China has one of the biggest construction markets in the world. Some past ventures of China, such as the Beijing Olympics held in 2008, the Shanghai World Expo of 2010, and many others provided enormous opportunities for foreign companies to undertake projects in China’s construction industry. However, the booming construction industry of China can be challenging for many foreign construction companies due to its complex laws and regulations.
Even though, china opened up overseas trade and investment in 1978 – the construction industry remained closed to foreign investment. However, as the need for new construction techniques arose, the government of China revised the Construction Law which allowed private companies to participate in the construction industry. The construction law which came into effect on 1st march 1998 introduced several new laws as well as regulated some of the pre-existing construction rules. The construction law not only provides a comprehensive legal system for the construction industry but set legal guidelines for many other aspects of the construction field such as building permits, contracts, tenders, project supervisions, qualifications for contractors, safety management of construction workers, legal liability, etc.
While the China Construction Law has been revised several times, foreign companies still find it difficult to access the construction market. As many as 9,000 state-owned companies are carrying out construction activities in China while only 400 private companies are participating in construction activities. The registration process for foreign construction companies in China is complex. Foreign companies wishing to perform construction activities in China are required do so by establishing a joint venture or a wholly foreign-owned enterprise.
The foreign companies are also required to obtain a construction-grade qualification which is divided into three categories:
1. General Contractor Qualification;
2. Specialty Contractor Qualification;
3. Labor Subcontractor Qualification.
The qualification determines the maximum size and scale of every project that the foreign construction company is set to undertake. They are also required to have some capital, a sufficient number of workers, relevant experience, and have good track record in the construction field.
Many Foreign construction companies, project managers, and designers have targeted China in hopes of taking part in its continuing infrastructure development. Many positive initiatives have been taken to implement better laws that make the construction industry easier for foreign companies to get started; however, these companies often find that despite the foreign reputation for quality, they are often overlooked in favor of contracting with State-Owned Construction companies, which are better placed to offer lower overall costs.