Projects & Construction - China

2022 sees a number of highlights in the construction sector in mainland China, below are a few worth mentioning:

 

1. Reform of the Public Tender/Procurement Procedure. In September 2022, the Opinions of the General Office of the State Council on Further Optimizing the Business Environment and Reducing the Institutional Transaction Costs of Market Participants (the “Opinion”) was issued. One of the core purpose of the Opinion is to effectively regulate the tender and public procurement procedure, an area local protection and corruption may arise. The Opinion calls for digital measures to be deployed throughout the whole process of public tender/procurement and the cancellation of those illegally set up supplier pre-selection database, qualification database, directories etc.
    
2. Improving Construction Progress Payment. In June 2022, the Ministry of Finance and the Ministry of Housing and Urban-Rural Development jointed issued the Notice on Further Improving Relevant Measures on Settlement of Construction Payment (the “Notice”) requiring the sponsor/employer to make progress payment which shall not be less than 80% of the cost of the completed works. The Notice also eliminate the pre-set 3% quality assurance deposit and allow the parties to agree as they wish (although some cities just changed the percentage from 3% to 1.5%).
    
3. Smart Construction. In November 2022, the Ministry of Housing and Urban-Rural Development designated 24 cities in mainland China as pilot cities to explore the new way of transition of the construction sector from the traditional model. There are three main purposes of such pilot programme. The first is to improve the quality and efficiency of the construction sector as the pilot programme will focus on digital design, smart production, construction internet, and construction robots. The second purpose is to explore the new business model which is low carbon and low emission. The third purpose is to train experienced staffs and to create more competitive companies with the capability of providing systematic solutions and core technologies, and are capable of competing internationally.
    
4. New Infrastructure. The idea of new infrastructure was first brought up in 2018 and has since been a key driver for the construction sector. It urges the construction and upgrade of a new generation information infrastructure. Key areas include 5G base station, UHV power transmission, high speed rail and inter-cities transportation, e-vehicle charging facilities, big data centres, industrial internet.
    
5. BIM Technology. There are increasing use of BIM technology in the construction sector to improve efficiency and reduce costs. Landmark projects like Beijing Daxing Airport, CITIC Tower all adopted BIM technology, which effectively manage the construction period and costs.
    
6. Prefabricated Building. With the goal of carbon peaking and carbon neutrality, prefabricated buildings are widely used in China. For example, the Xiong An city currently under construction have 80% - 90% percent of its building being prefabricated. Up to now, 20 provinces in mainland China have issued relevant support policies and subsidies programme.
    
7. Increasing familiarities of DAB. The mainland China market is not very familiar to the DAB regime with only two major hydro projects adopted such dispute resolution mechanism. More arbitral tribunal issued its own DAB rules and we finally saw the first DAB case closed after the promulgation of its DAB rules by CIETAC.

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