Striding into the big league

Chinese company hopes to clinch more infrastructure redevelopment deals in the UK

Britain's industrial hub, Manchester, is trying to boost its image as an international travel hub through its 800 million pound ($1.3 billion; 956 million euros) Airport City Manchester project. Chinese construction firm Beijing Construction Engineering Group will play a key role.

The Chinese construction company, which worked on the 2008 Beijing Olympics' press center and gymnasium venue, will share 50 percent workload of the project's construction, alongside the British construction company Carillion.

"Airport City Manchester is our first project in the United Kingdom and Europe, but we want to build on its success to win more contracts in the UK and establish a presence here," says Xing Yan, managing director of BCEG International.

"We already have about 25 employees in Manchester preparing for the project, and we'll add more at a later stage. The construction work will be done by local workers or employees subcontracted to local construction companies."

He says BCEG's experience of working in international markets would come in handy while developing solutions for global clients. At the same time, the company will also use its purchasing power in China to secure cost-effective construction materials for projects.

The Airport City project, spread over an area of 465,000 square meters, includes construction of offices, hotels, advanced manufacturing, logistics and warehousing facilities.

Outline planning permission for the project was granted at the beginning of last year. It will be completed over the next 10-15 years, and is expected to create more than 16,000 jobs.

BCEG's involvement was first announced in October during British Chancellor George Osborne's visit to China, although it was not clear at the time how the Chinese company would be involved in the project.

But now it is clear that the Chinese group will secure half of the contracts for the construction of the project, with British firm Carillion accounting for the rest. The division of work will be decided with the help of the UK firm Argent, which is the development manager for the project.

Aside from construction, BCEG will also help market the project in China to Chinese companies that wish to rent or buy office space in the business center. BCEG will conduct a roadshow for the project in Beijing, Shanghai and Shenzhen from June 9 to 13.

The Chinese company has also taken a 20-percent stake in the joint venture. Other partners in the joint venture are Carillion (20 percent) and Greater Manchester Pension Fund (10 percent), with Manchester Airport Group holding the remaining 50 percent.

BCEG, which was established in China in 1953, already has a presence in many developing countries. It expanded into Western markets in 2007 by building a hospital in Dallas. "It was a natural progression from the work we were doing in China and other markets," Xing says.

He says BCEG won a contract to participate in the construction of the US embassy in Beijing in 2004, a project that took four years to complete.

"At that time, we were the only Chinese company working on the embassy construction. It was a good opportunity for us to learn about US construction standards and the characteristics of the US construction market," Xing says.

The success of the project won BCEG recognition in the United States, which allowed it to secure a contract for a hospital in Dallas. Xing says some of the workload for the hospital was subcontracted to local construction companies.

He says BCEG sent a group of Chinese workers on training visas to teach some of the company's standards and values to local workers and subcontractors.

BCEG also worked on other projects in the US, Canada and Australia. Examples include an old-age home in Los Angeles and a commercial center in Australia.

Xing says he sees Airport City Manchester as a good opportunity for BCEG to gain recognition in the UK market, from which it hopes to grow its local presence.

"We are fully confident about the project. British construction standards are used in many international markets we worked in already, so it is very familiar for us," he says.

Charlie Cornish, CEO of Manchester Airport, says BCEG's international perspective made it unique in the bidding process.

"If you are a global company, you look at various construction management processes and different designs, and you're more prone to look at how you innovate approaches to meet construction standards," he says.

Cornish says Manchester Airport first came into contact with BCEG about two years ago. At the time, Manchester Airport was looking for financial support for the project, and came across Industrial and Commercial Bank of China.

ICBC then introduced Cornish's team to BCEG, and both parties saw an opportunity to work together. Although ICBC is not in the Airport City Manchester joint venture, it has expressed willingness to finance some of BCEG's investment in the project, Cornish says.

Manchester Airport opened a bidding process for construction companies, which was narrowed down to two likely consortiums. One team was BCEG with the British developer Ask Developments, and the other consisted of Greater Manchester Pension Fund, Carillion and Argent.

Having reserved the right to break up the consortiums and select the most suitable companies, Manchester Airport then selected Greater Manchester Pension Fund, Carillion and BCEG as equity partners and Argent as development manager.

David Partridge, managing partner of Argent, says his team is very excited about working with BCEG even though the Chinese company was originally in a different consortium.

"Having BCEG on the team gave us an international angle. We've always wanted to have that, but it was hard to find a partner who would support us in this way," Partridge says.

Cornish says that China is a big target region for Airport City Manchester, because many Chinese companies are expanding into Europe and Airport City Manchester would be a good location to host them.

He says there will be manufacturing facilities on site for Chinese companies that wish to either assemble their manufactured parts or manufacture products locally.

Airport City Manchester is also a good location for support functions like sales and marketing of Chinese businesses that want to tap into local human resources in these fields, he says.

Last year Cornish's team led the launch of the Manchester-China Forum, a network that helps to connect Chinese businesses with opportunities in Manchester and vice versa.

Rhys Whalley, executive director of the forum, says his team will support BCEG's efforts to attract Chinese businesses to Airport City Manchester.

To make Manchester more attractive for Chinese businesses, Manchester Airport has been in discussion with Chinese carriers for direct flights between Chinese cities and Manchester for two years, Cornish says.

He says the first direct passenger flights between Chinese cities and Manchester are likely to start by the end of 2014 or early 2015.

BCEG's participation in Airport City Manchester marks a recent trend of Chinese companies taking on major development projects in the UK.

Shanghai-based ZhongRong Holdings announced plans to rebuild London's Crystal Palace in October, and Beijing-based ABP (China) Holdings Group Ltd signed a deal in May to turn a derelict plot of land near London's City Airport into the city's third financial district.

Xing says as a leader in China's construction industry, it is important for BCEG to go global. "I think China's construction sector has a lot of opportunities but there is also a lot of competition," he says.

"We are fortunate to have opportunities to work on overseas projects, both in developing and developed countries, which give us valuable experiences and knowledge.

"I think working on international projects will always be a fruitful and fulfilling experience as long as we work hard."

cecily.liu@chinadaily.com.cn

(China Daily European Weekly 03/21/2014 page21)