Wen Jiabao

CRCC charges ahead in foreign lands

PUBLISHED : Friday, 03 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 10:54pm

China Railway Construction, one of the world's top 500 companies, will be hoping not to kick an own goal following its involvement in Italian soccer club Inter Milan.

State-owned giant CRCC has expanded its presence overseas in recent years and now operates in 48 countries and regions worldwide, according to the company's annual report last year.

Building a stadium for the top Italian football club is the latest step in its 'go global' efforts, which despite the big budget has suffered from a lack of experienced talent and a managerial style that often does not fit into the local culture.

CRCC, listed in both Shanghai and Hong Kong, said last year that it expected to lose about 4.15 billion yuan (HK$5.09 billion) on the construction of a light railway line between Mecca and other cities in Saudi Arabia, the first Middle Eastern project for a Chinese railway company. CRCC had been hoping to use the project as part of its portfolio to win other contracts in the region.

The Saudi line, with a total investment of US$1.77 billion, was to have been put into service in November 2010. But construction costs seriously overran the budget because of unexpected adjustments and changing requirements from the Riyadh government.

Undaunted by the setback, the company has persisted in looking for contracts in the region.

CRCC president Meng Fengchao said earlier this year that China should not reduce its investments in Saudi Arabia, and should continue to accumulate experience in overseas markets.

The company announced in February that it had signed two contracts worth a total of US$1.4 billion in Africa. It will build a 14.8 kilometre expressway in Nigeria for US$941 million and a railway in Djibouti, East Africa, for US$505 million.

On March 5, CRCC and the Tongling Nonferrous Metals Group signed a contract to develop a copper mine in Ecuador. The two Chinese firms have a 50-50 share in the mine, which will need a total investment of 15.67 billion yuan.

Last month, CRCC signed a 'strategic co-operation agreement' with ZTE, China's second-biggest maker of telecommunications equipment, to work together overseas.

In the first half of the year, the total value of CRCC's new contracts rose 30.4 per cent to 104.8 billion yuan, of which 87.4 billion yuan came from domestic contracts and 17.4 billion yuan from overseas deals.

'The domestic market is huge for CRCC as the country is upgrading its railway and highway network,' Professor Ji Jialun, of the Traffic and Transportation School at Beijing Jiaotong University, said.

'However, competition in the domestic market is bitterly intense and CRCC is not the only big player.'

In March, Premier Wen Jiabao said in his annual government work report to the National People's Congress, the country's cabinet, that China would boost outbound direct investment. He identified several industries that would be targets for the spending.

'China will guide all sorts of companies to invest in the energy, raw materials, infrastructure, agriculture and service industries through mergers and acquisitions,' Wen said.