Infrastructure and construction to China
(Last updated: 2 Sep 2013)
Trends and opportunities
China is to accelerate construction of urban public facilities by investing as much as RMB7 trillion during its 12th Five-Year Plan from 2011 to 2015.
It is estimated that investment on urban rail transit will surpass RMB700 billion in the 12th Five-Year Plan period.
(Source: China Daily, ‘China to invest 7t yuan for urban infrastructure in 2011-15’, 13 May 2010)
China will also invest heavily on transportation, and may invest RMB3 trillion on railway construction during the next five years. In 2012, government investment had outstripped expectation and reached RMB516 billion. In 2013, the government is expected to invest RMB630 billion.
By the end of 2012, there were 183 civil airports in China. According to the airport development plan, by 2020 China will have 244 civil airports.
(Source: Dow Jones Newswire)
By 2015, 36 large and medium sized cities will have sewer systems covering 100 per cent of urban areas with sewerage collection and treatment reaching over 85 per cent. All cities will safely handle domestic waste with a non-hazardous treatment rate over 85 per cent.
In the energy and utilities sectors, the focus will be on efficiency and low carbon generation, with nuclear and renewable energy featuring strongly in the projects pipeline. The power grid will be further developed with an estimated investment of RMB17 billion on smart grid construction during the 12th Five-Year Plan.
(Source: APCO Worldwide, ‘China's 12th Five-Year Plan’, 10 December 2010)
In the housing sector, the government has pledged the construction of another 50 million low cost housing units. In order to reach this target, the government spent RMB380 billion in 2012. While this will drive construction, the plan remains unclear in terms of allocations between the central and local governments and implementation. Due to limited local government budgets, the construction speed will be 20 per cent lower in 2013.
The west regional infrastructure development will have investment in many projects including railway, highway, rural irrigation and other utility development.
There are several sources of funding for projects:
- Central government budget
- National bonds
- Loans from multilateral funding agencies, such as the World Bank, Asian Development Bank and Japan Bank for International Cooperation
- Local government budget
- Private investment
There are increasing openings for Australian exporters and investors in the infrastructure sector. Many of these opportunities will be in China’s more underdeveloped western region, which covers 10 provinces and 56 per cent of China’s land mass.
Opportunities for Australian businesses include:
- Transportation (eg. highways, high speed trains and urban metro systems)
- Gas pipeline design, construction and management
- Natural gas reticulation projects
- Renewable energy and smart grid systems
- Air navigation systems and airport construction services
- Ports construction and management
Environmental (eg. wastewater treatment, surface water management and air pollution control)
Tariffs, regulations and customs
China’s customs administration collects duties, industrial and commercial consolidated tax, and regulating tax on import commodities.
Foreign exporters sometimes experience difficulties in understanding the application of customs classifications, tariff rates and import controls by local customs officials.
Industry standards for infrastructure projects vary depending on the nature of the project (gas, power etc.) and the product or service to be provided to the project. For building and construction materials there are two commonly applied standards in China:
- National Industry Standard or Industry Standard of the Ministry of Construction (in Chinese language only).
- Quality assurance system for building materials manufacturing - ISO 9001 and ISO 9002.
In China, the regulations make strict stipulations about foreign investors in real estate with respect to investment capital, qualifications, investment forms etc. Since the end of 2007, foreign investors have been restricted in investing in real estate agencies and prohibited in investing from the construction of golf courses.
According to the Guidance of the Ministry of Construction on foreign investment in the construction industry (2002), a wholly foreign-owned construction company is allowed in China. However, the company has to get approval from the local authority and have the relevant qualifications.
A wholly foreign owned construction company is only entitled to certain business areas where either the projects are generated from overseas or when a foreign construction technology is needed, whilst joint ventures can contract any local project according to their qualifications. The most efficient way for a foreign constructor to enter the Chinese market is to set up a joint venture with a domestic Chinese construction company or purchase one.
As a foreign architectural firm, it is possible to set up a Wholly Foreign-Owned Enterprise (WOFE) as a consultancy firm on architectural design. All official documents and drawings, including to permission drawings for the local authorities, official tender drawings and execution drawings have to be stamped by a Local Design Institute (LDI) for approval. It is not necessary to have a joint venture; cooperation with different LDI's on a project basis is possible.
Marketing your products and services
Early identification of opportunities is the key to Australian business success in infrastructure projects. Australian companies should consider several possible options for market entry:
- Direct export via local agents or distributors
- Local investment – joint venture, partnership, wholly owned
- Manufacturing localisation, including technology transfer
- Development of a strong in-market presence is important to support market development, particularly where products and technologies require service support
- For supply to large projects, local governments sometimes require the establishment of a local presence
Chinese design institutes often play a critical role in the approval, recommendation and assessment of new products for infrastructure projects
Distribution channels will vary depending on the type of project and its location.
Links and industry contacts
Government, business and trade resources for China
State Development and Planning Commission – www.sdpc.gov.cn
The Ministry of Finance – www.mof.gov.cn
China Economic Information Network – www.cei.gov.cn
Chinabidding.com – www.chinabidding.com.cn
China Daily – www.chinadaily.com.cn
Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.
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- develop international markets
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