Thursday, November 8, 2012

China - The construction contractor to the world?

Nothing exemplifies the spectacular rise of China better than its mega construction projects - roads and bridges, high speed railways, irrigation projects, and massive townships. In addition to being the factory of the world, China is rapidly emerging as the construction contractor to the world. Chinese firms have become extremely proficient in taking up large scale construction projects in infrastructure sectors like transport, electricity, and telecommunications at cheaper prices and completing them well within time.

It should therefore come as no surprise, as The Economist points out, that all the top three construction companies in the world are Chinese, a radical shift from 2003 when there was no Chinese firm in the top ten.

Predictably, Chinese firms are now aggressively bidding for construction contracts across the world. An important factor in the the success of China's strategic diplomacy in Africa, Latin America and the Caribbean, through offering them financial assistance to establish infrastructure facilities, has been the effectiveness of these large contractors. Once the agreement is signed, these contractors arrive with labour, materials and equipments, and execute the work in extremely challenging conditions in record time and at very low cost.

Evidently these Chinese firms have over a very short time managed to overcome the steep learning curve generally associated with managing the execution of large construction contracts in difficult conditions. In many respects, these large contractors have perfected a construction contractor model, which has striking similarities with its manufacturing sector. In both cases, Chinese firms have developed the capacity to mobilize large quantities of inputs and labour and manage them in the most cost-effective manner to meet highly ambitious targets and deadlines. It is something Indian firms would do well to learn and emulate.

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