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

Archana AmarnathTeam Leader,

Economic Research and Analytics DivisionEnvironmental and Building Technologies Industry

2

Focus Points

Focus Points

Green Buildings and Green Cities in China

Policy Backdrop and Incentives for the Industry

Growth Opportunities and Future Roadmap of the Industry

Economic Slowdown and Impact on the Industry

Integration of Systems Leading to Intelligent Buildings

Design and Construction Standards in China

Segments in the Building Technologies Industry

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

• Building Automation Systems

• Fire & Life Safety Equipments

• Lighting Controls and Products

• Integrated Facilities

Management

• Performance Contracting

4

Economic Turmoil and Emerging Economies

BrazilWithdrawal of Foreign Institutional

Investors (FII) inflows, currency depreciation, slowdown in export of oil

and other commodities

BrazilWithdrawal of Foreign Institutional

Investors (FII) inflows, currency depreciation, slowdown in export of oil

and other commodities

ChinaFall in exports, reduction in trade and

investment

ChinaFall in exports, reduction in trade and

investment

PolandEuropean banks withdrew investments from

eastern Europe, diminished exports

PolandEuropean banks withdrew investments from

eastern Europe, diminished exports

RussiaDrop in oil prices due to slower growth in

Europe and US

RussiaDrop in oil prices due to slower growth in

Europe and US

IndiaIndustrial production slowed down, fall in

demand and exports

IndiaIndustrial production slowed down, fall in

demand and exports

MexicoSlowdown of funds remittance from

US

MexicoSlowdown of funds remittance from

US

5

Way to Recovery - Stimulus Measures and Current Economic Outlook

Brazil Total $22 billion package- auto industry and exports- Increased lending by state banks,

Central Bank support for corporate foreign debt and monetary easing to partly offset impact of

global slow downQ1 2009 – 1.7%

Q2 2009 – 2%

Brazil Total $22 billion package- auto industry and exports- Increased lending by state banks,

Central Bank support for corporate foreign debt and monetary easing to partly offset impact of

global slow downQ1 2009 – 1.7%

Q2 2009 – 2%

PolandFiscal measures- Additional fiscal spending, additional credit. June 2009- Unemployment

dropping and overall industry growth and trade improving

Q1 2009 - 0.8 % Q2 – maintain 0.8%

PolandFiscal measures- Additional fiscal spending, additional credit. June 2009- Unemployment

dropping and overall industry growth and trade improving

Q1 2009 - 0.8 % Q2 – maintain 0.8%

Russia$58 billion package –tax breaks, loans, cuts in

interest rates. June 2009- Unemployment falling, investment and retail sales rising

Q1 2009 – (9.5%)

Q2 - expected between 1.3 – 2.8%

Russia$58 billion package –tax breaks, loans, cuts in

interest rates. June 2009- Unemployment falling, investment and retail sales rising

Q1 2009 – (9.5%)

Q2 - expected between 1.3 – 2.8%

Mexico

Lower interest rates are less effective in jump-starting economy. Dramatic fall in tourism.

Q1 2009 decreased by (8.2%)

Q2 2009 decreased by (10.4%)

Mexico

Lower interest rates are less effective in jump-starting economy. Dramatic fall in tourism.

Q1 2009 decreased by (8.2%)

Q2 2009 decreased by (10.4%)

IndiaStimulus packages with tax cuts, Cut in Reserve Bank of

India repo rate and fall in Cash Reserve Ratio. June 2009 - Business and investment improving. Economic

growth to gain momentum in second half of 2009Q1 2009 - 5.8%

Q2 – 4.7%

IndiaStimulus packages with tax cuts, Cut in Reserve Bank of

India repo rate and fall in Cash Reserve Ratio. June 2009 - Business and investment improving. Economic

growth to gain momentum in second half of 2009Q1 2009 - 5.8%

Q2 – 4.7%

ChinaStimulus package-$586 bn – targeted toward infrastructure development and post quake

reconstructionEconomic Growth

Q1 2009 - 6.1 % Q2 2009 - 7.9 %

ChinaStimulus package-$586 bn – targeted toward infrastructure development and post quake

reconstructionEconomic Growth

Q1 2009 - 6.1 % Q2 2009 - 7.9 %

6

Impact of the Economic Recession on the Building Technologies Industry

North America

European Union

China

Australia

China: Relatively Higher potential in the construction sector in China – driven by government support, energy saving incentives, investment and ongoing and proposed PPP projects.

China: Relatively Higher potential in the construction sector in China – driven by government support, energy saving incentives, investment and ongoing and proposed PPP projects.

Eastern Europe• Decline in segments in equipment

viewed discretionary such as HVAC, refrigeration

• Decline in new construction decreased growth of fire and life safety

Eastern Europe• Decline in segments in equipment

viewed discretionary such as HVAC, refrigeration

• Decline in new construction decreased growth of fire and life safety

Latin America• Postponement of investments in new

construction projects• Less demand for BT products,

services that are viewed discretionary

Latin America• Postponement of investments in new

construction projects• Less demand for BT products,

services that are viewed discretionary

North America• Fall in construction output

and consumer confidence in 2008

• Demand from refurbishment of old buildings decreased in 2008 to increase gradually in 2009

North America• Fall in construction output

and consumer confidence in 2008

• Demand from refurbishment of old buildings decreased in 2008 to increase gradually in 2009

GLOBAL IMPACT OF RECESSION• HVAC&R – Most impacted• I- FM – Least Affected

GLOBAL IMPACT OF RECESSION• HVAC&R – Most impacted• I- FM – Least Affected

7

Chinese Building Technologies Industry

An Insight into Key Trends and Green Initiatives in Buildings in China

8

Performance of Construction Sector in China in 2009

Government Support to Rejuvenate the Construction Sector in 2009

• A long-term development scheme - provide housing at affordable prices, issuing of loans for real-estate businesses and other financial products for property developers has been proposed by MOHURD

• Property tax (for first time buyers for properties smaller than 90 square meters) reduced from 3 percent to 1 percent in 2009

• The percent for down payment reduced from 30 percent to 20 percent in 2009.

• Stimulus plan - the development of 5.2 million low-rent properties from 2009 to 2012 and housing at subsidized rates for 7.5 million poor families from 2009 to 2011.

Government Support to Rejuvenate the Government Support to Rejuvenate the

Construction Sector in 2009Construction Sector in 2009

• A long-term development scheme - provide housing at affordable prices, issuing of loans for real-estate businesses and other financial products for property developers has been proposed by MOHURD

• Property tax (for first time buyers for properties smaller than 90 square meters) reduced from 3 percent to 1 percent in 2009

• The percent for down payment reduced from 30 percent to 20 percent in 2009.

• Stimulus plan - the development of 5.2 million low-rent properties from 2009 to 2012 and housing at subsidized rates for 7.5 million poor families from 2009 to 2011.

Economic Growth, China (2004-2010)

Newly Built Residential Buildings, China (2004-2008)

Signs of Recovery for the Construction Sector Since May 2009

• Drivers - the $585 billion stimulus plan and issuance of loans for real estate businesses.

• Real estate sales have increased by 45.3% from January to May 2009 as compared to the same period in 2008.

• Investments in the construction sector increased by 6.8% during the same period.

• Housing prices have increased by 0.6 percent month-on-month in May 2009.

Signs of Recovery for the Construction Sector Signs of Recovery for the Construction Sector

Since May 2009Since May 2009

• Drivers - the $585 billion stimulus plan and issuance of loans for real estate businesses.

• Real estate sales have increased by 45.3% from January to May 2009 as compared to the same period in 2008.

• Investments in the construction sector increased by 6.8% during the same period.

• Housing prices have increased by 0.6 percent month-on-month in May 2009.

5.69

6.616.30

6.88 6.956.80 6.84

7.758.1

6.67

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2004 2005 2006 2007 2008Floor Space of Newly Built Residential

Buildings in 100 Million Square Meters

Urban Rural

10.1 10.411.1

11.9

9.08.0

9.0

0

2

4

6

8

10

12

14

2004 2005 2006 2007 2008 2009 2010

In Percent

9

Stimulus Package and Impact on the Chinese Building Technologies Industry

Social Welfare,

$58.55 billion,

10%

Technology

Advancement,

$54.16 billion,

9%

Post Quake

Reconstruction,

$146.37 billion,

25%

Educational &

Cultural Projects,

$21.96 billion,

4%

Rural

Development,

$54.16 billion,

9%

Public

Infrastructure,

$219.56 billion,

38%

Sustainable

Development,

$30.74 billion,

5%

Note:

Conversion Rate: 1 RMB = 0.146374 USD

Breakdown Of $585 Billion Stimulus Package, Breakdown Of $585 Billion Stimulus Package,

China (2008)China (2008)Potential for Building Technologies Industry

Around 38% allocated for roads, railways, airports and power grids

• Infrastructure

• Property Market

Sales volume showing 29% growth in Beijing, Shanghai, and Chongqing as of April 2009

• Housing and Commercial Buildings

Construction of low-rent properties, subsidized housing for the poor and investment in post quake reconstruction. Reduction in property tax and the percent of down payment to encourage housing sales.

• Sustainable Development

Around 5% of plan allocated for energy conservation and emission cuts

Key Sectors Future Plans

10

Design and Construction Standards Driving Energy Conservation in China

Number Name of Design Standard

1 Design Standard for Energy Efficiency of Residential Buildings in Hot Summer and Cold Winter Zone

2 Standard for Energy Efficiency Inspection of Heating ResidentialBuildings

3 Technical Code for Renovation of Existing Heating Residential Buildings

4 Energy Conservation Design Standard for New Heating Residential Buildings

5 Energy Conservation Design Standard on Building Envelope and AirConditioning for Tourist Hotels

6 Energy Conservation Design Standard for New Heating Residential Buildings

Number Name of Construction Standard

1 Thermal Design Code for Civil Building

2 Lighting Design Code for Civil Building

3 Design Code for Heating, Ventilating and Air Conditioning

4 Design Code for Tourist Hotels

National Energy Strategy for Buildings

• Targets to reduce energy consumption by buildings by 50% by 2010 and by 65% by 2020 as compared to 1980 levels of energy consumption has been set

Targets Under Eleventh National Five Year Plan

• A target to reduce energy per of GDP by 20% has been set.

• Emphasis is on on energy efficient solutions for buildings

Other Laws

• China Building Code

• Energy Saving Law

• Product Quality Law (Amended 2000)

• Standardization Law (1988)

Other Legislations Driving Other Legislations Driving

Energy Efficiency in BuildingsEnergy Efficiency in Buildings

11

Government Initiatives for Energy Efficient Equipment in China

China Energy Label Program (2003)

Certification Programs For Controls and

Equipments

Light Emitting Diode (LED)

Lighting Research & Development Fund

(2008)

China Green Lights Project

(2001-2005)(Demand Pull and Technology Push

Strategies)

National CFL Standard

Program to Promote Efficient Lighting

Products in China (2008)

• Safety standard

• Performance standard

• Energy efficiency standard

• Electromagnetic Compatibility (EMC) standard

• Compulsory Certification CCC (2002)

• RoHS Compliance Certificates

• Energy Star Certificate

Energy Energy

Efficient Efficient

EquipmentEquipment

12

Technology Development Driving Intelligent and Green Buildings in China

Green And Intelligent Buildings in China

Electric Controls and Pneumatic Transmission

Electronic Controls

Multiplex Control Systems

Direct Digital Controls and Personal Computers

BACnet and LONWorks Revolution

Increasing Convergence of IT and BAS

Wireless Technologies with P2P Architecture

Integration of Building Services with A Single IT Platform (Open Systems)

Closing the Gap Between IT and BAS

BA

SIT 2005

End-users with large complex building

facilities are demanding integrated systems.

Opportunities lie in airport, government buildings, healthcare

and R&D facilities

Integration of Building Services and Functions w

ith IT Infrastructure

China BAS: From Proprietary Communication Protocols to Open Systems

2005

2005

1980

1980

2000

2000

“Energy Efficiency in Existing Buildings”(EEEB) Project (2006-

2010) – Propagation of advanced technologies and energy efficient solutions

13

Green City and Green Buildings Projects: Taking the LEED in China

Green BuildingsGreen Buildings Green CitiesGreen Cities

Drivers

• Government Support, Legislation and Investment

• Investment from Private sector and in R&D

• High Oil and Electricity prices pushing green measures and investment

Opportunities:

• Green Supply Chain - eco-friendly materials,

construction parts, and knowledge

• Community Waste Management

• Water Treatment and Purification

• Combined Heat and Power Systems

Evaluation Standard for Green Buildings (2006)

• Three Star System - Green buildings rated on three grades, 1 star, 2-star and 3-star.

• Similar to the LEED program.

Number of Green Buildings

• Three Star (2009)

8 Certified and 4 at Three Star Level

• LEED

161 registered and 12 certified

Category 3 STAR LEED v2.2

Sustainable Site 9 14+1

Energy & Atmosphere 14 17+3

Water Efficiency 7 5

Materials & Resources 10 13+1

Indoor Environmental Quality 9 15+2

Operations and Maintenance 8

Innovation 5

Total 57 69

3 Star Rating System In China 3 Star Rating System In China –– Comparison with LEEDComparison with LEED

14

Opportunities for Building Automation Systems Companies in China – End User Demand

Commercial Sectors (52% in 2008)

• Offices

• Retail and wholesale trade buildings

• Other commercial buildings

Other Non-residential Sectors (30% in 2008)

• Educational buildings• Health and aged care facilities• Entertainment and recreational facilities• Public facilities

Industrial Sectors (18% in 2008)

• Factories and other production buildings

• Warehouses

• Other industrial buildings

52%

30%

18%

15

Growth Opportunities in the Building Technologies Industry – On the Rebound from 2010

North America

European Union

China

Australia

Opportunities in Segments of:

Home Automation, BAS, CFLs, Integrated Systems, Open Platforms and Standards

Opportunities in Segments of:

Home Automation, BAS, CFLs, Integrated Systems, Open Platforms and Standards

CEE• High replacement demand would

drive refrigeration and lighting.• Continued growth of IFM due to small

specialized packages• Catch up with Western Standards due

to EU funding

CEE• High replacement demand would

drive refrigeration and lighting.• Continued growth of IFM due to small

specialized packages• Catch up with Western Standards due

to EU funding

Latin America• Rising Government infrastructure

spending in 2010 -2011 to improve demand for BAS

• Energy saving standards to increase demand for CFLs and HVAC

Latin America• Rising Government infrastructure

spending in 2010 -2011 to improve demand for BAS

• Energy saving standards to increase demand for CFLs and HVAC

North America• Green technology to

increase in 2010• Investment in construction

to improve demand

North America• Green technology to

increase in 2010• Investment in construction

to improve demand

EU• Legislation to drive energy efficient

lighting.• IFM providers to focus on performance

contracting

EU• Legislation to drive energy efficient

lighting.• IFM providers to focus on performance

contracting

GLOBAL IMPACTPeriod of Recovery (Q1 2010 -2011)

• Design, R&D and value added services to improve• Emphasis on low cost green products• Construction related demand to increase

GLOBAL IMPACTPeriod of Recovery (Q1 2010 -2011)

• Design, R&D and value added services to improve• Emphasis on low cost green products• Construction related demand to increase

16

Future Roadmap of the Building Technologies Industry in China

Level 1: 2009

Focus on Energy Conservation in Buildings and Infrastructure Development

Level 1: 2009

Focus on Energy Conservation in Buildings and Infrastructure Development

Level 2: 2010

Continued Growth of Energy Saving Technologies with Custom Interfaces for BAS

Level 2: 2010

Continued Growth of Energy Saving Technologies with Custom Interfaces for BAS

Level 3: 2011

Emergence of High-Tech Green Cities and More ‘Intelligent Green’ Buildings

Level 3: 2011

Emergence of High-Tech Green Cities and More ‘Intelligent Green’ Buildings

Level 4: 2012

Numerous Green and Intelligent Matching International Standards in China

Level 4: 2012

Numerous Green and Intelligent Matching International Standards in China

WorldChina

17

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