Chinese companies active in Asian infrastructure

The One Belt, One Road (OBOR) initiative accelerated during 2016. According to China’s Ministry of Commerce (MOFCOM) statistics, from January to November Chinese companies participated in 53 OBOR direct investment projects with a cumulative investment of US$13.35 billion, primarily investing in Singapore, Indonesia, India, Thailand, Malaysia, Vietnam, Laos, Iran and Russia. In the construction and engineering industries, Chinese companies signed 7,367 construction contracts relating to countries along OBOR with a cumulative value of US$100.36 billion across many industries including roads, railways, oil pipelines, energy, ports, development zones, business logistics centres, and economic and trade co-operation zones.

One of the main restrictions on economic development in Asia is inadequate and differing infrastructure, which causes disparate market conditions. China’s OBOR initiative will greatly promote Asian infrastructure construction and energy collaboration to the mutual benefit of countries along OBOR, while at the same time promoting opportunities for Chinese companies to go abroad.

Although the OBOR initiative is an attractive opportunity, in practice Chinese companies participating in outbound infrastructure construction projects should understand the varying political, economic, local market and legal systems within Asia, as well as the target country’s own politics, economy, law, culture, environment and work culture. During this familiarization process, companies should first perform comprehensive due diligence of the economic and legal environment, and explore different methods to communicate with the related government administrations, such as during negotiations.

WANG JIHONG is a partner and LIU YING is an associate at Zhong Lun Law Firm