In the course of its operation, the construction industry is affected by macroeconomic policies, its own industrial technology level, industrial structure adjustments, and capital compositions [1
]. The development path of the construction industry shows a repetitive pattern of deviations from and adjustments back to its equilibrium or linear trajectory [2
]. Its development path is in a forward wave [3
]. The importance of the construction industry for the three elements of sustainable development, namely economic growth, social progress, and effective protection of the environment, cannot be disregarded [4
]. Rapid increase in urbanization in developing countries led to a boom in construction activities, and hence increased the various impacts of the sector on the environment, society, and economy [7
]. Related literature shows that the construction industry relates closely to the sustainable economic development of the country and the improvement of people’s lives [10
]. The correlation coefficient between the growth rate of Chinese construction industry and the growth rate of gross domestic product is 0.71 [12
], which shows that the development trend of the construction industry will directly and significantly affect the operation of the national economy. It is very important for industry policymakers, business managers, and relevant research scholars to study the characteristics of the wave cycles of the industry development and grasp the future operation trend of the construction industry.
For the study of the cyclical fluctuations in the construction industry, many scholars focused on the influencing factors of fluctuations or the measurement of the cyclical fluctuations [1
]. The research results showed that there was indeed a law of cyclical fluctuations in the construction industries, but the lengths and frequencies of the cycles were different in the development paths of the construction industries in various regions and stages [2
]. The development of the Chinese construction industry began to have the characteristics of market volatility after its reform and opening up. For the determination of the fluctuation periods in Chinese construction industry, scholars mainly divided them directly from qualitative aspects, only considered the growth rates of the gross output values of the construction industry, or merely included the growth rates of the net output values of the construction industry. They predominantly used the indicators calculated from macro-level raw data, or only excluded the effect of price changes. They didn’t consider the long-term trends of the variables represented by the indicators. Hence, the results were not consistent [18
The main objective of this paper was to determine whether there are fluctuations in Chinese construction industry. The second goal was to describe the characteristics of the cyclical fluctuations in the Chinese construction industry. To study the fluctuations, the authors processed the time series of constant-price, gross output values (CP-GOV) of Chinese construction industry using the H-P Filtering method. The authors plotted the results of CP-GOV into the fluctuation chart of the total output value of the construction industry. According to the “valley-valley” division principle, there were five cycles in the development path of Chinese construction industry. Based on the fluctuation chart, the authors studied the heights, depths, amplitudes, standard deviations, and other characteristic cyclical fluctuations to calculate and describe the development of the construction industry. The scope of data collection in this research was 1980–2017 for the total output values of the Chinese construction industry. The structure of the paper includes the following sections. Section 2
reviews the related research on the cyclical fluctuations of the construction industry. Section 3
introduces the filtering model, the verification model, and the measurement steps in this research. Section 4
discusses the results and the analysis. The fifth part makes conclusions and provides some suggestions for future development of the industry.
2. Literature Review
The existing research results on the periodic fluctuations of the construction industries mainly focused on the following three aspects: (1) The relationships between the construction industries and national macro economy or other industries [11
], (2) Influencing factors on the development cycles of the construction industries [1
], and (3) Cyclical Patterns and characteristics of the construction industries [2
]. Table 1
shows the main research methods and cycle lengths of the development paths of the construction industries.
“Cyclical patterns in construction activity have been a part of more general discussions of economic cycles for some time” [2
]. Kuznets (1930; 1958) [20
] first identified that there existed long-term fluctuations in periods of 15–25 years of durations in the construction economy, in which residential buildings were an important part of the economy. The cyclical fluctuations of residential buildings were closely related to the population growth cycles. After that, many scholars attempted to study the cycle fluctuations in building activity and began to measure fluctuations in all kinds of building cycles. Barras and Ferguson (1985) [23
] considered the products of the construction industry included three types of buildings, namely, industrial buildings, commercial buildings, and residential buildings. The average duration of the cyclical fluctuations of the construction industry of was different between countries. The longest period was 9–10 years and the shortest period was 4–5 years in Britain [1
]. Gottlieb (1976) [21
] documented long building cycles in Europe and North America with periodicities of 14–25 years for the local cycles. Harvey (1978) [22
] identified building development cycles of 15–25 years, which were strongly associated with the waves of investment in the build environment. Wheaton (1987) [16
] determined that there were recurrent cycles with 10–12 year durations in the development of office buildings by estimating a structural econometric model from the mid-1960s to the mid-1980s in the United States. In the same way, Wheaton et al. (1997) [24
] analyzed the office buildings constructed in London in 1970–1995. The data showed that London experienced two major cyclical fluctuations in office construction in this period, but only one important boom occurred, in the 1980s. Leitner (1994) [2
] compared and analyzed the occurrences and durations of the prosperity and depression cyclic periods of the major US metropolitan office buildings from 1963 to 1986 using time-series data. Gornig and Michelsen (2015) [25
] showed that the construction industry in Germany had a new peak in 2014 by establishing the autoregressive model. All these research projects describe the existence of fluctuations in the construction industries.
The Chinese construction industry also shows the cyclical volatility in its operation process. Some scholars began to study the cyclical fluctuations in the construction industry. Cheng (1995) [18
] stated that the Chinese construction industry experienced a total of nine cycles of fluctuations in the period of 1953–1992. The longest cycle was eight years. The shortest cycle was two years. The average cycle was 4.4 years. He also pointed out that the fluctuation characteristics of this period included large amplitude, irregular cycle lengths, and periodic frequency distribution. Zhu (2004) [27
] divided the development path of the Chinese construction industry from 1949 to present into four stages, which were as follows: (1) Industry formation and growth stage (1949~1957), (2) Stagnation and wandering stage (1958~1976), (3) Recovery stage (1977~1983), and (4) Development stage (1984~present). Zhu (2004) [27
] also discussed in detail the characteristics of each stage and the development trend of the construction industry. Shi and Wan (1997) [26
] studied the division of the development cycles of the construction industry by using the annual growth rate of the gross output value of the industry.
Literatures showed that there were cyclical fluctuations in the construction industries [1
]. But the lengths and frequencies of the development cycles of the construction industries varied tremendously in different regions and different stages of development process. Existing research studied the characteristics of periodical fluctuations of the construction industries either by theoretical analysis or with the change of the moving average or the growth rate of a certain index. All these methods are direct analysis methods. The main advantage of the direct methods is their simplicity and easiness. However, the direct division methods cannot effectively eliminate the long-term trend of the variables used in the methods when studying fluctuations, because the value of the variable in a direct division method would be affected by its value fluctuations in adjacent years. In this case, the cyclical fluctuations of the variable values would not be effectively observed or easily identified.
The monthly or quarterly time series Y of each economic indicator contains four variants: the trend T, the cycle C, the seasonal S, and the irregular I. Irregulars are based on the time series decomposition of the variables, the cyclical fluctuation C of the variables is used to measure the period fluctuation, which reflects the cyclical fluctuation of the relative deviation of the variables to their long-term trends. This study will remove the long-term trends in the index variables, and the cyclical variation of the variables is used to describe the cyclical fluctuations in the construction industry.
In view of the problems of whether there are periodic fluctuations in construction industry and what are the characteristics of periodic fluctuations in Chinese construction industry, this paper uses the residual method in the measure of macro-economic cycle fluctuations to divide the periodic fluctuations of Chinese construction industry into five economic cycles since the reform and opening up. The results of the mathematical tests showed that there were indeed cyclical fluctuations in the course of the development of the construction industry. The peaks or the valleys of the economic cycles in the construction industry repeated approximately every 6~7 years, which was consistent with the average period length (6.75 years) of the characteristic of cyclical fluctuations as the calculation result of the construction industry. It shows that since the reform and opening up, the peak position of the cycle fluctuation of Chinese construction industry began to decrease gradually, the valley level began to rise gradually, the volatility showed a downward trend, and the construction industry cycle fluctuation entered a steady and smooth process.
The steady trend of construction cycle fluctuation has a great relationship with the change in China’s economic system. At the beginning of the time period, the construction industry began its rapid growth stage due to the transformation from the planned economy to the market economy of the country. Because the market economy system was not perfect, the fluctuation amplitude of the construction industry during this period was large. The development of the construction industry was very unstable. With the gradual establishment of the national macro-control and market mechanism, the peaks of cyclical fluctuation of the construction industry began to decrease gradually and the valleys began to rise gradually in recent years. The construction industry cycles have entered into a steady and smooth process. The cyclical fluctuations in the construction industry have been gradually transferred to the long and steady development state from the short periodical and frequently fluctuating state earlier. That is to say, the strong wave with obvious fluctuations is gradually changed into slow microwaves with a gentle growth trend. The cyclical fluctuations in the regional industries are generally consistent with the trend of cyclical fluctuations in the national construction industry, but the degree of coincidence is not the same.
The outbreak of the U.S. financial crisis in 2008 caused a strong impact on the construction industry in China. The construction industry entered a stage of depression since then. Under the influence of the investment in fixed assets of the Chinese government, the construction industry was expected to grow rapidly out of the depression stage. However, in 2013 the construction industry began to decline rapidly again. This showed that the construction industry was relatively weak in resisting external interference. Therefore, the construction enterprises should firstly accelerate the improvement of their own mechanisms, adjust the structure of the construction industry and improve the concentration of the industry in order to achieve both a core business and having diversified businesses. Chinese construction enterprises should enhance the external-resistance abilities and change from passive to active. Construction enterprises should change the patterns of economic growth from technology imports to independent innovation and take the road of intensive management to realize the transformation from quantity-increasing type to quality-benefit-oriented type.
This study enlightens us try to explore the overall law of the construction industry based on the vertical time series data, and we can also get unexpected gains, rather than just studying the development of the construction industry in a certain stage. In the study, this paper selects the gross output value of the construction industry to deal with and analyze. The added value of the construction industry is the gross output value of the construction industry minus the intermediate input, which can better reflect the development of the construction industry itself. However, due to the limitations of the data, only the annual data on gross output value of the construction industry is selected for processing and analysis. So, the more microscopic volatility of the construction industry is hidden. With the gradual supplementing and improvement of the statistical database, we can select more detailed data for different indicators to further understand the development fluctuations of the construction industry.