Page 244 - 2017 White Paper
P. 244
7 White Paper on the Business Environment in China
According to the China Daily, China produces 800 · Some contractors violate safety and quality
million tons of steel a year – four times more than any regulations.
other country has ever produced – yet the sector is
currently experiencing overcapacity of about 400 million · Some local governments requisition land
tons as construction slows. Both large and medium-sized illegally during the construction process (Jones Day
Chinese steel companies saw overall losses in the first 2009).
eight months of 2015 (Xing and Zhao 2015).
The document also reportedly stipulated that
In 2016, the gloomy outlook of China’s construction “officials at all levels of government will be ordered to
sector remained lackluster with slowing revenue growth, start inspecting all construction projects for which they
similar to its dismal 2% growth in 2015 and severely are responsible, to ensure that these problems are not
down from 8.7% in 2014; global rating agency Moody’s repeated” (Jones Day 2009).
cited construction companies’ large order backlogs and
long lead times for project completion. In August 2009 (a month after the proclamation)
it was noted that “during the last three months, there
High inventory for commercial and residential [had] been high-profile residential building collapses in
buildings has also caused property developers to slow Shanghai, Chengdu, Zhejiang, Jiangsu, and Shijiazhuang”
the pace of new projects, which means fewer contracts (Jones Day 2009).
for companies that construct these properties (Mengjie
2016). It appears that there is work yet to be done on this
issue: in November 2010, a 4-hour fire that consumed an
Notable Policy Activity apartment building in Shanghai was reportedly caused
by unlicensed welders (Master and Li 2011).
Investigation into Corruption and Illegal
Activity in the Construction Industry While the issue lingers, some sectors are at least
making efforts at compliance. The South China Morning
Jointly issued on July 9, 2009 by the general office Post last year reported that when state-run Sinopec was
of the Central Committee of the CCP and the State granted approval for a refinery expansion (a project
Council, the “‘Zhong Banfa’ Document No. 27” noted that reportedly worth US$ 900 million) in Fujian province in
there were some systemic problems in the construction March 2012, the company issued a strict warning to its
industry that had hurt the industry as a whole and project team specifically about accepting bribes, stating
betrayed the public trust. These issues were reported by that “project engineering and construction has been
law firm Jones Day as being identified as: a main area for corruption at Sinopec”. The warning
“underscores” - the SCMP reports – “what experts say is
· Money-for-power deals and commercial bribery, the greatest challenge facing President Xi Jinping and his
whereby some officials abuse their power to acquire drive to tackle corruption – rampant graft in engineering,
personal gain. procurement and construction contracts” (South China
Morning Post 2013a).
· Some local governments operate approval
and lease procedures illegally, and change the use New Regulation of“Irregular”Contracting
categorization of land and increase the utilization rate of
construction without approval. A draft regulation on the construction sector was
published on the State Council Legislative Affairs Office’s
· Some contractors illegally subcontract con- website in late November 2012 for public comment. As
struction work. originally published, the draft “bans one construction
project from having more than one general contractor”, in
· Some tendering agencies operate illegally. addition to “[stipulating] that only the general contractor
can outsource the project to subcontractors”, that
· Some local governments waste taxpayers’ “subcontractors are banned from outsourcing again” and
money by constructing lavish buildings. that “the developer is banned from interfering”, among
other stipulations (Xinhua 2012a).
244
According to the China Daily, China produces 800 · Some contractors violate safety and quality
million tons of steel a year – four times more than any regulations.
other country has ever produced – yet the sector is
currently experiencing overcapacity of about 400 million · Some local governments requisition land
tons as construction slows. Both large and medium-sized illegally during the construction process (Jones Day
Chinese steel companies saw overall losses in the first 2009).
eight months of 2015 (Xing and Zhao 2015).
The document also reportedly stipulated that
In 2016, the gloomy outlook of China’s construction “officials at all levels of government will be ordered to
sector remained lackluster with slowing revenue growth, start inspecting all construction projects for which they
similar to its dismal 2% growth in 2015 and severely are responsible, to ensure that these problems are not
down from 8.7% in 2014; global rating agency Moody’s repeated” (Jones Day 2009).
cited construction companies’ large order backlogs and
long lead times for project completion. In August 2009 (a month after the proclamation)
it was noted that “during the last three months, there
High inventory for commercial and residential [had] been high-profile residential building collapses in
buildings has also caused property developers to slow Shanghai, Chengdu, Zhejiang, Jiangsu, and Shijiazhuang”
the pace of new projects, which means fewer contracts (Jones Day 2009).
for companies that construct these properties (Mengjie
2016). It appears that there is work yet to be done on this
issue: in November 2010, a 4-hour fire that consumed an
Notable Policy Activity apartment building in Shanghai was reportedly caused
by unlicensed welders (Master and Li 2011).
Investigation into Corruption and Illegal
Activity in the Construction Industry While the issue lingers, some sectors are at least
making efforts at compliance. The South China Morning
Jointly issued on July 9, 2009 by the general office Post last year reported that when state-run Sinopec was
of the Central Committee of the CCP and the State granted approval for a refinery expansion (a project
Council, the “‘Zhong Banfa’ Document No. 27” noted that reportedly worth US$ 900 million) in Fujian province in
there were some systemic problems in the construction March 2012, the company issued a strict warning to its
industry that had hurt the industry as a whole and project team specifically about accepting bribes, stating
betrayed the public trust. These issues were reported by that “project engineering and construction has been
law firm Jones Day as being identified as: a main area for corruption at Sinopec”. The warning
“underscores” - the SCMP reports – “what experts say is
· Money-for-power deals and commercial bribery, the greatest challenge facing President Xi Jinping and his
whereby some officials abuse their power to acquire drive to tackle corruption – rampant graft in engineering,
personal gain. procurement and construction contracts” (South China
Morning Post 2013a).
· Some local governments operate approval
and lease procedures illegally, and change the use New Regulation of“Irregular”Contracting
categorization of land and increase the utilization rate of
construction without approval. A draft regulation on the construction sector was
published on the State Council Legislative Affairs Office’s
· Some contractors illegally subcontract con- website in late November 2012 for public comment. As
struction work. originally published, the draft “bans one construction
project from having more than one general contractor”, in
· Some tendering agencies operate illegally. addition to “[stipulating] that only the general contractor
can outsource the project to subcontractors”, that
· Some local governments waste taxpayers’ “subcontractors are banned from outsourcing again” and
money by constructing lavish buildings. that “the developer is banned from interfering”, among
other stipulations (Xinhua 2012a).
244
