Full steam ahead: China Railway Construction Corporation on the global stage

The China Railway Construction Corporation (CRCC) deserves a place in the China go global hall of fame purely because of its history in building the iconic Tam-Zam railway in East Africa which was the first major overseas Chinese project in the continent, its purpose to connect the Tanzanian coast with the copper mines of Zambia.

The firm remains highly active in Africa and is currently engaged in the continent’s biggest rail project, namely attempting to modernise the Nigerian rail system. This project will build a railway line 1,400 km long through 10 states along the southern Nigerian coast eventually reaching the oil rich (but extremely poor) Niger Delta region.

The company hit the headlines for the wrong reasons recently as three of its staff were sadly killed in the recent terrorists attacks in Mali.

CRCC has become the world’s largest railway construction company thanks to a recent 2015 merger with CSR Corporation, which should leave it well placed to use economies of scale and take on international competitors, but also of the danger of becoming unwieldy and hard to manage due to its huge size.

CRCC should be distinguished from China Railway which operates the rail system within the country.

Already a behemoth in China thanks to its role in developing new high speed rail lines in the country, it is now fulfilling an ambition to become a global construction firm and has a presence in every continent. The firm is involved in many high profile projects including the Dhaka expressway, a new metro in the holy city of Mecca, the Algeria east to west line as well as the Ankara to Istanbul high speed track. CRCC’s reputation for getting complex projects done quickly on a cost effective basis has made it the rail builder of choice for developing markets.

SWOT Analysis

Strengths

CRCC has sales of US$98 billion and nearly 250 thousand employees, so it is safe to say the firm has already “made it”. Sitting comfortably in the “Forbes 2000” at number 169 with a market cap of US$33.7 billion and profits of US$1.84 billion the company is comfortably in the premier league of construction firms. It looks set to cash on the boom for high speed rail across the globe and the demand for infrastructure in the developing countries which will dovetail nicely with Chinese bank’s lending strategy.

Weaknesses

The company remains under the control of the state via the Ministry of Transport, this means it cannot act like a private company and might find it difficult to lay off staff or pull out of sensitive projects due to political pressures.

Opportunities

The One Belt, One Road Initiative aka the New Silk Road should provide a wealth of new rail construction projects, as should the huge infrastructure needs of the developing world, the estimates of which run into the trillions. Naturally the fact that Beijing is backing and funding much of this new infrastructure will help them win contracts. The company is also starting to branch out into other fields such as real estate and logistics.

Threats

Other construction firms are not going to take CRCC’s competition lying down and will attempt to grab as much new business as they can. CRCC may find they have taken all the low hanging fruit and further expansion very difficult, particularly in developed markets. Also becoming the number one in any field brings more scrutiny and attention from the media and other governments which the company may not find altogether welcome.