Industry Trend Analysis - Chinese Companies' Overseas Expansion To Slow as Projects Face Hurdles - JAN 2018
BMI View: The rapid expansion of Chinese construction and engineering companies into overseas infrastructure markets will slow in 2018 as projects inevitably run into financial, logistical and political hurdles in their implementation stages. Despite strong support from Beijing for overseas infrastructure investments as part of the Belt and Road initiative, the high-risk environments of the host countries will weigh on companies ' overseas expansion strategies.
China's state-owned and private construction and engineering companies have been rapidly scaling-up their international operations, but we believe that this growth is set to slow in 2018 as many overseas projects run into implementation difficulties related to financial, logistical or political challenges. The companies' overseas growth accelerated following Beijing's launch of the 'Belt and Road' and 'Going Global' initiatives, which have dual goals of diversifying revenues away from the slowing domestic market and increasing economic influence internationally. Between 2010 and 2016, the overseas revenue share of many Chinese construction companies grew significantly as they picked up contracts across Asia, the Middle East and Africa, often with backing from state-owned commercial banks or policy banks like the China Development Bank and the China Exim Bank ( see ' Belt & Road Further Facilitates Infrastructure Company Expansion ' , March 9). However, financial reports from major construction companies show that overseas revenue growth has slowed in 2016 and 2017, coinciding with cancellations and delays on a number of high-profile Belt-and-Road-related projects.
We believe this highlights how the high-risk environments of many Belt-and-Road markets will impeded project progression, despite strong financial and political support from both China and the host governments.
|Slowing Overseas Growth|
|China Construction Companies - % of Annual Revenues from Overseas Sources|
|Source: Companies' Financial Reports, Bloomberg, BMI|