July 23, 2008

Chinese construction market offers opportunities, risks to Canadian contractors

China’s booming construction market, with planned major infrastructure projects, western development programs and the revitalization of the country’s industrial northeast, represents significant market opportunities and, in turn, profits for both domestic and foreign contractors, according to a new report from PricewaterhouseCoopers (PwC).

The report, called “Building Knowledge: China’s Booming Construction Market,” shows that the construction market in China will reach US$460 billion by the end of 2008 and construction spending in China is expected to grow at a rate of 9.7 per cent annually through to 2010.

It also points out that construction expenditures will benefit from growth in government-funded infrastructure construction projects.

These include the Three Gorges project, the 2008 Beijing Olympics, 2010 Asian Games and the Shanghai World Expo.

“The investment environment for the construction industry in China has been greatly improved since the first foreign contractors entered the market in the early 1980s,” said Michael Clifford, PwC Canada Industrial Products Tax Leader – Engineering and Construction, PwC.

“Foreign investors and contractors now have much broader access to the rapidly expanding construction market.”

Many private and foreign constructors are rapidly developing in China and in certain provinces, special economic zones have been initiated to attract foreign investment.

It is common for foreign investors to be offered a range of incentives in order to encourage them to establish themselves in a particular province.

Local government may also provide a “one–stop–shop” approach in order to assist foreign firms in working through the bureaucracy more quickly.

“However, foreign contractors directly investing in China or setting up office there may encounter a wide range of practical problems,” noted Clifford.

Some examples he cited were recruiting experienced staff with the right set of skills for international business, managing and motivating the local staff, and winning work as sometimes the selection process is not transparent.

Foreign contractors will also have to come to terms with Chinese tax, accountancy and employment law.

China is also going through rapid change and its regulations, legislation and institutional structures are in a state of continual transition.

JOC News Service

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