Talent Spot| Policy Drives the Ascent of the Chinese Contractors
Selecting contractors with the right capacity and experience for large value work is critical and timely for the works. Indeed, an undeniable reason for the resounding success of the Chinese contractors has been the role of the Chinese government in its overall foreign policy and economic strategy.
From the announcement in 1999 of this policy, the role of the Chinese State has evolved from facilitation services such as risk assessment and insurance, bolstered by high-level political trade delegation participation, to a more driving role, which has seen a dramatic increase in state funding through low-cost export credit facilities to many friendly governments for the development of their countries’ infrastructure. This work has been undertaken primarily by Chinese state-owned companies, but private sector participation and competitive tendering in overseas projects has also been encouraged. Over the past decade, SAFE, the foreign exchange regulator, and MOFCOM, the commerce ministry, gradually relaxed capital controls and brought in rules to allow Chinese contractors easier access to foreign exchange and capital markets. Other government agencies have supported SAFE’s push to facilitate funding for overseas ventures.
Since late 2008, Chinese contractors have had access to domestic commercial bank loans for cross-border mergers and acquisitions and as of 2009, Chinese firms could issue dollar-denominated bonds in China for the first time.
As a result of these policy drivers, Chinese contractors have in recent years increased market share in their established overseas markets of Africa and South Asia and, building on their experience and track record in these regions, have moved into and become serious contenders in other markets like South-East Asia, the Middle East, Latin America and even Europe. Chinese contractors have also been prepared to go to markets that contractors from other countries are not prepared or able to work in, notable examples being Iran and Afghanistan. It is therefore unsurprising that in recent years Chinese contractors have started to dominate certain markets through a combination of factors, namely strong Chinese government support, very competitive pricing and increasingly their technical excellence and the ability to work in the most difficult environments.
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