Chongqing became one of the cities directly under the control of the central government five years ago. Its total accomplished investment in real estate accounted for 24.69% of the total fix asset investment in 2002 (Table 4). Table 4: Real Estate Development in Chongqing (in 2002) Item 2002 Increased percent (%) 1. Housing investment (1,000,000,000 billion RMB) 2.Construction floor area of real estate development (1,000,000 million sq.m) 2.1 Housing area (1,000,000 million sq.m) 2.2 Others (1,000,000 million sq.m) 3.The newly-started area 4.Total accomplished area 4.1 Housing accomplished area 4.2 Others Source: Yang (2003) % % % % % %
7 Table 5 shows that sales of commodity building in Chongqing. The sum of real estate sale in Chongqing increased by 6.29 times than that of Table 5: Sale of Commodity Building in Chongqing (in 2002) Item 2002 Yield of year increase (%) 1. Area of commodity building sold 1.1 Area of housing sold 1.2 Others 2. Sum of commodity building sold (billion RMB) 2.1 Sum of Housing sold (billion RMB) 2.2 Others (billion RMB) 3. Area of commodity building pre-sold 3.1 Area of housing pre-sold 3.2 Others 4. Finished Sum of commodity building pre-sold (billion RMB) Source: Yang (2003) % % % % % % % The above data shows that real estate investment has kept pace with the level of economic development in Chongqing. Real estate is the most dynamic part in the framework of fixed asset investment and it is becoming one of the supporting industries in Chongqing. Expectation of housing industrialization Urbanisation and rapid growth of national economy has resulted in tremendous housing demand. According to the UN statistics for more than 70 nations, housing industrialization will enter a fast development period when GNP reaches 600 to 800 US Dollars (Table 6). In 2001, China s GNP was at 903 US Dollars pre capita (Shen, 2002). 7
8 Table 6: The relation of per capita GNP and the process of housing industrialization development Per Capita GNP (US Dollar) The process of housing industrialization development 200 to 300 Initial period 600 to 800 Fast development period about 1,300 Steady fast development period 8,000 to 10,000 Steady development period Source: Shen, J.Z. (2002), Present state and prospects of China housing industry development, Housing Science, 2002, Vol.11, p.4. After entry to the World Trade Organization (WTO), which contributes to the better economic and market environment, China s housing industry has more development potential. It is believed that the input of advanced housing industrialization techniques, design ideas and managerial ideas will speed-up the development of basic housing technology. Demand on the housing industry The process of urbanization is accelerating. By now, the urbanization rate has reached 33%, 4% lower than the national average (37%). Local government has decided to increase the urbanization rate to 50% by This means that there will be approximately 450,000 to 500,000 peasants entering the expanding boundary of the city each year. Assuming 20 square metres floor space is needed per person, the 5 million people will need 0.1 billion square metres. If it takes one year to build 10 million square metres, it will take ten years to build 0.1 billion square metres as the basic dwelling space required by the city. The improvement of housing conditions also leads to an increase in residential housing demand. Although there are 2,500 square kilometers of land in the urban area, only 700 square kilometres can be used for residential development because of topographical reasons. In the next 10 to 20 years, the main city of Chongqing will be developing rapidly, which means a vast growth in Chongqing s housing market. People in Chongqing need all kinds of buildings, including office building, commercial, residential, and other buildings. This growth will create huge demand for building construction especially that required for housing. A further requirement is to rebuild the old city. Several million square metres needed to be demolished. According to local policy for urban renewal, pulling down 1 square metre requires rebuilding 3.5 to 4 square metres, which translates into more than ten million square metres of floor space (Huang, 2002). From the above it can be seen that Chongqing needs to build at least 0.15 billion square metres in the next decade. At current levels of production, demand will far exceed supply 8
9 (Huang, 2002). Present problems of housing production in Chongqing Traditional construction techniques are still being used in housing construction. Compared with the other three municipalities in China, labour productivity of construction enterprises in Chongqing is lower than the average national level (Table 7), and much lower than those in Beijing, Tianjin and Shanghai (Figure 2). Table 7: Labour Productivity of Construction in four cities of China in 2000 (unit-yuan per capita) Region Overall Labour Productivity in Term of Added-Value China 15,929 Beijing 22,553 Tianjin 21,765 Shanghai 24,375 Chongqing 12,859 Figure 2: Labour Productivity of Construction in four cities of China in China Beijing Tianjin Shanghai Chongqing Source: China Statistical Year Book (2001), Compiled by Bureau of Statistics of China, China Statistics Press. P494. The term Value-added of Construction being referred by National Bureau of Statistics of China is defined as the final result of the activities of production and management of construction in monetary terms in the reference period. At present, the value-added of construction is calculated using the income approach. In other words, it is the sum of income of various production factors in the production process (China Statistical Year Book, 2001). The skills of construction employees in Chongqing are relatively low because a large number of construction workers in Chongqing are from rural areas. Many construction workers have received no formal training and are initially employed cheaply from the rural area. Until the end of 2000, the total number of construction workers was 731,600 persons, of which, 70% were farmers (Wong and Hui, 2001). There is a large difference compared with the other three cities, as shown in Figure 3. Figure 3: Number of Staff and Workers in Construction Enterprises by Registration Status in four cities of China in 2000 (unit persons) 9
10 Beijing Tianjin Shanghai Chongqing Source: China Statistical Year Book (2001), Compiled by Bureau of Statistics of China, China Statistics Press. P474. The consumption of construction materials of construction enterprises, as shown in Figure 4. The manufacture of traditional building materials in Chongqing is limited and contractors find it necessary to ship in 80% of materials from other provinces. The Construction Commission is currently investigating ways in which the production of local materials can be boosted up to 50% (Wong and Hui, 2001). Figure 4: Consumption of Main Construction Materials of Construction enterprises in four cities of China in 2000 (Value of Material, unit yuan) Beijing Tianjin Shanghai Chongqing Source: China Statistical Year Book (2001), Compiled by Bureau of Statistics of China, China Statistics Press. P498. Last year, there was rapid development in materials used to decorate buildings and homes. However, the introduction of new construction materials was low and a large proportion of existing materials did not have a fixed specification. There was little evidence of innovation and research in the development of new materials and construction processes. A major problem is poor standardization and there are no perfect standards for new technology and materials. The only efficient way to lower construction cost is to strengthen technical innovation and technological revolution, as well as to strengthen the industrialization and to standardized production. Previous research for the development of industrialized housing in Chongqing Previous studies (Wong, 2001; Li, 2001; and Howes, 2001) have identified Chongqing to be strategically important to opening up the development of Western China. The self 10
11 governing municipality has been identified as a sufficiently large market for industrialized housing, provided that the local population can be convinced that it offers quality and value for money. Additional pressure has been imposed on demand due to the need to re-house those families disposed by the impounding of the Three Gorges dam and the continued migration to the urban area of people from the surrounding countryside. Since these studies were undertaken, Chongqing has grown economically by 9% per annum, but despite this the additional wealth created and the science and technology base of the construction industry has not changed. Construction in Chongqing is mainly of a traditional nature and there are major skill shortages resulting in poor quality workmanship and the inability to meet housing demand. Construction materials are still imported from surrounding regions and elsewhere in China and technology transfer from other industries remains low. Previous research recommended a multi-faceted incremental approach to industrialized housing by encouraging innovative design based on an appraisal of existing industrialized housing systems worldwide. The design would incorporate locally produced materials, especially those that could be created from waste products and agricultural byproducts such as bamboo and rice paper. The research also recommended investment in the local steel and shipbuilding industries to produce lightweight cold rolled steel frames that could be used as the structure upon which, roofing, cladding and floors could be supported. Innovation was also encouraged using modularization and the use of composite panels, and service looms that would provide sustainable and high performance life cycle solutions. To date none of these recommendations have been acted upon. Demonstration projects for Ministry of Construction in Chongqing The objective of having national comfortable housing demonstration project is to promote housing industrialization; to drive the application of new material, new equipment and new technology. There are two comfortable housing demonstration projects in Chongqing, including Hui Long-Wan Residential Property, and Feng Ming- Shang Zhuang Residential Property. The aim of these projects is to demonstrate the latest developments housing design, construction level and dwelling quantity. These projects are essentially rationalized and improved versions of traditional construction projects, which provide incremental improvement rather than breakthrough in construction science and technology. This represents a safe approach, in that the improvements are based on designs that are known to work and are within the capability of designers and constructors. Therefore they do not comply with the radical approach necessary to significantly increase production, improve affordability, quality and value for money. Safeguarding the integrity of industrialized housing The application of industrialized housing in the United States, Europe and Japan has a history of failures and successes. This historical knowledge base, together with 11
12 technology transfer from other industries forms the basis of today s industrialized housing systems that conform to high standards of design and performance. Standards and codes have been developed that safeguard structural stability, enclosure, thermal insulation and the internal building environment as well as life cycle performance. The task of designing and manufacturing a housing system from scratch is a major task, since all building elements and components will need to perform in an integrated manner to cope with the environment and wear from users. Untested materials and components are likely to fail and this will impact through the building minimised by the ingress of moisture, salts and atmospheric pollution. It is therefore necessary to invest heavily in research and development programmes that incorporate extensive testing of prototypes intended to further develop designs where the risk of failure is reduced. Lessons gained from industrialized building projects undertaken worldwide point to the importance of providing building elements and components that require low maintenance and have good longevity that requires only minimal replacement during the lifecycle. Objectives for the future production of housing in Chongqing If an integrated housing system is to be established in Chongqing that includes both the housing industry and other industries, then it will be necessary to increase the average annual completion area per person from 20 square metres to 30 square metres, and to increase the science devotion rate of housing development from 25.4% to 35%, and the industrialization rate from 15% to 30% (Li, 2001). This will require change from traditional large scale production on site to fabrication and off site assembly so as to improve productivity and quality. In turn this will require new expertise and skills, which should be expressed in an integrated supply chain utilizing new technologies and standardized components. The new industrialized housing systems selected will need to achieve the criterions of adaptation, function, safety, durability, environment and economy. Further housing development must embody the ideas of humanity and sustainability. Key issues for industrialized housing in Chongqing The introduction of industrialized housing in Chongqing will require the following issues to be addressed in this research program: (1) The establishment of a housing system that is suitable for industrialization according to local conditions in Chongqing. This should incorporate an index such as structure type, size and height. (2) The establishment of standards and specifications. (3) The development of new technology for the production of building materials. (4) Technology transfer from other related industries and the establishment of new production line technologies. (5) The material supply chain. (6) The establishment of industrialized housing sector. 12
13 Conclusion To sum up, Chongqing is the key city in Western China, and it is in a favorable economic situation to lay a good foundation for the development of its housing industrialization. Currently, the housing market is very active, but problems exist with the development of Chongqing s housing industry, which include poor design concept, primitive technology, low management level, few new materials and production methods and poor standardization. Given these circumstances it is difficult to see how a system of industrialized housing can be developed locally according to a short timescale without intervention from expertise elsewhere in China and more importantly from foreign sources. A pre-requisite for successful adoption of new technology in Chongqing is the provision of proper education and on-the-job training to the existing local workforce. Also, incentives should be given by the local government to housing developers, such as an increase in development plot ratio, in order to encourage the use of industrialized methods for housing production. It is urgent to boost the development of housing industrialization and to expeditiously meet the demand of the housing market. To conclude, this paper has met with its objectives and the next stage of this research will focus on analyzing the various options capable for developing economic and viable industrialized housing solutions in Chongqing. This will include promoting the general quality of houses, economies of scale and reducing production costs. The research will also look at the necessary adjustments to the industry s structure, changes to construction methods and the full utilization of local resources to realize the objectives of industrialized housing. Restructuring of the related industries will also be included in the final analysis. Acknowledgements This study is funded by the Research Grants Council in Hong Kong (Project No. B-Q 561). Reference Chongqing Statistic Bureau (1997~2002), (in Chinese) Chongqing Statistical Yearbook, 2001, p.300 Chongqing Statistical Yearbook, 2002, p.193 and p.194, p.215 China Statistical Year Book (2001), Compiled by Bureau of Statistics of China, China Statistics Press. p.473, p
14 Huang, Q.F. (2002), The influence of the economic development on the Real Estate industry in Chongqing (member of the standing committee in Chongqing municipal party committee, Deputy Mayer), Chongqing Real Estate Market Reports, 2nd Quarter, 2002/No.9, p.101 (in Chinese) Howes, R. (2001), Potential for the Adaptation and the Strategic Implementation of Local and PRC Resources for Industrialized Housing in Chongqing, Journal of Chongqing Jianzhu University, Vol. 23 No.3, p.18. Moore J.A., JR., and Pubantz J. (2002), Encyclopedia of the United Nations, P202~204. Li, S.R. (2001), strategic Approaches for Implementing International Cooperation in Industrialized Housing in Chongqing, Journal of Chongqing Jianzhu University,Vol.23 No.3, p.38. Li, Z.F, Guan, K and Chao, X.C. (2002), Modern Housing Management, p.35 (2002). UN (1999), National Accounts Statistics: Analysis of Main Aggregates, 1998~1999, United Nations Publication, pp.9~12, pp.101~104. Shen, J.Z. (2002), Present state and Prospects of China housing industry development, Housing Science, 2002, Vol.11, p.4,5. State Statistics Bureau, China Statistical Year Book (2000), Beijing: State Statistics Publishing House, Wong, K.W., Hui, C.M., Yeung, C.W., Li, S.R., Howes, R. and Wu, M. (2001), A study of Manufactured Affordable Housing in Chongqing, Department of Building and Real Estate, The Hong Kong Polytechnic University. Wong, K.W., Hui, C.M., Yeung, C.W., Li, S.R., Howes, R. and Wu, M. (2001), Potential Homebuyer s Preference in Chongqing, Journal of Chongqing Jianzhu University, Vol. 23 No.3, p.24~33. Yang, D.Y. (2003), Present situation of real estate in Chongqing and the forecast in 2003, Chongqing Real Estate Market Reports, 1 st Quarter, 2003/No.12, p
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