The deepening debt crisis in China’s construction sector, which is a major driver of economic growth, investment, and employment, may have an unexpected climate benefit. China is the world’s largest construction market and the top cement producer, accounting for over half of the world’s total cement production. However, the heavy use of coal-fired kilns in cement manufacturing makes it a polluting industry.
China’s cement sector is responsible for a significant amount of carbon emissions, with 853 million tonnes of carbon dioxide discharged in 2021, nearly six times more than India, the next largest cement producer. It contributes approximately 12% of China’s total carbon emissions and is one of the largest greenhouse gas emitters along with the steel industry.
Due to concerns over spiraling debt among major property developers, the property sector in China has slowed down, leading to a decrease in cement output and consumption. The property markets account for about a quarter of China’s economy, and the debt burdens of major developers have caused borrowing levels to decline and slowed down spending across the economy.
As a result, cement production is expected to contract, leading to reduced emissions from the industry. Construction activity is slowing down, and some major building sites have come to a complete halt due to debt payment disputes among developers. This will likely lead to multi-year lows in cement output by the end of 2023.
In addition to the decrease in domestic demand, cement plants may also have to curtail output during the winter months to meet emissions caps during the peak season for coal heating. Some cement producers may try to offset lower domestic sales by boosting exports. However, they will face tough competition from lower-cost cement exporters in Vietnam.
Given the weak state of global construction activity and the presence of other major cement exporters, Chinese firms may be forced to quickly reduce output to match the subdued construction sector. This reduction in cement production will also result in a decrease in emissions, providing an unexpected climate benefit in the midst of the ongoing property market disruption in China.

Sources:
– World Cement Association
– Global Carbon Atlas
– Fidelity International
– China National Bureau of Statistics
– Vietnam National Cement Association (VNCA)