HSBC Sees Infrastructure as Shot in the Arm for World Trade
Infrastructure trade is set to triple by 2030 and see a significant rise in its share of global trade, according to the latest trade forecast issued by HSBC. The forecast outlines how, as countries look to increase their manufacturing capacity and civil infrastructure, demand for overseas goods and equipment will surge.
In a special focus on infrastructure, the report finds that between 2013 and 2030 infrastructure-related trade will grow at an average of 9% annually and see a rise in its share of overall merchandise trade, from 45% of total goods exports in 2013 to 54% by 2030.
International businesses around the world report the same level of confidence in global trade prospects as last year with the HSBC trade confidence index holding steady at 112 points – a reading above 100 indicating optimism and below 100 pessimism. The forecast predicts that world trade will grow at a modest pace to 2015 before accelerating between 2016 and 2020.
Shifting Infrastructure Demand
The report differentiates between ‘goods for infrastructure’ (GFI) – the materials needed for infrastructure projects, and ‘investment equipment’(IE) – the machinery required by businesses to boost production. The US is currently the biggest importer of infrastructure-related goods across these sub-sectors, but the report predicts that by 2020 India will become the lead importer of GFI as it invests in building its domestic networks. China is set to become the top importer of IE by 2020 as it boosts manufacturing capacity.
Other rapidly-growing Asian economies will take an increasing share of infrastructure-related imports over time, with Malaysia, Korea and Vietnam moving up the rankings. Excluding the US, Mexico is the highest ranking non-Asian importer of infrastructure goods, ahead of Brazil.
Overall the report indicates that trade in IE will increase more rapidly than trade in GFI in the years to 2030, in part due to the pivot in China’s economic focus towards consumer led growth and next generation technology.
“The investment countries are making in infrastructure is phenomenal and provides a huge opportunity for businesses looking to grow and develop,” said James Emmett, HSBC’s global head of trade and receivables finance.
“Rising middle classes across Asia’s rapidly emerging markets will drive significant infrastructure demand in the region. And as China looks to scale the value chain in terms of the goods it manufactures, there is a strong opportunity for developed economies to supply sophisticated investment equipment to the country’s producers.”
Maximising the Infrastructure Opportunity
China is forecast to increase its dominance of global exports for infrastructure, increasing its share of total global exports of these goods (among the 25 countries in the forecast) to 34% of GFI and 39% of IE by 2030. Between 2013 and 2030 Brazil makes a significant jump in the rankings from 15th to 10th place in terms of its share of global exports of GFI as the role it plays in world trade continues to increase.
According to the report, even as economies develop and become wealthier, their demand for infrastructure products remains strong. It outlines how advanced economies like the US, the UK and Germany will need to continue investing in infrastructure to maintain their competitive advantage in supplying investment goods to the rest of the world.
“We expect infrastructure-related goods to increase their share of rising global trade, providing strong opportunities across both developed and emerging economies for exporters and importers of those goods and the merchandise that can be manufactured as a result,” says Emmett.
Asia is forecast to see the most rapid growth in overall merchandise trade in the decade to 2030 led by India, China and Vietnam at an average of more than 10% a year. Yet advanced European economies, such as the UK, France and Germany, are also forecast to expand their exports of goods at rates of 4-5% a year on average over this period, while average growth in US goods exports will be closer to 6%.
Largest importers of infrastructure related goods (by type) forecast in 2013 and by 2030:
Goods for Infrastructure:
2013
2030
Investment Equipment:
2013
2030
Largest exporters of infrastructure related goods (by type) forecast in 2013 and by 2030:
Goods for Infrastructure:
2013
2030
Investment Equipment:
2013
2030
The annual report, prepared for HSBC by Oxford Economics, reports on the following 25 countries and territories: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, Korea, Japan and Egypt.