Like it or not, it seems inevitable that China is to play a part in our construction industry. Here, Olivia Boyd examines what we can expect, and indeed learn, from Chinese contractors.
Read the accompanying articles for this feature
Could Chinese contractors follow investment into the UK?
The year of the Dragon may have seen the flames die down a little in the red-hot Chinese construction sector, but as we enter the Year of the Snake, there is much for China and its building sector to sink its teeth into. It’s now the world’s biggest construction market and is forecast to account for a fifth of all construction output by 2020. And when it comes to shaping China’s built environment, a glance at the news would suggest anything is possible. After all, an entrepreneur who started out in the air-conditioning business is now building what he claims will be the world’s tallest skyscraper in just three months — all prefabricated.
This phenomenal construction growth, audacity and pace, has not just provided a lifeline to many western architects and consultants, but has also given rise to some of the world’s most powerful contracting firms which are now moving west. One of the largest, China State Construction Engineering Corporation, is already operating a successful subsidiary in New York.
Meanwhile, China is already the seventh largest investor in the UK and looks set to climb the table. In 2012, Chinese funds acquired stakes in Heathrow Airport and Thames Water, lined up a deal with the country’s largest developer of student housing and showed interest in the nuclear sector, though expectations of a Chinese bid for the Horizon nuclear JV were ultimately unfulfilled. Where China has invested in infrastructure projects elsewhere in the world, Chinese investors have a track record of taking their builders with them.
The question is: will they do the same in the UK? (See Vox Pop) And given China’s onward march on the world scene what do we have to fear, or learn, from Chinese construction?
“The London market would definitely be attractive to Chinese and Korean developers right now, and they would have the added benefit of bringing along state funding to get schemes off the ground,” confirms Erland Rendell, former partner at Davis Langdon and now director of his own consultancy Atorus Consulting. “They might be interested in taking a stake in a British firm to get their feet under the table. They are very interested in prefabrication and see that as where the future lies — they are like Laing O’Rourke in that respect. They are also about quality and not just pace,” he adds.
Slowing economy
Of course, not everything is that simple. The industry is fragmented, while implementation of government policies on sustainability, health and safety and building standards is a continuing battle. And construction — which accounted for around a quarter of China’s GDP in 2011 — is not immune to the slowing economy, affected by both the global financial crisis and government policies to suppress house prices.
“Construction has slowed considerably in the larger cities in China,” says Graham Robinson, director at Global Construction Perspectives. “We are probably at the low end of the cycle now, but the extent of overbuilding is still unclear.”
Full-on prefabrication The prefabricated building which is aiming to be the world’s tallest skyscraper, and which will go up in three months, is Broad Group’s Sky City, planned for a patch of farmland in Hunan province, far away from the glittering structures of the east coast.
Chief executive Zhang Yue has said it will be 90% factory-built, cutting costs by $400 per square metre and producing just 25 tonnes of construction waste. Time-lapse footage of his previous project — a 15-storey tower built in 30 days — has notched up more than five million views on YouTube.
Not everyone agrees about the sanity of this particular project. Zhang has been described as “that crazy man”. But everyone you speak to in China certainly agrees prefabrication is emerging as a new force in Chinese construction and has the ability to turn the sector on its head.
Broad Group’s proposed Sky City (left) will go up in three months, while the company’s previous project, a 15-storey tower, was built in 30 days
“What’s interesting about prefab in China is the potential,” says Tim Shen, director of sustainability for Asia at CBRE. “Certainly for a company that can really crack it as a solution there’s a real competitive advantage in the China market simply because they’ve still got 350 million people moving to the cities in the next 20 years and it’s not just that you can build things quicker but also cheaper. It could be a real trump card.”
Prefabrication is hardly a new concept, notes Shen, but it hasn’t yet taken off on a “game-changing” scale anywhere in the world. “China, which has already shown itself capable of taking existing technologies such as solar panels and driving down cost at incredible speed, could have an advantage here,” says Shen.
For Michael Kwok, Arup director and leader of the firm’s Shanghai office, this is the crux of innovation in the Chinese construction sector. “Recently a lot of innovation relates to prefabrication — how to do things quicker so that you save on time and cost and of course that will in association save on material waste and transportation if you do it right,” he says. “I think it’s the way to go for China. When you’re talking about a huge amount of construction, to be able to do things in a more industrialised way will be the way to go to save resources, manpower and energy and save costs for the client.”
Low-cost products
Already, China’s ability to manufacture low-cost, high-quality curtain wall and steel products is making itself felt abroad, says Kwok. Curtain wall giant Yuanda has won projects including the UK’s Leadenhall Building and the Abu Dhabi Investment Council HQ and has set up a European subsidiary in Switzerland.
“They are able to prefabricate and put curtain wall together and transport it to wherever the site is around the world in a very cost-effective way,” says Kwok. “It’s not just cheaper — it’s also of a quality that matches with local requirements. I was in Sydney a month ago at a building site and all the steel was from China, fabricated in China and shipped over to Sydney. That’s something I wasn’t seeing 10 years ago. Now when I go to other countries, I can see Chinese products. And this is steel work and curtain wall — very important parts of a building.”
Erland Rendell also points out that Chinese contractors are now prevalent in the Middle East, the point where east and west tend to meet. “I think things like the prices or how to find cost-effective resources are something that will give the Chinese contractor a very high advantage,” he says. And Kwok adds: “If foreign contractors are to learn from the Chinese, then they should look into how China actually manages that, how they do their procurement, how they can make their offerings so cost competitive and of a high standard.”
If western firms could benefit from studying Chinese efficiency, however, many argue China still has something to learn from Europe and America when it comes to consistency of quality.
“In China, the best is as good as you’ll find anywhere in the world. The next level down can be appalling,” says Michael Brown, deputy chief executive at CIOB, who has worked in China since the 1990s, when he helped develop a construction management curriculum for Chinese universities.
The problem is not so much a shortage of laws and regulations about how you can and should build, explains Brown, but a problem of implementation at local level and widespread corruption. “They have all the standards and they know what the right thing is, but implementing them in a country three times the size of the EU is an absolute nightmare.”
Lax standards
In the past, a failure to ensure the highest quality has had fatal consequences. The 2008 Sichuan earthquake killed more than 5,000 school children, many of them crushed by shoddily constructed classrooms, which collapsed even as buildings around them remained standing. The scale of the tragedy prompted accusations of corruption and lax enforcement of standards and eventually triggered protests by bereaved parents.
Some see such incidents as a warning to China to build more carefully and slowly. In the wake of the 2011 Wenzhou rail crash, when 40 people died on the high-speed line between Beijing and Shanghai, Kevin Jianjun Tu, senior associate at the Carnegie Endowment for International Peace, urged the government to slow its infrastructure construction frenzy, in particular to mute its nuclear power ambitions until it could be sure of a robust regulatory system.
The collapse of a block at the Lotus Riverside development in Shanghai in 2009 shows that standards still need addressing
“Governance failure, over-confidence in terms of localising advanced technology, poor implementation of regulations, lack of safety culture all contribute to the core problems,” says Jianjun Tu. “Generally speaking, mega-infrastructure building in China focuses too much on speed instead of quality.”
But industry insiders insist conditions are changing. Yang Shumei is director of the Chongqing branch of Xichuan West China Project Management, a firm based in China’s less developed western regions which exemplifies China’s construction boom, having grown from 12 to 500 people in eight years. “The quality of construction projects has improved and is now guaranteed,” she says. “This is thanks to government policies, for example the Construction Law, an improved supervisory system, and higher prices. These changes mean most people don’t dare mess about with quality, and have no need to.
“Combined with technological innovation and good internal management of companies and you can see that quality problems and reports about quality problems are less and less frequent.”
These improvements in standards can be seen in the prefabricated market. “We have not yet bid to work on any prefabricated buildings,” says Yang. “At the moment, this is happening more in the big cities like Beijing and Shanghai. Because in the last decade or more domestic prefabricated products weren’t up to standard – the technology had some flaws, seismic performance wasn’t good – a lot of places banned the use of prefabricated panels.
“Today’s prefabricated buildings show that the technology has improved a lot. But personally I think there are some areas that still need perfecting. Once the old technical problems have been solved, around water-proofing and earthquake performance and other such guarantees, then in the future prefabrication could really shake up the Chinese construction industry. It will speed up construction, reduce environmental pollution and cut costs. It is the future direction of construction and will benefit both investors and construction firms.”
Quality of construction and skills are also said to be spreading into China’s more remote regions in line with the reach of the major players such as state-owned China State Construction Engineering Corporation (CSCEC) – the third-largest contractor in the world – and CITIC. “Big contractors who in the past concentrated on big cities are now going to second and third tier cities, taking that skill and that knowledge,” says Arup’s Michael Kwok.
There’s a similar pattern with green buildings. While projects certified under LEED and the Chinese rating tool Three Star were traditionally confined to the major seaboard hubs, they are now proliferating in more remote regions, even Inner Mongolia. (See box, page 16). Converting will into reality is China’s challenge. At November’s Party Congress, the leadership signalled a desire for change, including a heightened emphasis on environmental protection. After a year in which the security of central government’s legitimacy has been rocked not least by the scandal surrounding the murder of a British businessman by the wife of politician Bo Xilai, it has also promised to tackle corruption head on. Delivering on those promises matters to Chinese construction — and will boost their export offering in the bargain.
Chinese construction in figures
China overtook the US as the world’s biggest construction market after spending more than $1trillion on new projects in 2010. By 2020, forecasts Global Construction Perspectives, Chinese construction output will account for a fifth of the global total, up from 14% in 2011.
High levels of government investment in infrastructure, policies to push Chinese firms abroad, a surging urban middle class with cash to flaunt in flash shopping malls and an expected migration of 350 million more people to the cities by 2030, all of whom will need somewhere to live, shop and work, are reasons to expect continued growth in China’s construction output.
The top 10 Chinese contractors by turnover 2011
1 China Railway Group (71,659)
2 China Railway Construction Corp (71,021)
3 China State Construction Engineering Corp (48,888)
4 China Communications Construction Group (39,638)
5 China Metallurgical Group Corp (29,917)
6 Shanghai Construction Group (13,011)
7 Dongfang Electric Corp (6,678)
8 Shanghai Urban Construction (Group) Corp (6,014)
9 GuangSha Construction Group Co (5,996)
10 China Petroleum Engineering & Construction Corp (4,971)
