Chinese construction firms, often following the Engineering, Procurement, Construction (EPC) model, are renowned for executing significant domestic and international projects. China boasts over half of the top 10 tallest buildings globally, and Chinese firms undertake more than 60% of major contracting projects in Africa.

1. EPC Firm’s Capability for Overseas Projects

When selecting a Chinese construction partner, it is crucial to confirm that the firm is authorized to undertake overseas projects. Not all Chinese construction companies have the necessary permits to operate internationally.

Key Considerations:

• MOFCOM Authorization: The Ministry of Commerce (MOFCOM) maintains a list of firms permitted to carry out international project contracting. Checking this list can help you verify the firm’s legitimacy for overseas work.
• Domestic vs. International Focus: Some Chinese construction firms may prefer focusing on the large domestic market due to familiarity and existing relationships. Ensure the firm you choose has a proven track record of successfully managing international projects.

China’s Sumec signs solar power project EPC contract with Philippine AboitizPower

2. Source of Financing for the Project

Understanding the financing source is vital for the smooth execution of a construction project. Different financing scenarios can significantly impact the pool of potential EPC partners.

Key Considerations:

• Financed Projects: Most Chinese construction firms are equipped to execute projects that already have secured financing.
• Projects Requiring Financing: For projects needing financing, consider these questions:
  • Does the project have a sovereign guarantee?
  • Can an international financial institution guarantee the project?
  • Can a local financial institution guarantee the project?

Business Case for Non-Guaranteed Projects:

• Feasibility Study: Projects with a feasibility study from a reputable institution are more attractive to EPC firms. Determine if the EPC firm needs to carry out the study.
• Implications: Each “no” response to the above questions narrows the pool of cooperation partners. Projects with guaranteed financing attract more EPC interest, while feasibility studies can enhance the project’s appeal.

International banks and financing institutions in China

3. Structure of the EPC

The structure of the EPC firm can influence its suitability for your project. Understanding the type of company and its affiliations can guide your selection process.

Types of Projects:

• State-Owned vs. Private Companies: Certain projects may be more favorable to state-owned enterprises (SOEs) due to their resources and governmental support.
• Central Government Firms: Projects involving government-to-government agreements or requiring financing from Chinese state-owned policy banks (such as the Export-Import Bank of China or China Development Bank) often necessitate partnering with central government firms.

View of the Export-Import Bank of China

4. Technical Requirements of the Project

The technical complexity of your project dictates the type of EPC firm you need. Chinese EPC firms vary in their technical capabilities and licensing.

Key Points:

• Main Contractor vs. Subcontractor: Most Chinese EPC firms can serve as the main project contractor and subcontract specific sections of the work.
• Specialized Projects: Select firms are licensed for highly specialized projects, such as airport runways and nuclear facilities. Licensing requirements are particularly stringent for SOEs, ensuring they meet the highest standards of technical proficiency.

Beijing Daxing International Airport plan view

5. Geographic Restrictions

Geographic restrictions can limit your choice of EPC firms. Understanding these restrictions is crucial for aligning your project location with the right partner.

Considerations:

• Government Regulations: Some EPC firms are restricted from entering certain regions due to Chinese government regulations.
• Internal Policies: Large EPC companies (like China Communications Construction, Sinohydro, and China Railway Construction) have internal policies to reduce intra-group competition, which may restrict their operations in specific areas.
• Interest and Feasibility: The firm’s interest in your project’s geographic location can affect its commitment and performance. Ensure the firm is enthusiastic and capable of operating in your desired region.

A railway project of EPC firms

6. Decision to Bid

The decision to bid on a project can be influenced by various factors. Understanding these factors can help you anticipate the likelihood of securing the right EPC partner.

Factors Influencing the Decision:

• International Bidding Requirements: Some projects necessitate international bidding, which can be a lengthy and competitive process.
• Reasons for Avoiding Bids:
  • Lower Profits: Increased competition can reduce profit margins, making some projects less attractive to EPC firms.
  • Low Chances of Success: Firms may avoid bidding on projects with low chances of securing the contract.
  • Investment and Risk: Significant investment is often required to prepare a competitive bid, with no guarantee of winning the project.

Chinese firms bid on Philippines Clark International Airport development

This article originally appeared in the Chinafrica Magazine, Selecting a Chinese Construction Partner.

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