Chinese contractors told to build for long run

Chinese contractors told to build for long run

Chinese contractors need to broaden their business models to capture markets along the "One Belt, One Road" initiative routes, officials said on Friday.

Diao Chunhe, president of the China International Contractors Association, which helps Chinese companies facilitate new business in overseas markets, said Chinese infrastructure companies should be acutely aware that they are facing more competition from other big players.

Rather than simply constructing a project and handing it over when complete, companies should offer transition periods where they also train people to run the facilities, as well as consider public-private partnerships along the Silk Road Economic Belt and 21st Century Maritime Silk Road, initiatives designed to further open up markets.

Diao's comments come after a deadlock was broken last month on plans for a Chinese-funded port city in Colombo, Sri Lanka, and after Mexican authorities halted the country's first high-speed railway project to be built by Chinese rail infrastructure companies in January.

China's status as one of the world's major big-ticket project contractors is facing spirited challenges from would-be contenders for the crown in recent years, especially from South Korea, Saudi Arabia, India, Malaysia and Spain.

"Though it is a common arrangement in the construction industry, 'engineering, procurement and construction' projects are often too focused on construction and not on maintaining assets over a lifetime. We would like to see more Chinese companies seal public-private partnerships or build-operate-transfer contracts, which deal with long-term upkeep as in the West," said Diao.

Fang Qiuchen, deputy director-general of the Ministry of Commerce's Department of American and Oceanian Affairs, said more nations in Latin America, Southeast Asia and Africa have realised that these models enable governments to use companies' expertise and efficiency.

"They can offer the delivery of certain infrastructure projects and services traditionally provided and operated by the government," said Fang. "It would be fairly encouraging to see a combination of Chinese contractors' dynamism and pragmatism with more public-private partnerships or build-operate-transfer practices in different markets along these two trading routes."

With more Chinese construction companies seeking new growth in marketplaces such as the Middle East and Africa, Zhang Xiang, spokeswoman for the China International Contractors Association, said that in addition to political, social and cultural perspectives, Chinese companies must add anti-terrorism plans into their "going out" checklist, as growing security problems have occurred in these regions.

The association's figures show Chinese contractors earned more than US$142 billion (S$189 billion) in revenue from the global market last year, up 3.8 per cent from a year earlier. They also signed US$192 billion in contracts with various governments and clients.

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