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Just near Bond Street Tube is a fashion store with a difference. Housed in a brand new £14m building this is the flagship store of Bosideng, one of China’s largest fashion companies, with 10,000 stores back home. Just down the road in Savile Row is the iconic British tailor Gieves & Hawkes – which is also now Chinese owned.
It shouldn’t come as a surprise, as China is already the seventh largest investor in the UK. It is this increasing emphasis on buying British that is fuelling speculation that we might see more activity from Chinese construction firms as well as investors. Not least, the bigger firms can bring China state development cash providing a vital capital stream to get schemes going. However, cladding company Yuanda is the only high-profile firm involved in UK construction at the moment – it is working on London’s Leadenhall Building.
Chinese-owned Bosideng store
However, while some giants of the sector are already working in developed countries – CSCEC has set up a subsidiary, China Construction America, which has secured projects including the $410m renovation of New York’s Hamilton Bridge – there are signs it won’t be easy for many Chinese firms to break into foreign markets.
Chinese contractor Covec is embroiled in a lawsuit in Poland after spectacularly failing to build a 50km stretch of road. The first major European contract to be won by a Chinese company was meant to be a landmark. Instead, it became a fiasco as the company suffered cash flow problems and stopped paying subcontractors.
Even without this setback, CIOB deputy chief executive Michael Brown is not convinced we’ll see a Chinese contractor in the UK. “[Chinese contractors] are still daunted at the thought of working in the UK,” says Brown. “We talk about our very low barriers to entry but they find that even more confusing. Nor do they really understand what goes on behind our planning system and why everything takes so long. I don’t see the Chinese moving in very quickly. I’ve always said to people in China if you want to work in the UK, buy a UK company. That’s the best way for them to enter the UK market.”
Similarly, he says that UK contractors will never work in China. “Foreign contractors, even Korean, will find it difficult to compete in that market. But clearly UK consultants are doing a lot of work in China. I just don’t know if that’s a temporary phenomenon or building relationships with companies will become a very long-term thing.”
Yuanda cladding has been specified at London’s Leadenhall development
Graham Robinson of Global Construction Perspectives says a lack of local knowledge and regulatory awareness could make it difficult to work in the UK. Instead of posing a challenge, he believes Chinese investment into this country spells a “big opportunity” for British contractors. China and the UK have signed a Memorandum of Understanding on infrastructure, which the UK government hopes will unleash Chinese cash to help achieve £200bn of infrastructure spending over the next five years.
Where UK contractors are more likely to see competition from China in the short term is the developing country markets. Already, Chinese contractors have established a significant footprint in Africa, South America, Central Asia and the Middle East, where they often come part and parcel with Chinese government-funded projects.
In the hydropower sector alone, China is involved in at least 300 dam projects in 66 countries. A list of the key offices of construction giant CITIC gives a clue to the current lay of the land: Angola, Brazil, Venezuela, Iran, Uzbekistan, Kazakhstan, Belarus and South Africa.
Not everyone is so sanguine about the UK market, however. (See Vox Pop for more views). Increasingly, the state is encouraging Chinese firms to expand into the developed world. And as China seeks to rebalance the economy away from investment and towards consumption, eyes may increasingly turn overseas. Michael Kwok of Arup sees the arrival of Chinese contractors in the UK as inevitable: “It will happen sooner or later. There’s no way anyone can stop that. If there is significant incentive for them to go they will go.”
