UK infrastructure projects attract Chinese firms
Updated: 2011-12-17 18:50
By Cecily Liu and Zhang Haizhou (
CARDIFF — Chinese investors have begun to seek projects in the UK infrastructure industry, following London's recent decision to open the sector to more foreign and private investors.
"We are looking for short-term projects to invest in almost immediately, and that could mean next year," said Qi Yue of CITIC Construction Co on his way to the first meeting of the UK-China Infrastructure Task Force in Cardiff on Thursday.
The Task Force — a high-level forum for China and the UK to discuss investment opportunities — was established in September when the two countries signed a landmark Memorandum of Understanding (MoU) on infrastructure.
For the first time, Chinese investors are trying to participate in British infrastructure projects through public-private partnerships (PPP).
Stephen Green, the UK minister for Trade and Investment, said that the UK is keen to attract Chinese investment into priority infrastructure projects to help the UK maintain "global competitiveness, secure growth and create jobs".
The UK's total jobless figure passed 2.6 million for the August-October period – the highest level since 1994, the Office for National Statistics on said Wednesday. Britain's unemployment rate is now 8.3 percent.
The country has a ￡200 billion($310 billion) infrastructure plan over the 2010-2015. However, the UK government can only contribute ￡5 billion($7.77 bllion) before 2015, to be followed by a further ￡5 billion in the next Parliament. The authorities will rely on the private sector to make up the shortfall.
Qi said his team has looked into a number of infrastructure projects since the MoU was signed, including the Atlantic Gateway, offshore wind farms in Scotland, Battersea Power Station and the UK Olympic Park.
"Britain's efforts to establish a concrete infrastructure plan make it a more attractive investment destination for us, compared with other European countries," said Qi.
"Our main concern is that these projects are either to be built in a few years time, or are too long-term and don't have the flexibility our investment strategy requires," he said.
Rather than providing finance, or being a "contractor" only, Qi said his team is "actively involved in the construction and operation of the projects", which means CITIC "can hire teams or equipment from other Chinese companies".
Green welcomed the initiative, adding that the City of London's expertise in the implementation of the "financing, legal and regulatory" aspects of PPP projects is "one of Britain's strengths".
Liu Yingjun, deputy director-general of the Department of Outward Investment and Economic Cooperation at the Ministry of Commerce, confirmed that many Chinese companies have started seeking infrastructure projects in the UK.
"It is important for individual British and Chinese businesses to exchange information and share experiences, so that our bilateral infrastructure cooperation can develop beyond just government discussions," said Liu.
China is the seventh-largest investor in the UK in terms of the number of projects, with 1,471 jobs associated with Chinese investment, according to UK Trade and Investment. But none of these involve PPP-based infrastructure projects.
Given their lack of experience and expertise, some experts have cautioned that the Chinese may not be the best managers and operators of British infrastructure projects.
"Investing in British infrastructure projects would require Chinese companies to cooperate with local subcontractors, which is not easy given the cultural differences," said Jonas Parello-Plesner, of the European Council on Foreign Relations, a think tank headquartered in London.
Just this summer, China Overseas Engineering Group Co (COVEC) withdrew from a $447 million highway construction project in Poland because of disputes about labor agreements, engineering standards and environmental protection.
The cancellation came just two years after the company became the first Chinese enterprise to win a large European highway contract.
"Chinese companies still have a lot to learn about managing infrastructure projects in Europe, despite their successful experiences in developing countries, but given Europe's demand for infrastructure this is definitely a good financial opportunity," said Parello-Plesner.
His views were shared by Qi. "Our next step is to learn more about the UK's legal system, labor market laws and economic climate, to ensure that our investments will be sustainable and profitable," he said.