A series of recent policy measures supporting western development is expected to drive infrastructure investment in western China, with the potential for better-than-expected medium- and long-term growth. At the same time, stronger efforts on energy conservation, emission reduction and elimination of excess capacity will ease overcapacity in the western cement industry; reduced supply and increased demand will significantly lift the cement industry outlook in Xinjiang, Gansu, Ningxia and other regions.

At several important meetings this year, national leaders have mentioned the need to build the Silk Road Economic Belt and strengthen infrastructure connectivity in western China. This means infrastructure investment growth in the west may exceed expectations. Strengthening western connectivity infrastructure includes two aspects: first, transport road construction between inland provinces and western provinces such as Gansu; second, transport road construction between western border provinces such as Xinjiang and Central Asia. Judging from the level of infrastructure stock, western China has considerable potential for infrastructure construction, and the infrastructure capital stock of western provinces such as Xinjiang, Gansu and Ningxia ranks at the bottom among all provinces nationwide. According to 2011 urban construction statistics, the road area stock in western China is about one-half that of the central region and one-seventh that of the eastern region. With the construction of the overland Silk Road, railway and highway network construction in western China will accelerate significantly.

Railway investment this year has been raised several times to 800 billion yuan. Sheng Guangzu, general manager of China Railway Corporation, once said that 78% of this year's railway construction investment will be placed in the central and western regions, which will clearly drive cement demand in the west, because the western cement industry relies more heavily on infrastructure investment.

Western provinces are also seizing the opportunity of Silk Road construction and putting forward their own development plans. Among them, all mention the need to increase funding input and accelerate infrastructure construction in various places, and state that only interconnected transport networks can better share in the dividends of the Silk Road. Among them, Xinjiang proposes to build itself into an important transport hub center of the Silk Road, and plans to complete fixed asset investment of over one trillion yuan this year, maintaining high growth of more than 25%. Gansu proposes to build a golden corridor of the Silk Road, a strategic platform for opening to the west, and a regional center for trade and logistics. Data show that with basic investment maintaining rapid growth, Gansu's cement output in the first quarter increased by 10.4% year on year, significantly higher than the national average. Ningxia proposes to focus on building the "four major platforms" and accelerate the construction of the air transport network.

In addition, good news on the supply side has also brought positive effects to the industry. Recently, the State Council issued the 2014-2015 Action Plan for Energy Conservation, Emission Reduction and Low-Carbon Development, which clarified cement emission reduction tasks for various regions. It explicitly mentions that regions such as Gansu, Ningxia and Xinjiang, where progress toward energy conservation and carbon reduction targets is lagging, should promptly formulate specific plans and adopt comprehensive measures to ensure completion of the energy conservation and carbon reduction targets. Data show that from 2014 to 2015, Xinjiang (excluding the Xinjiang Production and Construction Corps) has a cement denitrification emission reduction task of 27 million tons, the Xinjiang Production and Construction Corps 12 million tons, Gansu 10.5 million tons, and Ningxia 7.5 million tons. This means that in the next year and a half, western provinces will intensify efforts to treat cement industry denitrification and accelerate the shutdown and elimination of small and medium-sized cement capacity.

Against the background of expected better-than-expected demand growth and stricter capacity governance, the medium- and long-term outlook for the western cement industry is expected to be significantly boosted. Leading enterprises in the region, such as Qilianshan and Ningxia Building Materials, will be able to share in more industry dividends.