BIZCHINA / Construction
Foreign Investment
Updated: 2006-04-21 14:13
Introduction to Foreign Investment in the Construction Industry
China's first foreign-funded construction project was the water division
tunnel of the Lubuge Hydropower Station in Southwest China's Yunnan
Province, which was launched in the early 1980s with loans from the World
Bank through international open bidding. The project made the
construction sector the forerunner in China's opening up to the outside
world. Since then, foreign contractors started to enter China's
construction market.
The number of foreign contractors increased sharply in the early 1990s
and many foreign-funded prospect and design institutes and construction
enterprises emerged in China. In 1992, the Ministry of Construction and
the Ministry of Foreign Trade and Economic Cooperation jointly issued the
Administration Regulations on Examining and Approving Sino-Foreign Joint
Venture Design Institutes; in 1994, other coordinated documents were
promulgated, including the Interim Administration Rules on Foreign
Enterprises Contracting Construction Works in China and the Regulations
Concerning the Establishment of Foreign-funded Construction Enterprises
that began the work of legislative construction to serve the opening up
of the construction sector.
According to the above-mentioned documents and policy, the basic
principles of the construction sector in opening up to the outside world
are: allowing the establishment of Sino-foreign joint venture (JV) design
institutes, Sino-foreign JV construction enterprises and Sino-foreign
cooperation supervision organ in China; not allowing the establishment of
wholly foreign-owned prospect and design institutes and construction
enterprises in China, but allow foreign enterprises (including
enterprises from Hong Kong, Macao and Taiwan) to directly undertake
contract engineering work as an overseas legal person with restrictions
on the scope of the contracting construction.
China launched 256 construction projects with direct foreign investments
in 2001, accounting for 0.98 percent of the total foreign-funded projects
that year. Of the projects, 136 were civil engineering works, 48 were
railway, highway, tunnel and bridge projects, and seven were dam, power
station and harbor projects. They involved combined contractual foreign
funds of US$1.823 billion -- 2.63 percent of the total, including
US$1.034 billion for civil engineering works, US$470 million for the
construction of railways, highways, tunnels and bridges, and US$443
million for the construction of dams, power stations and harbors. The
actual amount of foreign funds used was US$807 million, 1.72 percent of
the total.
By the end of 2001, China's construction sector launched a total 9,315
projects with direct foreign investments accounting for 1.11 percent of
the total and contractual foreign funds of US$21.514 billion -- 2.89
percent of the total.
In 2001, China had 622 construction enterprises involving investments
from Hong Kong, Macao and Taiwan that employed 76,800 people. Their total
output value was 10.255 billion yuan that year; incremental value, 2.735
billion yuan; area under construction, 3,748,500 square meters; completed
area, 1,459,400 square meters; total profits, 376 million yuan and taxes,
331 million yuan.
Foreign-funded enterprises totaled 274 in 2001, employing 42,900 people.
Their total output value was 7.306 billion yuan; incremental value, 1.6
billion yuan; area under construction, 5,057,500 square meters; completed
area, 2,998,400 square meters; total profits, 234 million yuan and taxes,
180 million yuan.
The opening-up policy has helped improve the investment environment for
the construction industry and created conditions for the implementation
of construction projects with loans provided by international financial
organizations and investments from foreign countries. The inflow of
foreign enterprises has promoted the reform of Chinese enterprises and
helped establish a platform for Chinese enterprises to get a better
understanding of international practices, and compete on the world market.
(For more biz stories, please visit Industry Updates)
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