HSBC Sees Surge in Infrastructure Trade Led by Emerging Markets

Infrastructure-related trade will triple by 2030 when it will account for more than half of global exchanges of goods, boosted by demand from emerging markets such as China and India, HSBC Holdings Plc forecast.

Infrastructure-related trade, ranging from diggers to cement to robotic arms for factories, is expected to grow at an average of 9 percent a year until 2030 in the 23 countries analyzed in the report, HSBC said. China will overtake the U.S. as the largest importer of machinery required by business to boost production by 2020. India will replace the U.S. as the biggest importer of materials for infrastructure projects, according to the forecasts.

“This is a story of a significant growth in the middle class globally,” James Emmett, head of trade and receivables finance at HSBC, said in an interview. “It is causing a significant change in trading patterns around the world.”

As expanding emerging market economies boost more people’s purchasing power, countries are looking to increase their manufacturing capacity and develop roads, power networks and sanitation systems. The Chinese leadership is trying to transform the country, where per capita incomes are 88 percent lower than in the U.S., into a consumer-led economy from an exporter reliant on a managed currency.

A slowdown in the Chinese economy, which grew more than 10 percent a year for 20 years, means that companies from China and other Asian countries will increasingly have to look further afield for trade opportunities, according to the report.

Both Ends

“China ends up at both ends of the spectrum, both on the import side but also being a significant player in the export side associated with the goods for infrastructure,” Emmett said. HSBC forecasts China will keep its position as the world’s largest exporter of infrastructure-related goods.

Malaysia, Korea and Vietnam will increase their share of infrastructure-related imports. Brazil will climb to 10th place in the rankings of infrastructure goods exporters by 2030 from 15th currently, according to the report.

Exports from developed economies will expand slowly until economic growth recovers in 2016, after which the U.S. and Japan will grow faster than Europe, averaging at about 5.5 percent a year, the report said. The countries will need to continue investing in infrastructure to maintain their competitive advantage in supplying investment goods to the rest of the world, Emmett said.

“Those countries that are currently termed to be emerging cannot be assumed to keep deploying large labor forces. They will re-engineer their industries to become far more productive and efficient.”

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