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Marathon development

Cover story - China

Across China there are signs of rampant construction activity.

Andrew Mylius reports on a market where opportunities and challenges abound.

China hardly needed to win the 2008 Olympics bid to put it on the map.

Its economy is growing at a staggering 7% - GDP last year was £795bn. Two of the country's biggest contractors, Beijing Urban Construction Group and Beijing Construction Engineering Company say construction activity is expanding even faster.

To put things in perspective, Britain's Treasury is predicting 2% to 2.5% GDP growth this year and 3% next, and the construction industry is busting a gut to keep abreast of workload.

Currently the world's sixth largest economy, China is expected to overtake Germany and France within five years, going into competition for prime position with Japan and the United States. After decades of economic isolation, through the 1990s the country started stripping away trade barriers before joining the World Trade Organisation in 2001.

China's relatively low labour costs and high education standards are attracting investment in manufacturing operations for multinational companies. At the same time the People's Republic is expected to double its volume of international trade by 2007/8.

The only thing that could hold China back in its headlong rush to global primacy is inadequate power, water, road, rail and port infrastructure.

Just 20% of China's 1.4bn population lives in cities, but housing, public transport, power, water supply, sewage treatment and solid waste management are all under acute pressure.

In 2001 China's construction market was worth £225bn. Foreign firms won £34bn of that.

The numbers are only expected to grow.

With a land mass comparable to that of Western Europe, China presents a far from homogeneous picture. Arup director Grant Robertson describes Shanghai, the port city on China's south-eastern seaboard, as 'like Hong Kong was 20 years ago' - booming, optimistic, and full of opportunity. Beijing, too, is a hive of construction activity.

China's increasing prosperity is concentrated in the east of the country, which benefits from the proximity of its affluent Special Administrative Region Hong Kong and from growth in maritime trading.

Migration eastward has become a huge problem in the last few years, creating social unrest that threatens to destabilise China politically. To stem the movement of people, the government is now investing massively to boost economic activity in the west.

South-west China's fortunes are closely tied to the controversial Three Gorges Dam on the Yangtse river. This colossal hydropower project will help satisfy energy needs across Sichuan province. Car makers Ford and Fiat, and petrochemicals giant BP, have set up plants in the region, spearheading a wider drive to develop high tech manufacturing and process industries. At the same time, burgeoning principal cities Chongqing and Chengdu are rapidly reinventing themselves as power-hungry financial, IT, commercial and trading centres.

The Three Gorges dam will also open up south-western China to heavy shipping. Creation of a reservoir covering an area equivalent to that of Britain will increase water depth and slow the current enough to allow 10,000t vessels into the country's interior. The dam is expected to transform trade patterns in the region by cutting the time it takes to navigate from Chongqing's river port to Shanghai at the Yangtse's mouth, and by increasing the volume of freight that can be transported on the river.

Over the last five years £3.2bn has been invested in China's ports. In the last five years total throughput, including bulk coal, iron ore, containerised freight and ro-ro traffic, has grown at 30% a year. For the ports sector as a whole, growth is expected to be an impressive 10% per annum, reaching 3bn tonnes by 2005.

And demand is particularly strong for additional container handling capacity.

Between 1990 and 2000, throughput at China's top 10 container ports grew from 1.243M twenty foot equivalent units (TEU) to 18.675M TEU - a stunning 15-fold increase.

According to the Chinese Ministry of Communications, ports will handle in the region of 27M TEU this year.

Existing sea and river ports are under intense pressure to modernise and expand. In all, 135 new deep water berths will be built within the next five years and 45 berths will be upgraded. A new 57 berth deep water container terminal is planned close to Shanghai at Ningbo. It will eclipse the world's busiest port, Hong Kong when it is fully developed.

Meanwhile, flooding of the Yangtse valley above the Three Gorges Dam will submerge all existing port facilities on the river and its tributaries, requiring replacement from scratch.

In western China alone £57bn is earmarked for delivery of 42,000km of highways by 2012 as part of a strategy to aid movement of freight to and from ports. Across the country, between 1996 and 2000, 240,000km of highway were built and £83bn further investment in road building is planned up to 2005. Even so, the country's road network is struggling to keep pace with 22% per annum traffic growth.

The communications ministry, which oversees national roads planning, wants to realise eight major bridges in the coming decade. One, the bridge connecting Ningbo and Shanghai ports across Hangshou Bay, will be 27km long, with construction costs estimated at £585M. Total investment in new bridges, the ministry calculates, will be £2.7bn.

Over the next five years the Ministry of Railways plans to spend £8.2bn on new infrastructure, increasing the number of high speed lines and improving connections between provincial cities and regional capitals.

Airports too are under intense pressure to expand - passenger volumes grew by 11% to 133M between 1999 and 2000 and cargo by 15% to 4Mt. Since 1996, 17 new airports have been built and 33 have been upgraded. The government plans to build a series of hub airports at Beijing, Shanghai and Guangzhou, with airports at Chengdu, Xian, Wuhan and Kunming, serviced by regional jets.

The Chinese government's commitment to rapid modernisation can not be doubted: development in China is mapped out in a succession of five year plans.

But the Olympic Games have created a sense of additional urgency in China's construction sector. Completion dates in 2008 are looming for many projects only loosely connected with the 29th Olympiad. China will be putting itself on display to the world and wants to stand with the best of previous Olympic host nations.

INFOPLUS

For more information about opportunities in China visit

www. nceplus.co.uk/magazine Trade Partners UK, tel (020) 7215 4829.

www. tradepartners. gov. uk China Britain Business Council, tel ()020) 7828 5176.

www. cbbc. org British Consultants & Construction Bureau, tel (020) 7222 3651. www. bccb. org. uk

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