Contractors look to developed economies

BEIJING - Political turmoil in the Middle East and North Africa means that China's offshore construction contractors are shifting their focus from developing countries to developed economies, industry insiders said.

"We see business opportunities in developed economies and are trying to tap into the market due to the infrastructure upgrade there," said Yu Zhende, vice-president of Overseas Operations for China State Construction Engineering Corp Ltd, the country's largest construction enterprise.

Yu said that the company is cautious about projects in the Middle East and North Africa due to risks resulting from the political turmoil.

Yu made the remarks at the Sixth Plenary Session of the China International Contractors Association on Thursday. Chinese construction contractors had targeted the Middle East and Africa in recent years.

According to the association, China's international projects will experience a slowdown in revenue growth this year due to political instability in these regions and a shortage of overseas workers.

Revenue from China's international contracts, from January to October, reached $76.1 billion. This represented annual growth of 15.3 percent, a decline from annual growth over the last five years of 20 percent.

"Market risks are soaring because of political unrest," Diao Chunhe, chairman of the association, said.

The strategy of targeting developed markets is backed by Ma Tieshan, president of the Beijing Construction Engineering Group International Ltd.

"Accelerating expansion into high-end markets, such as the US and Europe, while stabilizing our traditional markets, is our main strategy during these turbulent times.

"The outbreak of the sub-prime crisis in the US, and the debt crisis in Europe, both of which resulted in a shortage of funds in developed economies, mean that we have opportunities to increase market share there," Ma said.

Merging with, or acquiring, local contractors provides a route for Chinese companies to enter the international market.

Yu said that the construction engineering corp had decided to acquire US contractors in a bid to boost efficiency and market share.

Since entering the US market in 1996, the construction engineering corp has completed a series of infrastructure projects, including public-housing in Manhattan and the Bronx and renovation of the West Eighth Street-New York Aquarium subway station in Brooklyn.

It won a contract worth $407 million for the renovation of the Alexander Hamilton Bridge, crossing the Harlem River between Upper Manhattan and the Bronx, in New York City.

With an investment of $125 million, the China Communications Construction Company completed the acquisition last year of a 100 percent stake in Friede Goldman United, (F&G), one of the world's leading providers of design services and equipment for offshore drilling rigs.

"We hope to localize our human resources, raw materials, research and development and sales, to be market-oriented," Wang Xiaoguang, general manager of its overseas department, said.

Sun Yong, deputy general manager of the construction engineering corp, said contractors must be prepared to enter the US and European markets as this will help their growth.

China Daily