Charts of the Day: China’s Shrinking Overseas Construction Business

The value of Chinese companies’ new overseas construction deals fell in the first half of this year, as the continued impact of the Covid pandemic and rising geopolitical risks weighed on the global construction industry.

New contracts inked by Chinese firms fell 6.2% year-on-year to $103.6 billion, according to data released by the Ministry of Commerce (MOFCOM) on Aug. 1, marking the largest first-half drop since 2018.

The weak performance is especially prominent in countries involved in China’s Belt and Road Initiative (BRI), which are key clients for Chinese construction firms. New contracts signed in these countries during the period were worth $52.2 billion, down 11.9% year-on-year, according to MOFCOM.

The economic impact of the pandemic and rising spillover risks stemming from the war in Ukraine have significantly disturbed the global construction market and could weigh on China’s overseas contracting industry this year, according to Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation.

In particular, Russia, Ukraine and Belarus have increasingly become main destinations of Chinese firms’ contracting work. In 2020, these three BRI countries accounted for more than 40% of Chinese companies’ revenue from contracted construction projects in Europe, wrote Zhou in industry magazine China Engineering Consulting in April.

“If projects in these countries cannot carry on due to reasons such as war or sanctions, not only would it cause a rapid decline in relevant revenue, but earlier investments could also go down the drain,” Zhou said.

In the first half of this year, Chinese companies’ revenue from overseas contracted construction business increased 4% year-on-year to $70.6 billion, well below the 12.2% recorded in the first half of last year.

Kelsey Cheng contributed to this story.

Contact editor Joshua Dummer (joshuadummer@caixin.com)

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