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The Chinese are coming… and they’re here to stay

Posted on: August 18th, 2015 by Staffan Engstrom

The news that the China Harbour Engineering Company has won preferred bidder status for the £300m marine work contract on Swansea Lagoon is hardly surprising: CHEC saw an opportunity to gain strong foothold in the UK infrastructure market, and for a private sector client that’s arguably more accessible than battling through our convoluted procurement system for public sector works.

Also this week, we have confirmation that a joint venture between Interserve and China State Construction Engineering Corporation (CSCEC) is preferred bidder for the £550m One Nine Elms scheme in Battersea for Chinese developer Dalian Wanda.

There’s every chance we’ll see more Chinese names on tender lists in the coming months. I’ve been looking at the nature and shape of the biggest construction companies in the world, and I am shocked at the prevalence of the Chinese in international construction.

Now, we know that there are some pretty large domestic construction companies in China. For example, CSCEC in Beijing has a turnover of almost $100bn (£65bn). That is more than the whole of the UK non-housing new construction industry, but in one company. At least two others are a similar size.

However, they are not keeping to China. According to the Engineering News Record Top 250 Contractors list last year, 62 of the top 250 contractors by international turnover (ie non domestic) are Chinese. In contrast, there are just two British contractors on the same list.

On a regional basis the picture is just as revealing: 49% of all the international contractors’ work in Africa was by the Chinese, with 16% and 17% for the Middle East and Asia respectively.

So if you look at the market share of the Chinese in various overseas markets, and the share they’ve already taken in Africa and parts of Asia, then the UK must be a big target market for them.

Generally, their success in overseas markets is price driven. In Africa, we’ve seen them come in wholesale with all the resources and materials they need shipped in from China – it’s all very efficient.

The question in many peoples’ minds is: can they learn the skills to operate well in our more complex UK environment?

On the other hand, if they can import low-cost materials in sufficient quantities and achieve a price advantage relative to UK competitors, then many private sector clients will go for it.

China is no longer the isolated ideological economic island that it once was. This is a nation that has learned the art of construction business. I don’t see any signs of them going away, but quite the opposite.

This article was written by Staffan Engstrom and originally published on 5th June 2015 by Construction Manager.