African competition heats up

Amid shrinking profits and fierce competition, Chinese contractors, which cannot win projects from the Kenyan government, extended their reach to regional construction projects, which threaten local businesses.

"Local companies started to unite to make trouble for us and demand preferential treatment for local businesses," Wang says. "Meanwhile, the cost of a work visa for a Chinese employee has increased and the number of work visas has been further tightened."

Hard coordination

Chinese companies are acting to address these new concerns.

Li Qiang, general manager of the Kenya office of China Road and Bridge Corp, or CRBC, says: "An association of Chinese construction companies in Kenya has been set up with the purpose of maintaining the overall image of Chinese companies and ensuring project quality."

Gong adds that the economic and commercial counselor's office of the Chinese Embassy in Kenya scores the performance of Chinese companies and issues evaluation letters to the best performers before they are allowed to bid.

But the mechanism does not work well, as the counselor's office does not have many projects to coordinate, says Liu Qichang, general manager of the East Africa branch of China Overseas Engineering Group.

"Instead, we hope the Chinese authorities, especially the constractors' chambers, establish criteria in view of the market size of the host country before Chinese companies go abroad," he says.

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"Also, we expect our parent company, China Railway Group Ltd, to balance business orientation after seeing seven of its subsidiary companies doing similar business in Kenya."

However, CRBC vice-president Sun Liqiang welcomes the competition from China's provincial players.

"Provincial companies may have an advantage in labor or costs, but our advantage covers the whole industrial chain from design to construction and equipment in addition to rich experience in overseas markets, which will help us win new and major projects," he says.

"We don't fear competition as we have defeated many companies from emerging economies."

Sun called for the government to give more support for companies going global, such as tax rebates to avoid double taxation.

Chinese standard

"Compared with business of project contracting and construction, standard-setting in the global market is more important," Sun says. "Chinese standards in overseas project contracting and construction abroad are now gaining momentum and it takes about five years to be accepted in Africa."

Gong agrees, saying that the gap between Chinese and international standards is narrowing, and the trend is to use Chinese standards in projects.

In 2012, the turnover of China's contracted projects overseas amounted to $116.6 billion, up by 12.7 percent year-on-year and the value of newly signed contracts was $156.53 billion, up 10 percent year-on-year.

Meanwhile, Africa has became the second-largest market for China's contracted projects overseas in 2011, according to the Ministry of Commerce.

African countries currently follow the standards of the United Kingdom and France, the continent's two former major colonial powers. Construction supervision firms are mainly European ones although China has the leading technology, Sun says.

"We must boost the internationalization of Chinese standards. It's a key move that will not only promote the exports of Chinese products and technology, but also advance the global reputation of Chinese design, consultancy and supervision. Moreover, it gives us more rights, or a bigger say, in project pricing and reduces project risk through engagement at the earliest stage," Sun says.

He expects more business opportunities to come from Africa's urbanization process and China's renminbi globalization.

"We are looking forward to the renminbi globalization," Sun says. "The day when the renminbi is used for settlement will be a new day for Chinese companies in overseas markets as it will enable them to enter the industries of the host countries. We will not only build roads and power stations, but also operate them."

Sun adds that China's projects in Africa, "in reality, help develop the continent, instead of practising neocolonialism. Instead, projects from Western countries are often accompanied by political agendas."

lijiabao@chinadaily.com.cn

   

Top: Sinohydro workers construct the bottom slab for a box culvert at the Nairobi-Thika Highway improvement project. Above: Workers pave a carriageway of the Nairobi-Thika Road.