China built the modular ecosystem. Can Australia build the pipeline?

China’s growing strength in modular construction is being built on more than low-cost manufacturing. Its advantage lies in industrial clustering, specialised supply chains and sustained production volume. Australia has already researched a similar model — but without a dependable pipeline, the economics remain difficult. (main image: Automated production at Modscape + Modbotics’ Essendon Fields facility in Victoria illustrates the type of advanced manufacturing capability that requires sustained project pipelines to operate at scale. Image: Modscape + Modbotics.)

China’s rapidly expanding modular construction sector offers Australia a useful lesson in what industrialised building requires to operate at scale.

Chinese exports of prefabricated buildings reportedly increased from approximately AUD $2.0 billion in 2015 to AUD $6.7 billion in 2025, with further strong growth recorded during the first quarter of 2026.

But the more important story is not simply the number of buildings leaving Chinese ports.

It is the manufacturing ecosystem behind them.

In established industrial regions such as Guangdong, Jiangsu and Shandong, modular manufacturers operate alongside suppliers of structural systems, wall panels, windows, plumbing, electrical systems, kitchens, flooring, furniture and other building components.

That concentration allows specialist businesses to supply multiple manufacturers rather than requiring each modular company to vertically integrate every part of a building.

The result is industrial density — and, crucially, enough recurring production to support it.

Australia has already examined how a similar model might work.

Building 4.0 CRC’s Project #38 Offsite + Modular Construction Hubs investigated the establishment of construction hubs in regional Victoria. The research describes hubs as a way of addressing the fragmented nature of construction and improving coordination across offsite manufacturing and the wider supply chain.

Importantly, these were not conceived simply as large modular factories.

The report describes construction hubs as the “glue” connecting manufacturing with logistics, finance, communication, research and development, design and engineering. It also recommends clustering manufacturers, suppliers, research institutions, government and other participants to encourage resource sharing, knowledge transfer and greater efficiency.

In that respect, the model bears a striking resemblance to the industrial environment now supporting China’s modular growth.

The missing ingredient is demand

The difficulty is that a construction hub cannot create its own market.

Factories invest in automation when they can reasonably predict future production. Component suppliers invest in additional capacity when they can see repeat orders. Training providers develop specialised programs when they know employment will continue. Logistics networks become more efficient when material movements are recurring rather than intermittent.

Without that pipeline, clustering alone does not solve the commercial problem.

Project 38 acknowledges this constraint. It identifies economic cycles and construction’s project-based structure as challenges to long-term innovation investment, while concluding that sustained industry change cannot be achieved by government or individual businesses acting alone.

That same issue has emerged in recent work by the John Curtin Research Centre.

In an interview with Built Offsite, JCRC Chief Economist Lachlan Kerwood-McCall argued that manufacturers do not require indefinite government support. What they need is confidence that sufficient demand will exist to justify investment.

“The industry doesn’t need the government to prop up the industry indefinitely,” Kerwood-McCall said.

“What we need is for government to provide demand-side certainty that allows industry to achieve those economies of scale and unlock those efficiencies.”

The JCRC’s Manufacturing Homes report reaches a similar conclusion. It argues that successful manufactured housing sectors require coordinated action across finance, procurement, workforce development and supply-chain capability, with manufacturing facilities supported by strong domestic supplier networks and stable demand pipelines.

That provides an important bridge between the Building 4.0 hub concept and the Chinese experience.

The physical ecosystem matters. But so does the volume of work flowing through it.

Australia’s policy question is therefore not simply whether governments should support another factory or establish a manufacturing precinct.

It is whether sufficient demand can be aggregated over a long enough period to justify private investment around it.

That pipeline need not consist exclusively of housing. Social and affordable housing could potentially sit alongside schools, healthcare facilities, regional accommodation, defence projects and other repeatable government building programs.

A predictable multi-year program could give manufacturers and component suppliers greater confidence to invest in equipment, facilities, workforce development and digital production systems.

Building 4.0 CRC went as far as recommending the co-design and cost-benefit analysis of a place-specific offsite construction hub supported by a digital construction hub for skills development and industry coordination.

China increasingly demonstrates why that type of ecosystem matters. But it also demonstrates something more fundamental.

A manufacturing hub without a pipeline is infrastructure without an industry.

Australia does not appear to lack ideas about what an industrialised construction sector could look like. Building 4.0 CRC has already mapped many of the conditions required to support one, while the JCRC has identified demand certainty as central to unlocking private investment and economies of scale.

The harder question is whether governments are prepared to assemble the long-term pipeline capable of turning those ideas into an industry.