Entering the dragon

Right now, China accounts for almost one-third of the world’s economic growth and has a construction market worth £300bn a year; in 20 years, it is expected that it will account for more than half of the global market for construction services. No surprise, then, that Lord Foster and the bosses of four leading engineering consultancies were among the business people accompanying the prime minister on his trip to Beijing.

The Chinese are ravenous for the UK’s know-how. They’re in awe of what we’ve done in regeneration and urban planning. And then there’s sustainability and low-energy building technology – contrary to received opinion, China is deeply concerned about climate change. As we reported last week, Arup has been commissioned to draw up a masterplan for a city near Shanghai that is powered entirely by renewable energy, and that could be rolled out across the country. Even PPPs are on their horizon.

UK construction firms say that if they are to feed this demand, it is vital that senior politicians pay court to the Chinese authorities – a point that ministers seem finally to have grasped. However, those who’ve already approached the dragon can attest that China is no Dubai. It is no goldmine. Despite its belated accession into the World Trade Organisation, state agencies don’t always observe Queensbury rules, and the trade wall of China can only be penetrated by setting up local offices, forging personal relationships and forming joint ventures. The Chinese have armies of highly skilled architects and engineers; what they want to do is reverse-engineer the West’s techniques.

The implications of China’s economic miracle are not restricted to its domestic market. We’ve already experienced the effect that China’s voracious appetite for steel has had on global prices. How long before product manufacturers switch their factories there? British firms such as George & Harding and Buro Happold have teamed up to make prefabricated pods in China, so it may be the Chinese who make the push towards off-site manufacture possible – or London’s Olympics for that matter. Anyone visiting the recent off-site manufacturing show at BRE would have seen a Chinese delegation soaking up British expertise. And what about core construction itself? On the global stage, the Chinese are expected to compete for big civil engineering projects, an area where British firms have traditionally done well; China’s biggest construction firm, the Chinese State Engineering Corporation, has won contracts in the Middle East, is extending Hyderabad airport in India and building offices in Manhattan. Now it’s eyeing up the European market with a view to acquisitions …

Nobody can clearly map out how the Chinese dragon will affect UK Construction plc. But as Lord Powell, Margaret Thatcher’s old foreign affairs adviser and joint leader of the business delegation to China, said this week: “Three years ago what went on in the Chinese economy didn’t really affect the world economy.” Now it does. The government, he said, had now woken up to this. The construction industry ignores it at its peril.