A Regional and Provincial Productivity Analysis of the Chinese Construction Industry: 1995 to 2012

Abstract

The Chinese construction sector is one of the largest in the world, but the nation’s 31 provinces, autonomous regions, and municipalities (hereafter ‘provinces’ for simplicity) have experienced varying levels of economic development. It is important for stakeholders to truly understand Chinese construction sector efficiency and these regional disparities. Considering it a more robust approach, this study uses the Färe-Primont data envelopment analysis (DEA) method to estimate construction productivity and efficiency across China from 1995 to 2012. A general finding is that construction productivity in China has experienced incredible growth from a low base in 1995, with Eastern China the most productive region and Northern China the least. The most productive provinces were Zhejiang, Hunan and Jiangsu; contradicting conventional wisdom, the least productive were Beijing, Shanghai and Guangdong. Decomposing the productivity further, it is found that China’s construction industry appears to be more scale-efficient than technically efficient. In other words, the industry is operating at an optimal scale for productivity but relies less on technological advancement. This research provides significant insights for understanding productivity of the world’s largest construction market in a different perspective. The Färe-Primont DEA method appears to be an effective means of probing industry efficiency from different perspectives, and enables development of evidence-based policies targeted at improved construction productivity in particular regions or provinces.