Chinese contractors surf the big wave

As revenues swell, many companies seek to expand foreign business to use skills in untapped markets

Overseas contractors are actively seeking new customers in markets they previously had less involvement with, including Europe and Latin America, as total revenues surged by 17.6 percent in 2013 compared with a year ago, a national trade organization said on Feb 27.

Chinese contractors made more than $137 billion in revenue last year, according to China International Contractors Association, the largest industry organization in the country.

Although the major customers remain in Asian and African markets, demand from countries such as the United Kingdom, Germany, Brazil and Mexico has rapidly jumped.

Chinese companies signed $11.4 billion worth of contracts in Europe, a jump of nearly 32 percent year-on-year, according to Zhang Xiang, a spokesperson with the association.

In Latin American markets, construction deals in infrastructure, harbor and oil refinery sectors were dominant.

The value of new contracts signed increased by 25 percent year-on-year to more than $18 billion in that region, according to the association.

"Telecommunications projects were predominately the biggest deals from Europe in the past, but we noticed road projects in Serbia and Belarus as well as labor demands from Germany have surged dramatically," Zhang says.

More companies are eyeing mid- and high-end projects in 2013, she added, saying China's technology edge in electronic and hydropower industries gave contractors an upper hand in attracting these orders.

More than a third of the bids over the last year were targeting mid- and high-end projects, data from the association showed.

Signs of economic recovery in developed economies will give contractors more investment opportunities this year, it said.

Last October, Beijing Construction Engineering Group partnered with the Manchester Airports Group Plc in building an "airport city" in the northern British metropolis.

The total investment for the project was estimated at around 800 million pounds ($1.3 billion; 970 million euros).

"Beijing Construction Engineering Group has been very active in that country and gained a good reputation from previous projects. The local government literally dragged the Chinese company into the deal," Zhang says.

A total of 55 Chinese companies were listed in the top 250 contractors in 2013 by Engineering News-Record, a leading industry magazine. The average revenue for the companies was $1.2 billion, a 6.4 percent year-on-year increase, said the magazine.

China is likely to receive more orders for high-speed railway projects, one of the best known high-tech export products from China.

Thailand, Hungary, Serbia and Russia are already in talks with China on introducing high-speed railways, Zhang says.

In addition, China is striving to lift the quality of overseas labor.

China started to send about 150 nursing workers to Germany last year, where there is a need for roughly 40,000 carers for senior citizens.

Angola in Southwest Africa and Algeria in the northern part of the continent were the biggest destinations for Chinese construction workers. Developed economies in Asia, including Japan and Singapore, were the top markets for non-construction workers.

Zhang from the association estimated the increase in outbound workers is losing its edge in terms of payment but skilled workers will play an increasingly important role in the years to come.

Security concerns in the biggest contract destinations may also harm Chinese companies businesses as well as threaten worker's lives, the association said.

An armed attack targeting a Chinese company that left one Chinese worker dead and six others injured in Zambia on Feb 13 was the latest testimony to the dangerous living conditions many Chinese workers are facing.

Moreover, the sluggish economy in Latin American nations may further damage Chinese contractors because the region has started to become an important source of orders in recent years, according to the association.

"Chinese contractors have to keep an eye on funding difficulties faced by some large projects in South America while most local policies in Central America countries may not be in favor of them," Zhang says.

jiangxueqing@chinadaily.com.cn

(China Daily Africa Weekly 03/07/2014 page22)