Enhancing Profitability and Cost Efficiency in China's Construction Industry: Strategic Analysis and Recommendations
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Abstract
This paper aims to investigate the profitability status and cost structure of the construction industry in China, as well as to conduct a case study analysis on the profit gap and differences between industries for cost drivers and strategies for taking returns. Using descriptive statistics, multiple regression, Monte Carlo simulation, and cluster analysis, this study draws from national statistics, industry reports, and company financial statements to determine the influence labor costs, material prices, and taxes have on earnings. The study finds that there is a substantial return distribution across sub-sectors: residential construction shows shorter projects lives and higher returns, while the long-term nature of civil engineering (and associated infrastructure) results in lower profitability despite large capital outlays. The biggest headwinds appear to be material and labor costs, while tax burdens compound the issues. While Monte Carlo simulations quantify the uncertainty of profitability, cluster analysis is used to detect the cost–profit structure and offers insights for developing focused efficiency strategies. In addition to operational effectiveness and resilience, some measures are encouraged like lean construction, digitalization (BIM and AI), and prefabrication, advancing public–private partnerships. They are actionable insights for policymakers and industry leaders to inform evidence-based cost containment, strategic investment, and sustainable growth in construction.
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