Workshop Manchester-FGV Global MBA

1. Chinese Engineering Construction MarketAn entry assessment Team Code: W1.2A Cohort code: Brasil, July 2011 Elber Ribeiro Miguel Bichara MikkoVehanen RuyCamargo Sandra Silva 30th of July, 2011

2. Agenda China Overview Key facts Is China buying the world? Data Reliability Regulations Industry Specifics Main recommendations

4. The fastest growing economy in the world

5. Expected to be the largest economy in the world by 2016 according to IMF

6. China challenges include: Human Rights critics, bad investments and piracy (ranks the worst among the top 10 economies)http://www.nationmaster.com/graph/cri_sof_pir_rat-crime-software-piracy-rate http://news.bbc.co.uk/2/hi/africa/country_profiles/1287798.stm

8. Likely, in 2013-2015 a reduction in active workforce is expected

10. Foreign investment in China rose by 18% in the first 11 months of 2010, while China's overseas investment increased by 10%

11. Chinese firms are going global for the usual reasons: to acquire raw materials, get technical know-how and gain access to foreign markets. But they are under the guidance of a state that many countries consider a strategic competitor, not an ally.

12. China’s natural rise could be turbocharged by its vast pool of savings. Today this is largely invested in rich countries’ government bonds; tomorrow it could be used to buy companies and protect China against rich countries’ devaluations and possible defaults.The Guardian, Thursday 13 January 2011 - http://www.guardian.co.uk/world/2011/jan/13/china-not-buying-the-world Nov 11th 2010 | from the print edition - http://www.economist.com/node/17463473

13. Are Chinese Official Statistics Reliable? While data reliability has been severe questioned in China, Deeper studies have stated otherwise. Specialists suggest mistakes are found to be part of an emerging market challenges and not unique to China Specialists suggest the data is usable cesifo.oxfordjournals.org/lookup/resid/52/2/396?view=full.pdf...cgi CESifo Economic Studies, Vol. 52, 2/2006, 396–414, doi:10.1093/cesifo/ifl003 Advance Access publication 24 April 2006

14. IndustrySpecifics Construction Industry is growing 11% annually, Population is migrating from the countryside to cities (urban places), that represents an increase in the construction in general; Expected to hold the largest share of construction output by 2020, 19% of the world’s market. Only 400 foreign firms invested in construction industry in China; Government of China establish some steps for foreign companies to entry in the construction markets: Sourceshttp://www.researchandmarkets.com/research/b1c639/china_construction_industry_business_and Sources www.copper.co.za/.../The%20China%20Analyst%20-%20March%202011

16. US Green building Council has granted LEED (Leadership in Energy and Environmental Design) certificates to 656 projects in China

17. LEED certification on the rise:Shows that LEED-certified buildings in China are on the rise. There are now around 4 million m2 of LEED rated construction in China when there was virtually none 7 years ago. Source: Ken Langer, EMSI

18. Main Recommendations Use the Environmentally-Sound ‘turn key solution to get into the country, as demand is there. Special attention should be given to the Shanghai and Beijing as they boost the green construction initiative. Commercial construction segment is the recommended starting point, as projections indicate the highest growth rates (500% in 4 years). Compare and test if the current innovative ideas of the company overcome what’s in the Chinese market currently The world pressure from governments and consumers will push the Green Budget to increase. Taking advantage of this momentum is a good thing 96% of the engineering construction companies in China are state owned. A Joint Venture or a partnership highly recommended It’s recommended that a blended leadership model is adopted. A Chinese leader to deal with government, employees and customers and an European to lead the investor relationship, IP, Risk and Finance

19. References http://www.industryweek.com/articles/china_overtakes_u-s-_in_green_investment_21415.aspx http://www.whitehouse.gov/the-press-office/2011/01/19/fact-sheet-us-china-commercial-relations Sourceshttp://www.researchandmarkets.com/research/b1c639/china_construction_industry_business_and cesifo.oxfordjournals.org/lookup/resid/52/2/396?view=full.pdf...cgi CESifo Economic Studies, Vol. 52, 2/2006, 396–414, doi:10.1093/cesifo/ifl003 Advance Access publication 24 April 2006 The Guardian, Thursday 13 January 2011 - http://www.guardian.co.uk/world/2011/jan/13/china-not-buying-the-world Nov 11th 2010 | from the print edition - http://www.economist.com/node/17463473 Pikeresearch–http://www.szwgroup.com/2011/greenbuilding/newshow21.asp