Internationalization of Chinese Construction Enterprises

Low Sui Pheng1 and Jiang Hongbin2

Abstract: Thirty-five international contractors from China were included by the Engineering News Record in the list of the Top 225
International Contractors in 2000. Although Chinese international contractors are increasingly playing a significant role in the global
construction market, relatively few studies have been completed on their historical background and foray into the international arena.
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Apart from seeking to fill this lacuna, this paper also provides an analysis of the these 35 Chinese international contractors to evaluate
their achievements using the following performance indicators: International Revenue/Total Revenue, International Business Distribution,
Overseas Management Structure, Involvement in Specialized Fields, and Overall Index of Internationalization. The analysis identified the
top ten Chinese international contractors who are truly global in outlook. The study also suggests that the traditional multinational
enterprise theories may not explain the development of Chinese international construction firms adequately.
DOI: 10.1061/共ASCE兲0733-9364共2003兲129:6共589兲
CE Database subject headings: China; International factors; Contractors; Construction industry; Foreign projects.

Introduction struction industry has developed rapidly as it is well recognized in

China that infrastructural and urban development formed the most
In recent years, China’s construction enterprises were increas-
essential part for economic development.
ingly involved with international engineering projects, manpower
In terms of its size, China’s construction industry is relatively
services, and other cooperative projects overseas. According to
huge. As shown in Fig. 1, the annual production from the con-
the annual survey conducted by ENR 共Engineering News
struction industry between 1980 and 1999 ranged from 4.3%
Record兲, more than 30 of China’s construction enterprises were
共1980兲 to 6.6% 共1999兲 of the Gross Domestic Product 共GDP兲 with
included within the top 225 international contractors based on
output value of up to Renminbi 共RMB兲 544.27 billion 共National
their construction revenues generated outside China in 2000. Chi-
Bureau of Statistics of China 2000兲.
na’s international construction enterprises 共CICEs兲 are emerging
While the local construction industry played one of the most
as one of the strongest contenders in the field after international
important pillars in China’s domestic economy, many Chinese
construction enterprises from the United States, UK, Japan and
enterprises have also been involved in the international construc-
several other European countries. Although CICEs are growing
tion market. At the end of 2001, the cumulative dollar amount of
recently to be more involved with global businesses, the amount
overseas contracts since 1976 was reported to be U.S.$127.867
of literature or analysis of their international performance avail-
billion, of which the 2001 figure alone was U.S.$16.45 billion
able for study in this area is very limited.
共Department of Foreign Economic Cooperation 2002兲. Most of
In order to analyze the top CICEs, the construction industry
these overseas contracts were for civil engineering works in the
and its relevant role in China’s economy will first need to be
developing countries.
reviewed. In this paper, the historical background and character-
In China, enterprises in the construction industry are organized
istics of CICEs are first introduced, followed by an analysis of the
into three categories: State Owned Enterprises 共SOEs兲; Urban and
internationalization trends of CICEs in the global market. A
Rural Collectives 共URCs兲; and Rural Construction Teams 共RCTs兲.
model for measuring the degree of internationalization of CICEs
In 1999, there were more than 84,250 construction enterprises in
is also proposed in the paper.
China employing over 23.65 million workers. These were made
up of about 9,394 SOEs with 6.9 million employees, 25,442
Construction Industry in China URCs with 9.35 million employees and 49,414 RCTs with nearly
The construction industry is one of the oldest traditional indus- 7.4 million employees 共National Bureau of Statistics of China
tries which formed the backbone in China’s economy. The con- 2000兲. The rapid growth in construction during the past 24 years
has expanded the construction labor force, which increased from
1
Associate Professor and Vice-Dean, School of Design and Environ- 9.8 million in 1980 to over 23.65 million in 1999. In recent years,
ment, National Univ. of Singapore, 4 Architecture Drive, Singapore there is an increasing trend for the emergence of private construc-
117566. E-mail: [email protected] tion companies, due to the privatization of some URCs and RCTs.
2
PhD Candidate, Dept. of Building, National Univ. of Singapore, However, the number of private construction companies is still
4 Architecture Drive, Singapore 117566. small relative to the entire construction industry.
Note. Discussion open until May 1, 2004. Separate discussions must Generally, the following characteristics of China’s construc-
be submitted for individual papers. To extend the closing date by one tion industry and enterprises may be identified:
month, a written request must be filed with the ASCE Managing Editor.
The manuscript for this paper was submitted for review and possible 1. Large Domestic Market and Huge Construction Work Forces
publication on June 4, 2002; approved on October 21, 2002. This paper is As shown in Fig. 2, the construction industry is closely re-
part of the Journal of Construction Engineering and Management, Vol. lated to the national fixed capital investment, which has been
129, No. 6, December 1, 2003. ©ASCE, ISSN 0733-9364/2003/6- increasing rapidly along with China’s economic growth. Chi-
589–598/$18.00. na’s fixed capital investment in 1985 was RMB 254.3 bil-

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J. Constr. Eng. Manage., 2003, 129(6): 589-598

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Fig. 3. Changes in China’s construction enterprises and employment

共1980 Index⫽1兲

Fig. 1. Construction industry in China

ment, as well as the possible influence of reforms on State
Owned and Urban Collective enterprises. Hence, foreign
lion, 65.1% of which were in construction and installation construction companies have limited access to the industry.
projects. In 1999, the total fixed capital investment had Consequently, it is only five years after China’s entry to the
reached RMB 2,975.46 billion, with 63.17% or RMB World Trade Organization 共WTO兲 that foreign companies
1,879.6 billion in construction and installation projects. In will be allowed to set up wholly owned enterprises in China.
the foreseeable future, this trend will continue to remain However, although the construction industry is not as open
high. On the other hand, China’s construction work force as other industry, reforms are underway in many aspects.
continues to remain as the largest labor force in the working Joint ventures and subcontracting are currently common
population. As mentioned above, almost 23.65 million within the various enterprises. There are very few private contrac-
people are working in the industry in 1999. This comprises tors in China. Although SOEs handled most of the construction in
of 6.9 million in SOEs, 9.35 million in URCs and 7.4 million the past, their relative share is now decreasing. SOEs that com-
in RCTs 共National Bureau of Statistics of China 2000兲. Al- prise both the local units authorized by municipal governments
though China’s construction industry contributes to employ- and central ministry-affiliated enterprises have undertaken most
ment opportunities to a large extent, it is still a very labor of the construction of the infrastructure projects. For some years,
intensive industry that is not likely to change drastically in notable progress has been achieved in reforming these enterprises
the near future. Fig. 3 shows that in 1999, the number of in terms of commercial behavior, operational autonomy, and com-
construction enterprises and employment increased to 1.5 petitive bidding. However, SOEs still face many unresolved prob-
and 2.5 times that of 1980, respectively. Meanwhile, the total lems, i.e., poor management, use of old technology and an exces-
production was raised almost 36 times during the same pe- sive labor force. The Urban Collectives and Rural Teams, on the
riod as shown in Fig. 4. The productivity in terms of produc- other hand, have been developing fast. The URCs and RCTs in
tion per employee increased 15 times as shown in Fig. 4. 1999 accounted for over 71% of the construction labor force and
These trends suggest that improving the labor productivity of produced about 62% of total construction output 共National Bu-
construction can remain a tough task to tackle in China. reau of Statistics of China 2000兲.
2. Labor Intensive and Less Open Industry The rapid growth of the URCs and RCTs in China’s construc-
China’s labor-intensive construction industry, to some extent, tion industry helped contributed to the country’s economic re-
does not presently rely on technological innovation. It is not forms towards a market-oriented system. While many SOEs are
as open an industry compared with other industries. This still in the process of reforms, the URCs and RCTs, who were set
situation occurs because of its potential impact on employ- up in a market environment, have readily captured some market
shares because of their low production costs, flexible labor force,
profit-driven objective, and ease of movement from one city to

Fig. 2. National fixed capital and investments in construction/ Fig. 4. Changes in total production and production per employee
installations 共1980 Index⫽1兲

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 Table 1. Chinese Government’s Economic and Technical Aid Pre-1979
Projects undertaken Projects completed
Investment Investment Investment Investment
Period Number over 10 million Renminbi over 100 million Renminbi Number over 10 million Renminbi over 100 million Renminbi
1954 –1963 234 32 1 101 6 —
1964 –1970 555 70 10 313 31 3
1970–1978 509 101 8 470 59 7
Total 1,307 202 19 884 96 10
Note: Source: EOMC 1989.

another. However, the quality of the URCs and RCTs is relatively Chinese construction enterprises usually do not have re-
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poorer because of their lower level of professional and techno- search and development 共R&D兲 departments. A few con-
logical management. In addition, the involvement of more RCTs struction R&D institutes are administrated by the line min-
in China’s construction market, especially in the larger cities, has istries, while the remaining are managed by provincial or
resulted in some social problems because of poor management municipal governments. Construction R&D works received
and the large number of workers which the RCTs brought along relatively low emphasis in China compared with those in
with them; Japan, the UK, and the United States. In 2000, R&D expen-
3. Specialized Enterprises diture in the construction industry was only RMB 530 mil-
Traditionally, the entire construction industry in China is dis- lion nation-wide, accounting for only 0.6% of the whole
persed in many economic fields, each of which is adminis- country’s R&D expenditure. Apart from construction re-
trated by relevant government sectors. Generally, the enter- search institutes, most of the design institutes have their own
prises may be categorized into construction of building and research sections providing some supporting works, which
the construction of civil engineering projects. The former construction enterprises do not have.
includes the construction of houses, office buildings, hospi-
tals, and other buildings. The latter includes the construction
of roads, highways, bridges, hydropower stations, thermo- Development of Chinese International Contractors
power stations, nuclear power stations, irrigation works, and
other infrastructures. Different types of projects are admin- China’s state owned enterprises dominate the domestic construc-
istrated by different government departments. Hence, each of tion market as well as almost all the shares of China’s enterprises
the construction enterprises traditionally possesses specialty in the international construction market. The development of Chi-
in a certain field. But along with the market-driven economy nese international construction enterprises can be traced back to
that is growing rapidly in China, construction enterprises the 1950s when the Chinese government provided economic and
have also reformed and diversified to include as many types technical aid to other developing countries. The historical pen-
of projects as possible. etration of the international construction market by Chinese en-
4. Delineation Between Design and Construction terprises can generally be divided into the following three stages:
China has a very well established system of design institutes. • Chinese Government’s Economic and Technical Aid before
In 1999, there were nearly 12,572 design institutes that em- 1979
ployed 786,370 employees, of whom 612,027 were engi- The Chinese government’s economic and technical aid pro-
neers or designers and the rest were supporting staffs 共Na- vided prior to the 1970s refers to the financial donations to
tional Bureau of Statistics of China 2000兲. About 44% of other developing countries to achieve the so-called objective
employment in this field is administered by line ministries, of ‘‘liberation and independence of brother countries in the
with the rest managed by provincial and municipal govern- third world.’’ In this stage, the international involvement of
ments. The need to develop an adequate construction super- Chinese construction firms is mainly for financial aid projects
vision capacity was felt once contracts started to be awarded in some developing countries with funds provided by the Chi-
based on competitive bidding other than on an assignment nese government 共see Table 1兲. These projects were agreed
basis as practiced earlier. Traditionally, there is no indepen- upon by the two governments and administered by the corre-
dent supervisory organization in China’s construction indus- sponding government authorities instead of independent enter-
try. From the 1990s, some supervisory-based companies prises. Essentially, these projects do not technically constitute
were set up gradually. Many of these companies were off- part of the international construction market for the following
shoots of state-owned design institutes, especially the larger reasons: 共1兲 these are not motivated by the market place or
ones. There are presently 277 A-class supervisory-based profit-driven for the firms; 共2兲 all project costs and other ex-
companies in China which were registered and approved by penditure were funded by the Chinese government; and 共3兲
the Ministry of Construction of China 共Information Center of firms participated in the projects only and are not involved in
Ministry of Construction China 2002兲. In 2001, the regis- any decision-making activities.
tered supervision engineers in the Ministry of Construction However, during this stage, the Chinese construction enter-
of China numbered 11,330 共Ministry of Construction, China prises involved gained basic information about the international
2001兲. Engineering consulting is a new but fast growing field market that helped to train many personnel when China opened
in China. While design institutes still undertake some con- her door to the world.
sulting work, they are not named as consultants in the market • Emergence of Chinese International Construction Enterprises
place as such. The Chinese construction industry started to reform in the
5. Separation of Research and Development early 1980s following China’s open-door policy. On August

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J. Constr. Eng. Manage., 2003, 129(6): 589-598

 13, 1979, China’s State Council introduced an Act which al-
lows Chinese specialized companies to invest in other coun-
tries. In the construction industry, the government started to
introduce regulations to help set the basic ground rules. At the
enterprise level, the companies were gradually given the flex-
ibility to operate as ‘‘commercial entities.’’ Subsequently, sev-
eral SOEs were separated from governmental departments, but
they continued to work primarily for overseas financial aid
projects until the mid-1980s. Soon after, SOEs at the central
government level 共under the direct administration of the cor-
responding Ministries兲 were able to obtain licenses issued by
the Ministry of Foreign Economic Relations and Trade to bid
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for projects in the international market.

The operations of these enterprises from then on were inde-
pendent of financial aid from the Chinese government. They par- Fig. 5. Chinese construction enterprises in international market
ticipated in international bidding, tendered for commercial
projects and negotiated with their foreign counterparts. Their mo-
tivation soon turned to one that is profit-driven from going • Project funded through Chinese government loans or financial
abroad. aid to developing countries,
In November 1978, China’s first international construction • Projects funded by loans from the World Bank or Asian De-
enterprise—China Construction Engineering Corporation 共for- velopment Bank,
merly the China State Construction Engineering Corporation兲 was • Projects obtained through government bilateral trade agree-
set up. Some of the largest SOEs were established soon after, such ments,
as: China Road and Bridge Corporation, China Civil Engineering • Projects won through international bidding,
Construction Corporation, China International Water and Electric • Projects obtained through local clients, and
Corporation, China National Complete Plant Import and Export • Projects obtained through local branch offices of Chinese en-
Corporation, etc. Their growth was phenomenal, and terprises.
• Development of Multinational Enterprises In 2001, Chinese construction companies had expanded their
Since the early 1990s, some of the largest state owned con- businesses in more than 190 countries with 39,400 new contracts
with a total contract value of U.S.$16.45 billion 共Department of
struction enterprises had gained experience in the international
Foreign Economic Cooperation 2002兲 共see Fig. 5兲.
market. Subsequently, provincial-level and some other re-
In 1999, the projects undertaken by Chinese international com-
gional companies were allowed to obtain licenses for contract-
panies were distributed mainly in Asia and Africa, where about
ing overseas. The price-war among Chinese companies in
73% of the total turnover value came from. 共See Table 2兲.
some traditional markets in the developing countries 共such as
Overseas design and consultancy services were first offered by
Pakistan, Iraq, and other Middle Eastern and African coun-
Chinese international construction companies in 1995. However,
tries兲 also commenced. The more experienced and larger com-
as shown in Fig. 6, the amount from design and consultancy
panies expanded their businesses to new countries rapidly. By
services contracts was small relative to the overall contract value.
1994, several of the more established Chinese international
Although Chinese international construction enterprises have
construction companies had shaped up. Thereafter, the more gained great stride in the global market, their scale of overseas
profitable enterprises were encouraged to list in the stock mar- operations is still small relative to their European, Japanese, and
ket following a strict evaluation exercise, which means they North American counterparts. According to the ranking of inter-
would no longer be protected by the government. Between national contractors by Engineering News Record 共ENR兲 in 2001,
1997–1998, many SOEs were completely separated from their 35 Chinese enterprises were listed among the top 225 interna-
respective government organizations. Large scale SOEs were tional contractors in the world 共ENR 2001兲. The total interna-
supervised by the newly established Office of Large Scale tional revenue of these 35 contractors was U.S.$5.383 billion in
State-Owned Enterprises under the State Council. 2000.
To be listed on the stock market appears to be one of the most While engaged with international contracts, equipment made
important management and financial strategies for these enter- in China was also exported in large volume. The total export
prises. Hence, most construction enterprises are very keen on the value of equipment and material that accompanied overseas con-
stock market over the past few years, while the tough process of struction projects in 2000 was U.S.$875.59 million 共Department
reforming the SOEs was still on going. As a strategy, construction of Foreign Economic Cooperation 2001兲. These construction
enterprises off-loaded their unprofitable assets in favor of more works contributed to economic development in the host countries
favorable assets to form new share-holding companies after strict through the completion of highways, dams, hydroelectric power
evaluation by the Committee of China Securities and Shares. By stations, thermo power stations, transmission lines, and buildings.
the end of 2001, however, few construction enterprises had suc- The management mechanism commonly adopted by Chinese
cessfully sold their shares through their share-holding companies. companies in overseas projects includes both the intercontracting
Many Chinese international construction enterprises are pres- and subcontracting arrangements. Intercontracting means that the
ently struggling through the process of reforms to become multi- project, upon the contract being signed between the contractor
national enterprises in the global market. and client, will be contracted to the local branch office with a
Where projects are concerned, the contracts successfully won percentage for overhead charges. The local branch office may
by Chinese international companies overseas fall into the follow- contract the project wholly or partially to a project team who is
ing categories: from the same enterprise. Alternatively, the head office may di-

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 Table 2. Annual Turnover of Chinese International Construction Companies—Local and Overseas 共in U.S. Dollars Million兲
1998 1999
Design and Design and
Contracting Labor consultancy Contracting Labor consultancy
Region Sum projects service works Sum projects service works
Asia 6,900 5,322 1,548 30.2 6,247 4,502 1,711 34.1
Africa 2,019 1,871 144 4.3 2,036 1,828 203 5.5
Europe 489 239 246 4.2 306 126 171 9.2
Latin 153 104 48 0.9 144 72 70 2.1
America
North 322 111 204 6.8 331 104 225 1.9
America
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Oceania 150 100 48 2.0 182 120 63 0.2

and
Pacific
Islands
Others 52 36 16 — 59 44 14 0.1
Inside 1,688 1,461 136 92.0 1,930 1,727 166 36.5
China
Total 11,773 9,243 2,390 140.5 11,235 8,522 2,623 89.6
Note: Source: China Statistical Yearbook 共2000兲.

rectly contract the project to a project team with a percentage for national contractors 共including those from Hong Kong兲 were
overhead charges. Subcontracting, on the other hand, is to con- ranked among the top 225 international contractors in the world.
tract the project to other companies at a percentage for overhead In terms of the number of firms from a single country, China was
charges. These companies may be Chinese, local, or from other ranked second after the U.S. 共73 firms兲. Japan was ranked third
countries. In both cases, the head office will maintain overall with 21 firms, Germany fourth with 11 firms, and Italy fifth with
control of the project performance and provide the necessary as- 10 firms. The total share of Chinese firms, at U.S.$5.383 billion,
sistance to the project team such as the working capital, major accounted for 4.6% of the total billings 共Table 3兲.
equipment allocation, etc. Although relatively more firms from China were ranked
among the top 225 international contractors, their share of the
total international billings is less than that of the other developed
Engineering News Record Top 35 Chinese countries. Nevertheless, since all the Chinese firms were involved
International Contractors in the international construction market only over the past ten
years, the necessity of analyzing the performance of these firms is
ENR has annually ranked the Top 225 International Contractors even more critical.
according to construction revenues generated outside of each
company’s home country. In the 2000 ranking, 35 Chinese inter-

Table 3. Nationalities of Top International Contractors

International billings
Number of firms
U.S. dollars
Country Rank Number Rank million %
United States 1 73 1 24,962.80 21.5
China 2 35 6 5,383.80 4.6
Japan 3 21 5 8,801.60 7.6
Germany 4 11 2 18,162.60 15.7
Italy 5 10 10 3,437.20 3.0
Spain 6 8 8 4,405.20 3.8
France 7 7 3 15,991.60 13.8
UK 8 7 4 9,182.80 7.9
Korea 9 7 9 3,611.80 3.1
Turkey 10 7 11 265.8 0.2
Canada 11 5 12 194.6 0.2
Netherlands 12 2 7 4,522.40 3.9
All other 32 16,985.30 14.7
countries
Fig. 6. Components of overseas contracts won by Chinese interna- All firms 225 115,907.50 100
tional construction companies
Note: Source: ENR 2001.

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 Literature Review

Despite intensive research on internationalization and globaliza-

tion of enterprises over the past decades, the determination of the
degree of internationalization of a firm appears to remain an
evolving one. ENR ranks international contractors according to
the absolute amount of international revenue, which is one of the
most acceptable ways to measure the degree of international per-
formance of a firm. As suggested by Buckley, Dunning, and
Pearce 共1977兲, Stopford and Dunning 共1983兲, and Daniels and
Bracker 共1989兲, a company’s foreign sales or revenues are mean-
ingful first-order indicators of its involvement in international
business 共Sullivan 1994兲. The level of international revenues
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would form the basis to estimate the degree of internationalization

of a firm. However, it could not reveal the overall degree of Fig. 7. Internationalization matrix of firm
internationalization and various other related aspects for a firm.
The traditional multinational enterprise 共MNE兲 theory, as es- fied to reveal the locational advantages of the firm. However,
tablished by Dunning 共1977, 2000兲 along with other MNE theo- Chinese firms may possess different locational advantages in
rists, suggests that the eclectic paradigm is a useful model for terms of performance and structural factors 共foreign employ-
analyzing international production. The eclectic paradigm pro- ment, overseas subsidiaries, or branches, etc.兲 in different
vides a framework to analyze the internationalization of a firm by countries. Hence, the locational advantages of a particular
taking into account its ownership 共O兲, locational 共L兲, and inter- country are adjusted by a coefficient. To reflect the different
nalization 共I兲 advantages. The transnationality index, adopted by L-advantages of Chinese firms in different countries, this co-
the United Nations to evaluate multinational corporations, takes efficient utilizes the total turnover of all Chinese international
the average of three ratios: foreign assets to total assets, foreign construction enterprises in a particular country as a percentage
sales to total sales and foreign employment to total employment of the total turnover of all these enterprises throughout the
as a measurement 共United Nations 2001兲. Other literature sug- world. Consequently, a country where Chinese enterprises op-
gests that the factors influencing the degree of internationalization erate at a lower degree will receive a lower coefficient than the
of a firm may fall into three categories: performance 共Vernon country where they are more involved in. Hence, the interna-
1971兲, structural 共Stopford and Wells 1972兲 and attitudinal 共Per- tional business distribution 共L-advantages: IBD兲 of a firm is
lmutter 1969兲. Sullivan 共1994兲 adopted five variables to measure estimated as the sum of the coefficients of those countries
the degree of internationalization of a firm: foreign sales as a where the firm is working in.
percentage of total sales, foreign assets as a percentage of total • The firm’s overseas management structure: Internalization or
assets, overseas subsidiaries as a percentage of total subsidiaries, I-advantages
psychic dispersion of international operations, and top managers’ Due to data privacy, it is difficult to measure all the internal
international experience. Another model which measures the de- factors of a firm. However, the pattern of business manage-
gree of internationalization of a firm was suggested by Tong ment and overseas management structure of a firm could dem-
共2000兲 to include six quantifiable factors: pattern of international onstrate its internalization advantages to some extent. Most of
business management, financial management, marketing, human the overseas management pattern of Chinese international con-
resource management, management structure, and the transna- struction enterprises falls into the following categories:
tionality index adopted by the United Nations 共2001兲. • Through local agent,
By considering the advantages of internationalization of a firm • Representative office or liaison office,
in one direction and the impact in international operations in an- • Subsidiaries,
other direction, and taking into account the most significant as- • Joint-venture company, and
pects affecting the internationalization of a construction firm, an • Branch company 共solely owned兲.
internationalization matrix may be constructed 共Fig. 7兲. A firm with a representative office or liaison office operating
As a rule of thumb, the analysis should be restricted to data overseas is given a one-point score, while each subsidiary or
that is achievable in general, and the measure adopted should solely owned branch company overseas receives a two-point
enable an estimate to be made objectively. Hence, based on the score. The overseas management structure 共I-advantages: OMS兲
proposed internationalization matrix, the analysis can be carried of a firm may be measured as the sum of these scores, and
out to cover the following aspects: • The firm’s market involvement among different specialized
• The firm’s international performance: Ownership or fields: Specialty-advantages
O-advantages The international involvement of a construction firm is, to a
Because most of the Chinese construction enterprises are not great extent, restricted by its technical specialty advantages.
listed publicly, information on their assets is not available. The more diversified technical specialties a firm possesses, the
However, to estimate the firm’s international performance, as a more business shares it may obtain. ENR classifies the con-
major part of its ownership advantages, its international rev- struction industry into ten specialized fields: general building,
enue as a percentage of total revenue 共O-advantage: IRTR兲 as manufacturing, power, water supply, sewerage/solid waste, in-
listed by ENR, is adopted. dustrial process, petroleum, transportation, hazardous waste,
• The firm’s international business distribution: Locational or and telecommunications. Thus, the number of such specialized
L-advantages fields that a firm is involved with out of the ten categories, can
To analyze the business distribution of a firm throughout the provide an estimate of its involvement in different specialized
world, the countries where the firm is operating in are identi- fields 共S-advantages: ISF兲.

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 Table 4. Overall Internationalization Index and International Strengths of the Top 35 Chinese International Contractors

Engineering news International Score for Overall

records revenue International Score for Score for internationalization International
ranking for 2000 to total business overseas involvement of index 共OII兲 strength of firm
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revenue distribution management specialized

Engineering news International Total 共IRTR兲 共IBD兲 structure 共OMS兲 fields 共ISF兲
Number Firm records rank revenue revenue O-IRTR L-IBD I-OMS S-ISF OII Rank Rank
1 China State Const. Engineering Corp. 19 1,278.7 4,703.8 0.27 0.72 0.82 1.00 2.81 3 3,598 1
2 China Harbour Engineering Co. Group 42 631.2 1,862.4 0.34 0.93 1.00 0.71 2.99 2 1,885 2
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3 Paul Y.—ITC Construction Holdings Ltd., HK 44 615.0 1,457.0 0.42 0.58 0.79 0.57 2.36 11 1,450 3
4 China Civil Engineering Construction Corp. 70 272.2 288.0 0.95 0.48 0.71 0.29 2.42 10 659 4
5 China National Chemical Engineering Corp. 76 212.1 600.0 0.35 0.76 0.36 1.00 2.47 8 524 5
6 China Road and Bridge Corp. 74 243.5 1,181.1 0.21 0.57 0.57 0.43 1.77 17 432 6
7 China Jiangsu Int. Econ-Tech. Coop. Corp. 94 133.3 165.9 0.80 1.00 0.64 0.29 2.73 4 364 7
8 China Int. Water and Electric Corp. 共CWE兲. 101 120.3 175.7 0.68 0.65 0.82 0.57 2.73 5 328 8
9 China Nat. Complete Plant Imp. and Exp. Corp. 87 166.2 166.2 1.00 0.17 0.46 0.29 1.92 15 319 9
10 China Metallurgical Const. 共Group兲 Corp. 103 116.1 1,550.3 0.07 0.54 0.86 1.00 2.47 9 287 10
11 China Shanghai SFECO 119 89.8 95.3 0.94 0.91 0.36 0.86 3.07 1 275 11
12 China National Overseas Engineering Corp. 115 98.1 98.1 1.00 0.34 0.57 0.43 2.34 12 230 12
13 China Wanbao Engineering Corp. 125 78.5 87.9 0.89 0.67 0.64 0.43 2.64 6 207 13
14 CMEC 110 104.0 155.7 0.67 0.24 0.39 0.57 1.87 16 194 14
15 Shanghai Construction General Co. 78 201.4 2,224.0 0.09 0.51 0.18 0.14 0.92 31 185 15
16 China Railway Engineering Corp. 88 165.9 3,715.8 0.04 0.55 0.21 0.29 1.09 28 182 16
17 Dongfang Electric Corp. 109 104.2 116.9 0.89 0.15 0.36 0.29 1.69 18 176 17
18 China Petroleum Engineering Const. Corp. 114 100.0 167.3 0.60 0.21 0.29 0.29 1.38 22 138 18
19 China Elec. Power Tech. Import and Export Corp. 146 45.3 256.1 0.18 0.61 0.50 0.86 2.14 13 97 19
20 China Zhongyuan Engineering Corp. 142 54.7 56.3 0.97 0.24 0.18 0.29 1.67 19 92 20
21 Harbin Power Engineering Co. Ltd. 123 82.1 111.3 0.74 0.09 0.11 0.14 1.07 29 88 21
22 China Wu Yi Corp. 135 63.6 101.0 0.63 0.33 0.14 0.14 1.25 25 79 22
23 China Nat. Water Res. and Hydropower Eng. 136 61.7 1,302.6 0.05 0.36 0.43 0.43 1.26 24 78 23
24 China Tianjin Int. Eco. and Tech. Coop. Corp. 161 30.1 38.7 0.78 0.25 0.36 0.57 1.95 14 59 24
25 China Shenyang Int. Eco. and Tech. Coop. Corp. 178 19.9 23.1 0.86 0.82 0.36 0.57 2.61 7 52 25
26 China Huanqiu Chemical Engineering Corp. 159 33.3 40.5 0.82 0.25 0.25 0.14 1.47 21 49 26
27 Zhejiang Construction Eng. Group 150 41.1 461.3 0.09 0.53 0.36 0.14 1.12 27 46 27
28 China Railway Construction Corp. 154 37.9 3,837.1 0.01 0.54 0.32 0.29 1.16 26 44 28
29 China Liaoning Int. Coop. Holdings Ltd. 173 24.4 31.3 0.78 0.09 0.36 0.43 1.65 20 40 29
30 China Dalian Int. Cooper’n Holdings Ltd. 158 34.2 82.7 0.41 0.03 0.11 0.43 0.98 30 33 30
31 Sinopec Engineering Inc. 132 65.2 585.2 0.11 0.18 0.07 0.14 0.50 34 33 31
32 Beijing Chang Cheng Construction Corp. 193 12.4 651.4 0.02 0.56 0.46 0.29 1.33 23 16 32
33 China Huashi Enterprises Corp. 199 9.8 523.0 0.02 0.38 0.18 0.29 0.86 32 8 33
34 TEC China 196 10.9 40.1 0.27 0.01 0.04 0.29 0.61 33 7 34
35 Beijing Urban Construction Group Co. Ltd. 169 27.0 1,474.5 0.02 0.03 0.04 0.14 0.23 35 6 35
Note: Source: ENR 2001 共the international revenue and total revenue are in U.S. dollars million兲.

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 Table 5. Comparison of Performance of Top 35 Chinese International Contractors in Domestic and International Markets
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To estimate different aspects of internationalization of a firm Table 4 shows the OII and the international strength of each
on the same scale, three indices described above, i.e., firm among ENR’s top 35 Chinese international contractors, along
L-advantages: IBD, I-advantages: OMS, and S-advantages: ISF, with their estimates of O-IRTR, L-IBD, I-OMS, and S-ISF.
should be adjusted into a ‘‘0–1’’ scale, taking the maximum of a The following analysis is drawn in two directions: horizontal
particular index of all firms as ‘‘1.’’ A firm’s overall index of analysis 共i.e., comparison between firms兲 and vertical analysis
internationalization 共OII兲 sums O-IRTR, L-IBD, I-OMS, and 共i.e., comparison of common attributes across firms兲.
S-ISF. The OII indicates the degree of internationalization of a
1. Horizontal Analysis
firm on a relative basis.
A comparison of these 35 firms suggests that their business
strategies appear to rely on different dominant markets
Analysis of Engineering News Record Top 35 Chinese 共Table 5兲.
International Contractors • The dominant business line lies in overseas markets
Following the methodology derived from the literature review Due to historical reasons, some Chinese international firms
described above, the analysis should combine the absolute perfor- developed their businesses mainly in the overseas market.
mance of the firm in terms of its international revenue and its This appears to contradict traditional MNE theories which
relative degree in terms of the four internationalization indices suggest that enterprises could expand their businesses be-
and the overall index of internationalization 共OII兲. The absolute yond the border only if they had already achieved a certain
international revenue of a firm forms the basis of an internation- capacity in their home country. A few Chinese construction
alization analysis, which reveals the firm’s international presence. firms were mainly engaged in overseas markets. These in-
However, this ignores the other major aspects of the firm, such as clude:
the distribution of such revenue, its overseas management struc- 冑 China Civil Engineering Construction Corporation,
ture, as well as other factors. Hence, the international strength of Beijing, China
a firm, which is derived from multiplying the absolute interna- 冑 China National Complete Plant Import and Export Corpo-
tional revenue of the firm by its OII, may overcome this weakness ration, Beijing, China
共Table 4兲. The international strength of a firm reflects both its 冑 China Jiangsu International Economic and Technical Co-
absolute level of international revenue and various other factors operation Corporation, Nanjing, China
influencing its internationalization. 冑 China International Water and Electric Corporation

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J. Constr. Eng. Manage., 2003, 129(6): 589-598

 Table 6. Truly Global Chinese Contractors
Rank
Overall by overall
internat- internat-
Engineering news records ionalization ionalization International
Rank Firm rank index index strength
1 China State Const. Engineering Corp. 19 2.81 3 3,598
2 China Harbour Engineering Co. Group 42 2.99 2 1,885
3 Paul Y.—ITC Construction Holdings Ltd., HK 44 2.36 11 1,450
4 China Civil Engineering Construction Corp. 70 2.42 10 659
5 China National Chemical Engineering Corp. 76 2.47 8 524
6 China Road and Bridge Corp. 74 1.77 17 432
7 China Jiangsu Int. Econ-Tech. Coop. Corp. 94 2.73 4 364
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8 China Int. Water and Electric Corp. 共CWE兲 101 2.73 5 328
9 China Nat. Complete Plant Imp. and Exp. Corp. 87 1.92 15 319
10 China Metallurgical Const. 共Group兲 Corp. 103 2.47 9 287

共CWE兲, Beijing, China countries not to pursue profit, i.e., they are not profit-
冑 Dongfang Electric Corporation, Chengdu, Sichuan Prov- driven businesses. This probably reflects the malady in
ince, China some of China’s SOEs. It would appear that this situation
冑 China National Overseas Engineering Corporation, will improve as economic reforms in China take effect
Beijing, China further.
冑 China Shanghai SFECO, Shanghai, China 2. Vertical Analysis
These firms only have a small portion or even no rev- • International business distribution
enue from their domestic home markets in China. While From an overview of the international business distribu-
this situation may change after China’s entry into the tion of these 35 firms, it can be observed that some of
WTO recently, it may remain the same for yet some them have concentrated their businesses in a few key
time to come. countries, while others have developed their scope of
• The business mainly relies on the domestic market business in many countries. This may be related to the
A majority of these firms mainly rely on the home market firm’s business strategy to either maintain a few important
for businesses. They may be engaged in a small way in the overseas markets, where they may have operated for a
international market as a strategy to diversify some risks or few years, or to expand their businesses in many countries
to seek other long term developments. These firms include: to capture more potential opportunities. Examples of
冑 Shanghai Construction General Corporation, Shanghai, these two groups of companies are shown below.
China Businesses developed in a few key countries:
冑 China Railway Engineering Corporation, Beijing, China 冑 Harbin Power Engineering Co. Ltd., Harbin, China
冑 China Metallurgical Construction 共Group兲 Corporation, 冑 China Wu Yi Corporation, Fuzhou City, China
Beijing, China 冑 China Zhongyuan Engineering Corporation, Beijing,
冑 China National Water Resources and Hydropower Engi- China
neering Corporation, Beijing, China 冑 China Dalian International Cooperation Holdings Ltd.,
冑 China Railway Construction Corporation, Beijing, China Dalian, China
冑 Beijing Urban Construction Group Co. Ltd., Beijing, 冑 Beijing Urban Construction Group Co. Ltd., Beijing,
China
China
• The business developed and is balanced in both markets
Businesses developed in many countries:
Some firms have developed their businesses which are bal-
冑 China State Construction Engineering Corporation,
anced in both the international and domestic market. These
Beijing, China
are also some of the most prominent companies in China.
冑 China Harbour Engineering Co. Group, Beijing, China
These firms include:
冑 China National Chemical Engineering Corporation,
冑 China State Construction Engineering Corporation,
Beijing, China
Beijing, China
冑 China Jiangsu International Economic and Technical
冑 China Harbour Engineering Co. Group, Beijing, China
Cooperation Corporation, Nanjing, China
冑 Paul Y.—ITC Construction Holdings Ltd., Kowloon, Hong
冑 China Shanghai SFECO, Shanghai, China
Kong
冑 China Road and Bridge Corporation, Beijing, China • Overseas management structure
冑 China National Chemical Engineering Corporation, Due to the nature of construction works, most of the Chi-
Beijing, China nese construction firms operate their overseas businesses
• Firms with high internationalization index but relatively through representative offices on a project basis. Some of
lower foreign revenues OII is a relative index which re- these firms may set up a local branch office or joint ven-
flects the various aspects of a firm related to international ture company to pursue interests in countries where re-
business development. Hence, the index may not be con- strictions are imposed. For example, in some countries,
sistent with the absolute level of a firm’s performance in the local or joint venture companies may enjoy a 7% dis-
the international market. One reason is that some firms, count off the bidding price. Hence, this may force the
with the backing of the government, ventured into other foreign firm to set up a joint venture with a local firm. In

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J. Constr. Eng. Manage., 2003, 129(6): 589-598

 addition, the foreign direct investments 共FD兲 to other aspects of a firm’s internationalization exercise, instead of all as-
countries by Chinese international construction firms are pects. Hence, the study is limited in its scope as defined in the
not very significant. It is only in a few countries where paper. Second, the data used in this study was developed based on
they have operated for many years with an intent for a a few major professional/governmental publications, whose reli-
longer stay, may they then establish a subsidiary or solely ability needs to be verified through other sources. Finally, because
owned company. For example, as one of its overseas busi- of some special characteristics of China’s international construc-
ness strategies, China State Construction Engineering tion enterprises, especially those of the reformed SOEs in China,
Corporation usually develops and operates its overseas the traditional MNE’s theories may not be able to explain the
businesses on a project basis through its 19 representative Chinese situation adequately. Although more factors may need to
offices throughout the world. For example, because of be incorporated in the study, further theoretical study and more
existing business opportunities in Singapore and the comprehensive research effort are recommended. Following Chi-
Southeast Asian market, the Singapore branch company is na’s open door policy, further study is also recommended to ex-
an active subsidiary of China State Construction Engi- amine the international marketing strategies adopted by Chinese
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neering Corporation. construction enterprises in the global market when they gradually
• Involvement of specialized fields in the construction in- compete against their more established North American, Japa-
dustry nese, and European counterparts.
Most Chinese international construction firms have fo-
cused on general building projects overseas. A few firms,
with their specialized background in China, have ex- References
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Combining both the absolute measure of international business international economic cooperation, Editorial Office of ‘‘Modern
performance and the relative OII of a firm, the truly global Chi- China,’’ Zhongguo Shehui Kexue Chubanshe, Beijing.
nese contractors may be identified. As shown in Table 6, the truly Engineering News Records 共ENR兲. 共2001兲. ‘‘The top 225 international
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具http://www.cein.gov.cn典 共May, 2002兲.
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1. China State Construction Engineering Corporation; yearbook—2000, China Statistics Press, Beijing.
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