China's Infrastructure Sector Momentum: Contract Growth as a Leading Indicator and Equity Opportunities

China's infrastructure sector has emerged as a cornerstone of economic resilience, with contract growth under the Belt and Road Initiative (BRI) and domestic projects serving as a leading indicator of broader economic recovery. In 2024, BRI construction contracts and investments surged to USD70.7 billion and USD51 billion, respectively, marking a 31% year-on-year increase and the highest level since the initiative's inception, according to the BRI Investment Report 2024. This momentum accelerated in H1 2025, with total BRI engagement reaching a record USD124 billion, driven by USD44 billion in energy projects (including USD22 billion in oil and gas and USD9.7 billion in renewables) and USD24.9 billion in mining investments, per a Serrarigroup analysis. Such figures underscore infrastructure's role in stabilizing China's economy amid challenges like property-sector contraction and fixed-asset investment declines.

Contract Growth as a Leading Indicator

The surge in infrastructure contracts reflects both domestic and international strategic priorities. Domestically, the 14th Five-Year Plan has prioritized "new infrastructure," including 5G, smart cities, and green energy, with transportation infrastructure accounting for 41.3% of the 2024 construction market, according to a Mordor Intelligence report. Government stimulus, including a ¥10 trillion debt-swap program, has further fueled Q3 2025 infrastructure investment growth of 4.6% year-on-year, per CNBC. Internationally, BRI's focus on high-value sectors like EV batteries and green hydrogen-USD23.2 billion in H1 2025-signals a shift toward innovation-driven global expansion, as noted in the Serrarigroup analysis.

The sector's resilience is also evident in GDP performance: China's Q3 2025 GDP expanded by 4.8% year-on-year, outpacing global slowdowns, as CNBC reported. This growth, while modest, highlights infrastructure's role in offsetting weaknesses in other sectors.

Equity Opportunities in a High-Yield Sector

For investors, the infrastructure sector offers compelling opportunities, particularly in equities with strong fundamentals and defensive characteristics. Key players include:

1. Jiangsu Expressway (SHSE:600377): The largest infrastructure operator by market cap (USD9.9 billion), it manages toll roads in Jiangsu Province. Despite a 6-month stock decline of 12.92%, according to Simply Wall St, its P/E ratio of 9.3x is significantly lower than the broader Chinese market, and its 5.71% dividend yield appeals to income-focused investors.
2. China Railway Group (HKG:0390): A construction giant with a 52-week stock gain of +3.01% and a P/E ratio of 2.97 (TTM). Its low beta of 0.37 indicates reduced volatility, while a 4.83% dividend yield supports long-term value, according to StockAnalysis statistics.
3. China Communications Construction Company (CCCTC, 01800.HK): With a P/E ratio of 8.23 and a 3.39% dividend yield, CCCTC benefits from government-backed projects in railways and ports, per GuruFocus data.

While residential construction remains challenged by debt-laden developers, the industrial and infrastructure segments are outperforming. The Mordor Intelligence report's view that the MSCI China index's 11x P/E ratio as of April 2025 suggests undervaluation is particularly relevant for companies with exposure to renewables and digital infrastructure.

Risks and Strategic Considerations

Investors must navigate risks such as local-government debt sustainability (e.g., USD651 billion in bond repayments in 2024) and supply-chain disruptions in steel and copper, concerns highlighted in the Mordor Intelligence report. However, the sector's alignment with national priorities-such as the 60,000 km high-speed rail target by 2030-provides a long-term tailwind noted by the same report. A bottom-up approach, focusing on firms with robust balance sheets and low exposure to property-linked projects, is advisable per the Mordor Intelligence analysis.

In conclusion, China's infrastructure sector is a dual engine of economic recovery and equity returns. As contract growth accelerates and policy tailwinds persist, investors are well-positioned to capitalize on this momentum-provided they prioritize quality and resilience.