China's construction industry exports its expertise

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By Si Tingting (China Daily)
Updated: 2009-09-28 09:04

Earlier this month, China State Construction Engineering Corp, the world's largest public construction contractor by market value, inked a $1.9 billion construction deal with Bahamas-based Baha Mar Resorts Inc during a visit by China's top legislator, Wu Bangguo, to the North American island.

"The biggest advantage for Chinese construction firms doing business abroad is that they are enjoying strong support from their home country," said Liu Bo, deputy general manager of China Jingye Engineering Corp Ltd.

China Jingye Engineering is a subsidiary of construction conglomerate Metallurgical Corporation of China (MCC), which is overseeing the construction of a Universal Studios theme park at Sentosa Island in Singapore.

Liu said many Chinese contractors who operate in overseas markets fail because they seek privatization and independence from their parent companies in China.

Many of China's top construction contractors have placed overseas expansion high on their agenda, since overseas constructions projects normally have a higher profit margin than domestic projects.

Liu said MCC intends to have 20 percent to 30 percent of its total contracts from overseas markets this year, a plan that is in line with China's strategy to encourage State-owned companies operating abroad.

Similar to the "oil for loans" strategy that China adopted to secure supplies of raw material and energy sources to fuel its fast-growing economy, Chinese contractors are sometimes commissioned to build infrastructure facilities for countries with rich natural resources.

The contract value of new projects in Asia and Africa hit $47.8 billion from January to May -- 90 percent of the total contract value of all China's international project contracting business during the same period, according to the China International Contractors Association (CICA).

The top three markets by contract value of new projects were Iran ($8 billion), India ($4 billion) and Saudi Arabia ($2.5 billion).

"Rich natural resources such as petroleum, metals and natural gas ensured payment in due time. Lots of customers in the Middle East and Africa use these resources as a means of payment," said CICA Director Diao Chunhe.

Growing the economy

Winning service contracts also can help boost exports of manufactured goods, as Chinese contractors tend to source most materials and equipment for overseas projects from China.

Accompanying the deal to build the Universal Studios park, MCC also won a deal to supply, fabricate and deliver 23,000 tons of structural steel for the project.

According to the Ministry of Commerce, every dollar of contracted work translates to an increase of $4.9 in GDP.

The success of Chinese contractors is not limited to emerging countries.

MCC is involved in Australian mining projects. A Chinese aircraft technology company recently secured a major contract for wind power projects in the United States. And China Construction of America won a bid to renovate the Hamilton Bridge in New York.

As for MCC's Liu, he also wants to establish a reputation for superior contract execution through the project to build the Universal Studios theme park in Singapore.

"I hope this will help the company impress our US counterparts who might one day choose to partner with us," Liu said.

(For more biz stories, please visit Industries)

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