Workhouse of the Belt and Road: China Communications Construction Corporation in profile

When people think of China’s role in the world often it is focusing on its industrial prowess and mighty export machine, or perhaps its growing influence in developing nations and maybe now its new foreign policy cornerstone; the Belt and Road initiative to connect Eurasia. What has characterised China’s go global strategy has been its use of economic diplomacy such as trade and investment as political tools.

This job has been made easier thanks to the government’s control over many of the enterprises carrying out its much vaunted investment, when analysts say “China” is investing in Africa or Asia or wherever – they actually mean one of many of its usually state owned enterprises (SOEs) and for the government they are one and the same, compare this to a US firm like Apple or ExxonMobil – which might spread US values but owe it no particular favours when it comes to paying tax or pursuing foreign policy objectives.

Companies like China Communications Construction Corporation (CCCC) are the workhorses of China’s march overseas, largely anonymous but with huge revenues and a fast growing portfolio of overseas projects to balance what is a slowing Chinese market.  CCCC specialises in Marine Engineering, bridges, ports, tunnels, dredging and reclaiming land. CCCC has built container berths in Sudan, a ring road in the Surabaya-Madura Strait Bridge in Indonesia and the Nairobi-Naivasha Standard Gauge Railway  to name just a few of its projects.

For those betting that China will successfully execute its overseas expansion, investing in its shares might seem wise choice, it is now the world’s fourth largest construction contractor and has been assigned a respectable A- Stable rating by Fitch. While the state retains a 63% shareholding the remainder of the company is listed on the well regarded Hong Kong exchange which is a more reliable guide to a company’s truth worth than the casinos in Shanghai and Shenzhen. With a market capitalisation of HK$ 232 billion it ranks as one of the biggest companies in its field.

Dovetailing perfectly with the Chinese government’s new efforts to seduce Malaysia into its orbit, CCCC just signed a new deal to build a rail line along its East coast, as well as a line from Kuala Lumpur to Kelantan. Malaysian ties with the US have been unsettled by the IMDB scandal – the US justice department initiated investigations into how the IMDB (a Malaysian government investment funds) monies went missing. The Chinese government sensing an opportunity have stepped into the breach and ensured CCCC closed the rail deal on favourable terms and also sweetened the two nations closer ties with a deal for Chinese coastal naval vessels.

CCCC’s opportunity to expand will be found in overseas markets – primarily developing countries, but these also represent the greatest risk, the more the company expands abroad the more it will be exposed to the vagaries of emerging markets and the risks of projects falling to all the usual problems found in these places such as; currency risk, governments interfering or undermining in business matters, cost overruns and many other issues borne out of a tough business environment.

Thanks to the construction sector’s unglamorous image CCCC are unlikely to ever be a household name, but it is sure to be involved in numerous projects that will form the Belt and Road initiative and thus will continue to quietly become an important instrument in China’s foreign policy toolbox.

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