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Overseas builders facing change

By Bao Chang in Macao | China Daily | Updated: 2012-04-25 08:04

Project contracting and infrastructure investment combined are increasingly dominating China's contracting industry overseas, and the industry has reached a plateau as it upgrades.

Chen Jian, deputy minister of commerce, said on Tuesday: "Over the past 30 years, China's offshore project contractors have made profound progress in (their) industrial structure and market distribution.

"They will embrace infinite business opportunities in terms of infrastructure investment and building globally, based on an interactive and mutually beneficial cooperation" with their foreign counterparts, Chen said.

"Amid the global economic slowdown, infrastructure investment will become a locomotive" driving the world economy, Chen added.

Chen made the remarks at the Third International Infrastructure Investment and Construction Forum, which started in Macao on Tuesday.

The event is jointly organized by the Ministry of Commerce's China International Contractors Association and Macao Economic Services.

At the forum, CICA released its annual report on foreign project contracting.

The report said that China's offshore contracting industry signed new contracts valued at $142.3 billion in 2011, up 5.9 percent year-on-year.

Growth was constrained by the European debt crisis, a slowdown in emerging economies and political unrest in the Middle East and North Africa, the report said.

The association estimated that China's offshore contracting industry will expand 5 to 10 percent this year.

"Compared with the fast growth of previous years, the foreign contracting industry has evidently entered a state of steady development, and the trend will continue in the coming years," Diao Chunhe, director of CICA, said during the forum.

"However, in the medium and long term, the industry will regain momentum when companies complete their industrial upgrading," said Diao.

"Involvement in infrastructure investment can be part of Chinese project contractors' efforts to promote industrial upgrading," said Meng Fengchao, chairman of the board of State-owned China Railway Construction Corp Ltd.

Meng said that construction contracting is the primary focus of Chinese contractors' international expansion.

He said contractors should seek further improvement in the infrastructure industry as investors, apart from their traditional role as project contractors.

Infrastructure investment could generate more profit than contracting, he noted.

Meng added that in the second half of last year, CRCC's overseas contracts surpassed the average total seen during previous full years.

Financing has become one of the biggest challenges for infrastructure project management and construction contractors.

Most infrastructure projects need strong capital support, given the high risks of their investments and long payback periods.

"Governments, contractors and financial institutions in different countries should strengthen cooperation and introduce more financial products that project managers and contractors need, maintaining the sustainable development of the industry," Chen said.

In recent years, Chinese contractors have been exploring investment projects, merger and acquisition opportunities and joint operations in the global infrastructure market.

During the forum, a series of infrastructure projects were finalized. China Friendship Development International Engineering Design & Consult Corp and officials from Congo signed a memorandum of understanding for a special economic area in that country.

China Gezhouba Group Co Ltd and Albania's Energy Green Solution Ltd reached a consensus on the Shala River hydroelectric project in Albania.

China International Capital Corp Ltd has estimated that by 2017, infrastructure demand will double in the African, Middle East, Latin American and Asian markets to $3 trillion annually.

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