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Infrastructure offers world of opportunity

By Zhang Chunyan | China Daily | Updated: 2015-02-03 07:58

Companies involved in infrastructure projects are set to explore more markets and increase exports to Europe in the coming years, with strong support from the Chinese government.

The government has repeatedly mentioned the need and desire to facilitate Chinese companies as they explore overseas markets and join the international competition for business.

The latest sign of support came from the State Council (cabinet) on Jan 28. It announced measures to support overseas direct investment in the rail, nuclear and other infrastructure industries.

The measures call for the exploration of international markets for heavy equipment, with an emphasis on various forms of cooperation such as joint ventures and hybrid ownership. The Council also urged companies to offer services such as engineering consultancy, construction, equipment supply and operational maintenance.

And it announced that the government supports exports of steel, non-ferrous metals, construction materials and textiles. It backs exports of communications, electricity, engineering and shipping equipment through overseas project contracting, overseas investment and acquisitions.

There were four key factors behind the announcement.

First and most important is that China now has the advanced technology and equipment for highways, nuclear plants and other facilities after more than 20 years of work in the domestic market.

So now it is appropriate for companies to tap into international markets such as Russia, Brazil and Thailand.

Developed markets are also being targeted. China Northern Locomotive and Rolling Stock Industry Group Corp announced a subway export contract with the United States on Jan 26. It is China's first foray into the US rail transit market. CNR will sell 284 subway trains worth $670 million for Boston's Red and Orange subway lines.

Second, China plans to withstand downward pressure on its traditional trade activities and pursue its strategic focus. The nation is losing price competitiveness as labor and financing costs rise and the yuan strengthens. Exports of higher value-added products such as transport and communications equipment, which are less price-sensitive, will give China some advantage.

Third, the infrastructure industry's expansion abroad will help the sector upgrade and modernize. Domestic infrastructure technology and equipment are price-competitive, but there is still room for improvement in terms of performance and security.

Joining the international competition will prompt companies in this sector to do better.

Fourth, China's overseas direct investment will maintain rapid growth in 2015, and investment in the infrastructure industry will help shift the emphasis of investment away from financial assets toward physical ones, which are believed to offer better returns.

In Europe, rising demand for new and improved infrastructure is creating opportunities for Chinese companies. The demand comes from not only less-developed eastern European nations but also highly advanced economies such as the United Kingdom and Germany.

Germany was once known for its fast autobahns, efficient industries and ability to rally public resources for big projects. But its infrastructure - roads, bridges, train tracks, waterways and the like - is aging, and experts have warned that problem could undermine its economic growth.

In the UK, China will modernize the infrastructure by investing 105 billion pounds ($159 billion) into several energy, real estate and transport projects by 2025, according to a report published in October by law firm Pinsent Masons.

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