Real estate is heating up in China, with strong demand for fire safety solutions. IMS Research Analyst Bo Zhang examines what's hot in the China fire market.
China enjoys the global limelight, sustaining growth and attracting foreign investment. A construction boom has resulted in demand for fire safety solutions, with fire detection and suppression products bringing in US$683.5 million for 2009.
In its latest research on the Chinese fire detection and suppression market, IMS Research has identified growth drivers likely to impact market growth over the coming years.
Amendments to the China Fire Control Law came into force on May 1, 2009. The new legislation holds all entities liable, including the Chinese government and its administration department, together with local enterprises and citizens. China has also taken steps to enhance the fire protection and suppression capabilities for buildings outside of China's major cities, where real-estate growth continues.
The Chinese government is encouraging enterprises to purchase fire liability insurance. In the future, it may be mandatory for all enterprises in China to purchase fire insurance. However, this is currently not in effect.
Changes to China's fire laws will drive the fire detection and suppression market. With new liability concerns, Chinese enterprises will focus their attention on purchasing more high-end fire detection and suppression equipment, as they stand to carry the highest level of blame for fires on their premises. Chinese enterprises will also pay more attention to the maintenance of their fire systems.
In previous years, Chinese enterprises preferred low-cost fire detection and suppression equipment that was rarely serviced and maintained. This will no longer be the case moving forward.
If insurance companies enter the market, they are likely to have a positive effect on the quality of fire products. If an enterprise decides to use poor-quality product, they may face higher insurance premiums or be rejected with no insurance.
China's GDP grew 8.5 percent in 2009, with real estate increasing by about 25 percent. In 2010, China's GDP is expected to grow 9 to 9.5 percent.
With the government allocating most of its stimulus funds in 2009, real-estate development will be a major driver for economic growth. Real estate is set to increase 35 to 40 percent in 2010.
After 2010, IMS forecasts a rebound in the world economy. With the global economy recovering, China will depend less on the real-estate market for growth, forming a smaller chunk of its GDP after 2011. Growth for fire detection and suppression equipment will slow as a result.