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THE CONSTRUCTION INDUSTRY IN CHINA: ITS IMAGE, EMPLOYMENT

PROSPECTS AND SKILL REQUIREMENTS

Working Paper · January 2001

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 WP. 180

SECTORAL ACTIVITIES PROGRAMME

Working Paper

THE CONSTRUCTION INDUSTRY IN CHINA:

ITS IMAGE, EMPLOYMENT PROSPECTS AND SKILL REQUIREMENTS

1 2
Lu You-Jie and Paul W. Fox

Working papers are preliminary documents circulated

to stimulate discussion and obtain comments

International Labour Office

Geneva
October 2001

1
Department of Civil Engineering, Tsinghua University, Beijing, China
2
Department of Building and Real Estate, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China
FOREWORD

In December 2001 the ‘Sectoral Activities Programme’ of the International Labour Organisation
held a ‘tripartite’ meeting with representatives of Employers, Workers and Governments in the
construction industry. The title of the meeting was “The construction industry in the 21st. Century: Its
image, employment prospects and skill requirements”. China was one of the 23 countries whose
government was invited to participate in the meeting. This paper was prepared as a case study
contribution from China to provide input into the report for the meeting. In view of the paucity of
information available to an international audience on recent developments in the construction industry in
China, it was decided to publish the paper as a Working Paper of the Sectoral Activities Programme.

It is now widely recognized that construction activity plays a vital role in the process of economic
growth. With many barriers to trade in construction goods and services, the development of an efficient
and effective local construction industry is an objective of policy in most countries. However, attention to
date has largely focused on the development of the companies or enterprises that comprise the sector – the
consultants, contractors and subcontractors. Less attention has been paid to the development of the labour
force. This is a serious omission. Construction is a labour intensive activity and it is the skills of the
workforce that largely determine the effectiveness of the construction process and the quality of the
products.

This paper makes a start in redressing this imbalance. It documents recent changes in the
organization and regulation of the construction sector in one rapidly developing country, China. And it
analyses the impact of these changes upon the construction labour force - the terms and conditions of
employment, health and safety, training and the acquisition of skills. The authors conclude that in China
(as elsewhere in the world today) construction employment is going through a period of transition, from
the ‘Iron Rice Bowl’ and ‘Fixed Workers’ towards flexible, short term contracts and labour-only
contracting. One result is that work in the industry is not attractive to young people, especially those with
urban resident status. Much needs to be done to raise the image of the industry and the skills of the
workforce.

The ILO hopes that this study will be the precursor to similar work in other countries, so that
construction workers begin to take their rightful place at the center of the stage in studies of the
construction industry and of the requirements for its development.

Oscar de Vries Reilingh

Director
Sectoral Activities Department

ii
CONTENTS
Page
1. INTRODUCTION 1

2. BACKGROUND TO THE CURRENT INDUSTRY FRAMEWORK 3

2.1 History 3
2.2 Reform programmes for the construction industry in China 3
2.3 Environment for the construction industry in China 4
2.4 Legal Frameworks 5

3. THE VOLUME AND COMPOSITION OF CONSTRUCTION OUTPUT IN CHINA 8

3.1 Fixed capital investment in China 8
3.2 Contribution of construction to GDP 10

4. CONSTRUCTION PROJECT IMPLEMENTATION 13

4.1 Historical perspective 13
4.2 New procurement methods 14
4.3 Construction contracts 15
4.4 Selection of designer 16
4.5 Selection of construction companies 16
4.6 Calling for bids 17
4.7 Construction marketplaces or ‘Construction Project Transaction Centres’ 18

5. STRUCTURE AND OWNERSHIP OF CONSTRUCTION ENTERPRISES 19

5.1 Overview 19
5.2 Structure of construction industry enterprises in China 19
5.2.1 Types of construction company by ownership 20
5.2.2 Types of construction company by size 26
5.2.3 Types of construction company by trade 26
5.2.4 Types of construction company by qualification 26
5.2.5 Types of construction company by sector 27
5.2.6 Types of construction companies by contractual relationship 28
5.3 Industrial associations 28

6. EMPLOYMENT IN THE CONSTRUCTION INDUSTRY IN CHINA 29

6.1 Numbers employed and distribution 29
6.2 Permanent versus temporary workers 31
6.3 "Cradles of building craftsmen" and "Construction Labour Bases" 32
6.4 Incoming construction force administration offices 34
6.5 Resident offices of construction workforce supplying governments 35
6.6 Trade unions 35
6.7 Terms and conditions of work in the construction sector 36

7. TRAINING AND SKILL REQUIREMENTS FOR CONSTRUCTION 39

7.1 Overview 39
7.2 Informal skill acquisition 40
7.3 Role of various organizations in the provision of training 41
7.4 Views of employers on the 'quality' of the labour force and skill requirements 42

iii
8. HEALTH AND SAFETY IN CONSTRUCTION 43
8.1 Legislation on safety and health in construction 43
8.2 Safety administration in construction 43
8.3 Safety performance in construction 44
8.4 Injuries and deaths caused by accidents in construction in 1997 45
8.5 Other safety activities 45

9. DISCUSSION, SUMMARY AND CONCLUSIONS 47

FIGURES
1. Administrative hierarchy of the construction industry in China 4

TABLES
1. China’s fixed capital investment in current prices, 1981-1999 8
2. Financial resources for capital projects 9
3. The composition of construction investment by SOEs 9
4. Fixed capital investment of state owned entities by cost items 10
5. GDP and its construction component, 1978-1999 11
6. Percentage contribution of major sectors to GDP, 1978-1999 12
7. Number of SOE construction contracts obtained through bidding 14
8. Number of construction companies by type of ownership 20
9. Breakdown of public construction enterprises by type of ownership 20
10. Profitability of state owned construction companies 22
11. Profitability of urban collective construction companies 23
12. Number and origin of overseas contractors with active projects in China 25
13. Performance of foreign contractors in China 25
14. Performance of Hong Kong contractors in mainland China 26
15. Construction enterprises by class 27
16. Total workforce and construction workforce 29
17. Distribution of public sector construction employees 30
18. Employment in privately owned urban enterprises 30
19. Total permanent workforce and permanent construction workforce 31
20. Breakdown of the incoming construction labour force employed in Beijing 33
21. Number of bases supplying construction labour to Beijing in 1996 34
22. Average annual payments to construction personnel at end of year (yuan) 37
23. Schedule of standard pay rates valid for November 1998 in Shanghai 38
24. Safety problems revealed in 1997 and 1999 44

iv
1. INTRODUCTION

The Chinese economy, and in particular its construction sector, have seen some very
dramatic changes in recent years. Since China is a vast country, with many autonomous and
distinct parts, there are major differences between regions. The paper focuses on mainland
China. However, in the final section, The Special Administrative Region of Hong Kong is
also mentioned by way of comparison. This is significant, since some political commentators
within the Beijing administration believe that Hong Kong is a role model for the mainland for
some aspects of regulation.1 In terms of the governance of the construction industry, there
are likely to be more similarities as the respective construction industries develop and learn
from each other.

This study begins in section 2 and 3 with a brief historical background to the
construction industry of mainland China, together with a statement of its current economic
performance. It is shown that there has been an immense shift in the way the industry is
perceived by government officials as well as the society it serves. Given the steady yet
unstoppable change from a centrally-planned economy towards a market-driven one, the
construction industry has massively changed its basic characteristics in terms of its structure
and processes.

Since the construction industry is a project-based industry, section 4 deals with the
main procurement methods, the usual forms and conditions of contract, and bidding
procedures used. In the last five years there have been several major laws enacted specifically
for the construction industry, together with associated regulations, codes of practice and
procedures. There is little published as yet in the English language about these new pillars of
construction legislation, so the authors could not refer to other authoritative works. Hence the
need for a rather fuller background to aid the readers understanding of this essential
framework.

Section 5 deals with the current structure and ownership of construction enterprises in
China mainland. This covers both the State-Owned Enterprises (SOEs) as well as the urban
and rural collectives. It also includes the current status, classification and arrangements for
foreign construction firms. The section ends with a brief summary of the newly emerging
federations and associations of various stakeholder interests in the industry.

Section 6 focuses on the employment of labour in the construction industry. Over the
past 15 years there has been a move away from “fixed workers” towards “contract workers”.
These terms are explained more fully together with their associated concepts of field
workforce and labour-only subcontracting in the transition to a market-led framework of
employment. Recognition is given to the “cradles of building craftsmen”, geographical areas
which are renowned for producing high quality craftsmen. These locations have become
“Construction Labour Bases”, essential in the market-driven process of providing a conduit
for rural labour to migrate to the urban areas where construction skills are much in demand.
There is a remarkable co-operation between rural and urban local governments in facilitating
the flow of workers in an orderly way. The role of trades unions and the normal terms of
employment are also described.

1
See for example, Lai Nai-Keung “SAR should lead by example with rule-based society”, South China
Morning Post, 26 January 2001

1
 Education and training of the workforce follows on naturally after dealing with
employment. This is dealt with comprehensively in section 7 by explaining the patterns of
general education and the various links into more specialised or vocational education &
training for construction. As in other areas of governance, there are new laws having a
significant impact on vocational education. The full implications of these are only starting to
be realised. This section finishes with a view of the various roles played in the provision of
training, past & present.

As in most other countries, the construction industry in China has a great need to
improve its performance in health & safety. Section 8 begins with an outline of the 12 major
items of legislation dealing with these matters, many of which have been enacted in the last
six years. The Ministry of Construction (MOC) has taken a major role in pushing for safer
working conditions, and its second campaign for this was launched in 1995. The principal
roles and responsibilities in safety management are explained.

Section 9 brings the report to a conclusion. It summarises the main trends, introducing
the relevant Hong Kong developments by way of comparison.

2
2. BACKGROUND TO THE CURRENT INDUSTRY FRAMEWORK 2

2.1 History

The construction industry was not recognized officially as a separate economic sector
contributing to Gross Domestic Product (GDP) until in 1983. Before 1980 the construction
industry was viewed as just a subordinate work force giving effect to the state’s fixed capital
investment programme. Many people, including certain top government officials, believed
that construction activities involved simply assembling the materials, plant and other items
made by the other economic sectors to form building and civil engineering works, adding no
value to the total social product.

The construction enterprises were under the direct supervision of the central
ministries or local governments. Their operations were restricted by the supervisory
government agencies to certain sectors and/or geographical areas. As a result, most of them
lacked horizontal mobility and experience in other sectors. The enterprises had little
autonomy with regard to obtaining workload. They had to wait for the government agencies
to assign construction works to them. The technical and managerial personnel and the skilled
field workers and labourers were allocated by the supervisory government agencies. Building
materials, construction equipment, working capital and other inputs were also allocated by
the government as part of the central planning process. The entire industry could thus be
viewed as a single large enterprise with a centralized hierarchical organization where factors
of production and other resources were allocated almost exclusively through administrative
channels.

The obvious weaknesses of the system hindered the healthy development of the
construction industry and the problem became more serious as time went on. The central
government realized this when Mr. Deng Xiaoping pointed out in 1980 that the construction
industry could be a profit-making industry as an important productive sector and should be
treated accordingly. Subsequently the situation started to change in the early 1980s and a
series of reform programmes have been introduced into the construction industry.

2.2 Reform programmes for the construction industry in China

The reform programmes are intended to:

(1) Introduce a market mechanism into the construction market;
(2) Diversify ownership of construction enterprises;
(3) Deregulate employment in the construction industry;
(4) Deregulate building materials supply;
(5) Diversify the business scope of construction enterprises;
(6) Use bidding procedures to allocate construction works;
(7) Bring the construction industry under a unified administration of the Ministry of
Construction and its local agencies;

2
This section and parts of section 4 and 5 are from Lu You-Jie Construction Practice in China, Part I and II,
unpublished monograph for civil engineering students at the Hong Kong Polytechnic University, July 2000

3
 (8) Further privatise the state-owned construction enterprises;
(9) Separate field operation from management.

2.3 Environment for the construction industry in China

The environment in which the construction industry in China operates refers

hereinafter to the system that regulates the relations, actions and interactions of all the
participants in the industry. The regulatory framework involves government agencies and
industrial associations and covers procurement policies and procedures, licensing
requirements, codes and standards, taxation, credit systems, import and export policies and
rules and legislation such as construction law, contract law, tendering law and so on.

The administrative framework regulating the construction industry in China is shown

in Figure 1. It is a hierarchical system with roughly four levels: central, provincial, municipal
and county.

Figure 1. Administrative Hierarchy of the Construction Industry in China

Central Government Provincial and local governments

State Council

Provincial, Autonomous Regions, &

Ministry of Municipalities immediately under the
Construction Central Government

Construction Commissions Cities under provincial,

autonomous region, municipal
governments

Construction Bureaux Counties and Cities

at County level

Construction Sections Townships & Districts

Construction Units

4
 The Ministry of Construction (MOC) is at the top of the framework and plays a
leading role in guiding and administering the industry. Since it was set up in 1952, the name
of the MOC has been changed several times. For example, during the period from 1982 to
1988 it was called the Ministry of Urban and Rural Construction and Environmental
Protection. It was given the current name in June1988.

The MOC shares the duties of regulating construction activities throughout the
country with the State Development Planning Commission. The State Development Planning
Commission is responsible for making proposals and policies of nation wide fixed capital
investment, setting the overall scope and size of fixed capital investment, appraising and
approving requests for funding of capital projects. The commission also coordinates the
implementation of priority capital projects, and makes regular inspection to ensure that the
state’s fixed capital investment programme should be implemented as planned.

The cities at various levels have their own agencies guiding and regulating
construction activities within their jurisdictions. They are called “Urban and Rural
Development Commission”, “Construction Engineering Bureau”, or “Construction Industry
Administration Bureau” etc. All of them can be called “Construction Commission” for short.
A number of central ministries such as the Ministry of Railways have departments
performing the same functions.

The MOC, Provincial, City and County Construction Commissions join hands to
oversee the construction industry throughout the country. The Provincial, City and County
Construction Commissions report to both the People's Governments at the same local level
and the MOC through the vertical administrative structure.

Each construction commission has under it a quality monitoring and control office to
monitor works for compliance with the codes and standards. There is a system for estimating
construction costs and setting standard unit rates and price indices. A municipal or provincial
construction commission has an office called “norms unit” to update the norms (unit rates
and price indices) regularly, usually quarterly. The construction cost for a works is calculated
according to the applicable norms. Even the overheads and profit for construction companies
are specified in the norms for various types of construction project and qualification grade of
construction companies.

2.4 Legal frameworks

In order to guide and regulate the activities of the construction market, the central,
provincial and municipal governments have enacted the Construction Law, Contract Law and
Tendering Law, as well as a number of detailed regulations and procedures relating to the
qualifications of contractors, soil and site investigators and design institutes, design and
construction codes and standards, competitive tendering etc.

China did not have any unified construction law until 1996. The Construction Law
was enacted on 1 November 1997 and put into effect on 1 March 1998. The law covers a
wide range of issues such as qualifications for entry into the construction industry,
procurement and delivery of works, construction supervision, construction safety,

5
construction quality, legal liability, market regulations and procedures in construction
projects. The Construction Law has integrated all existing construction related regulations
issued from different sources and will govern all activities in the construction industry,
including the issue of permits, procurement and delivery of works, supervision, safety,
quality and legal liability.

In addition there are a number of rules regulating the construction market, participants
in the construction industry, quality and safety:

Rules regulating the construction market

1. Regulations On Administration Of Construction Market issued by the MOC and the

State Industrial and Commercial Administration Bureau on 21 November 1991
2. Rules of administration of tendering for construction works issued by the MOC on 30
December1992
3. Provisional rules of tendering for construction projects issued by the National
People’s Congress and the MOC on 20 November1984
4. Procedure for administration of construction contract issued by the MOC on 29
January 1993
5. Procedure for registering construction projects issued by the MOC on 13 August
1994
6. Regulations on contract administration
7. Chapter 16 of the Contract Law enacted by the Ninth National People’s Congress on
15 March 1999
8. Ordinance on contracts of construction and installation works issued by the State
Council on 8 August 1983
9. Model conditions of contract for works of building construction (GF-1999-0201)
issued by the MOC and the State Industrial and Commercial Administration Bureau
in December 1999
10. Tentative regulations on construction supervision issued by the MOC on 28 July
1989
11. Tendering Law of the People’s Republic of China approved and issued by the 11th
Session of the Standing Committee of the Ninth National People’s Congress, on 30
August 1999
12. Contract Law of the People’s Republic of China enacted by the Second Session of
the Ninth National People’s Congress, on 15 March 1999

Rules regulating participants in construction industry

1. Qualification standards of construction enterprises issued by the MOC on 30 May

1989
2. Qualification standards of fitting out and finishing enterprises issued by the MOC on
30 May 1989
3. Tentative regulations on qualifications of construction supervision organizations
issued by the MOC on 18 January 1992
4. Regulations on administration of qualifications of construction enterprises issued by
the MOC on 6 October1995
5. Tentative procedures for site investigation and design firms to register issued by the
MOC and State Industrial and Commercial Administration Bureau on 13 July1991

6
 6. Regulations on administration of qualifications of site investigation and design firms
issued by the MOC on 23 December 1997
7. Regulations on registered architects issued by the State Council on 23 September
1995
8. Tentative provisions on qualifying foreign contractors for undertaking construction
works in China issued by the MOC on 22 March 1994
9. Provisions on forming construction enterprises by foreigners in China issued jointly
by the MOC and the Ministry of Foreign Trade and Economic Cooperation on 18
September 1995
10. Tentative regulations on administration of qualifications of turnkey contracting
enterprises (for trial implementation) issued by the MOC on 3 April 1992

Rules for governing quality and safety in construction

1. Regulations on construction quality issued by the MOC on 16 November 1993

2. Regulations on administration and monitoring of construction safety issued by the
MOC on 9 July1991
3. Regulations on construction site management issued by the MOC on 9 July1991
4. Regulations of construction quality administration approved and issued by the State
Council on 10 January 2000

The Regulations of construction quality administration specify the responsibilities and

duties of all the participants in a construction project for project quality. The Regulations
contain nine chapters covering the responsibilities and duties of owners, site investigators,
designers, construction companies and construction supervisors, as well as the liabilities for
defects, penalties to be imposed and Government’s authority to supervise and inspect.

7
3. THE VOLUME AND COMPOSITION OF CONSTRUCTION OUTPUT IN CHINA

3.1 Fixed capital investment in China

Fixed capital investment, or investment in fixed assets, in China refers to the

expenditures made by all the economic sectors, including the governments, on construction
and installation works; purchase of machinery, equipment and tools, acquisition of land and
many other items related to capital projects. It is very important that any foreigner who
wishes to enter the construction market has a good understanding of fixed capital investment.

Table 1 gives a general picture of fixed capital investment in China, in current prices,
in the past 20 years. It can be seen that investment as a percentage of GDP has increased
steadily over the years and has remained above 30% since 1992.

Table 1 China’s fixed capital investment, in current prices, 1981-1999

Year GDP Total Investment State Owned Collective Individuals Exchange Rate
& Other Units Units $=Rmb
108 Yuan 108 Yuan % of GDP 108 Yuan 108 Yuan 108 Yuan
1981 4862.4 961.0 19.8 667.5 115.2 178.3 1.7050
1982 5294.7 1230.4 23.2 845.3 174.3 210.8 1.8930
1983 5934.5 1430.1 24.1 952.0 156.3 321.8 1.9780
1984 7171.0 1832.9 25.6 1185.2 238.7 409.0 2.3200
1985 8964.4 2543.2 28.4 1680.5 327.5 535.2 2.9440
1986 10202.2 3120.6 30.6 2079.4 391.7 649.4 3.4530
1987 11962.5 3791.7 31.7 2448.8 547.0 795.9 3.7220
1988 14928.3 4753.8 31.8 3020.0 711.7 1022.1 3.7220
1989 16909.2 4410.4 26.1 2808.2 570.0 1032.3 3.7660
1990 18547.9 4517.0 24.4 2986.3 529.5 1001.2 4.7957
1991 21617.8 5594.5 25.9 3713.8 697.8 1182.9 5.3360
1992 26638.1 8080.1 30.3 5498.7 1232.9 1242.7 5.5287
1993 34634.4 13072.3 37.7 9278.8 2231.3 1476.2 5.7763
1994 46759.4 17042.1 36.4 12312.6 2664.7 1970.6 8.6187
1995 58478.1 20019.3 34.2 14169.7 3289.4 2560.2 8.3507
1996 67884.6 22974.0 33.8 16102.2 3660.6 3211.2 8.3142
1997 74462.6 24941.0 33.4 17660.8 3850.9 3429.4 8.2780
1998 78345.1 28406.2 35.8 20469.6 4192.2 3744.4 8.2770
1999 81910.9 29876.0 36.4 21719.0 4190.0 3967.0 8.2770
Source: State Statistics Bureau, A Statistical Survey of China - 2000, China Statistics Press, Beijing,
2000

During the period of planned economy in China only the central and local
governments made capital investment for the state owned enterprises and organizations.
Today other business units are allowed to make capital investment in Mainland China. While
government and publicly owned units are still the largest investors, non-state owned entities
have been increasing their capital investment since the1980s and especially since1992. This
is a logical result of China’s market oriented economic reform that started in the late 1970s
and early 1980s. The transition from a planned to a market economy has encouraged the non-
state owned sectors to make capital investments on an increasing scale.

8
 The financial resources available for capital projects have also diversified
significantly since 1984, as shown in Table 2. Prior to 1986 fixed capital investment by State-
owned enterprises (SOEs) was divided into only two major categories: new capital projects
and technical upgrading projects, but now it is divided into four portions. Table 3 shows the
composition of construction investment by SOEs between 1981 and 1999.

Table 2 Financial resources for capital projects (108 Yuan)

Year Total State Domestic Foreign Equity Others

Investment Appropriation Bank Loans Investment
1988 4753.8 410.0 926.7 259.0 29.0
1989 4410.4 341.6 716.4 274.2 2355.5 450.1
1990 4517.0 387.7 870.9 278.3 2329.5 583.0
1991 5594.5 373.0 1292.2 316.3 2878.6 648.8
1992 8080.1 560.0 1588.0 470.7 4082.4 880.4
1993 13072.3 463.9 2925.8 907.3 6218.8 1942.1
1994 17042.1 529.6 3703.1 1769.0 8001.5 2543.4
1995 20019.3 529.57 3997.6 1768.95 8388.2 3142.8
1996 22974.0 528.37 2564.2 1470.03 5749.6 1085.0
1997 24941.1 629.7 2835.1 1589.8 6735.8 1203.3
1998 28406.2 1033.7 3561.2 1533.9 7787.0 1393.8
1999 29876.0 1488.7 3685.1 1139.2 7685.1 1411.1
Sources: State Statistics Bureau, A Statistical Survey of China - 1997, 1998, 1999, 2000,
China Statistics Press, Beijing, 1997, 1998, 1999, 2000

Table 3 The composition of construction investment by SOEs

Total Investment New capital projects Technical upgrading Real Estate Development
Year projects
(108 Yuan) (108 Growth rate (108 Yuan) Growth rate (108 Yuan) Growth rate
Yuan) (%) (%) (%)
1981 667.5 442.9 -20.8 195.3 4.4 - -
1982 845.3 555.5 25.4 250.4 28.2 - -
1983 952.0 594.1 6.9 291.1 16.3 - -
1984 1185.2 743.1 25.1 309.3 6.2 - -
1985 1680.5 1074.4 44.6 449.1 45.2 - -
1986 2079.4 1176.1 9.5 619.2 37.9 101.0
1987 2448.8 1343.1 14.2 758.6 22.5 149.9 48.5
1988 3020.0 1574.3 17.2 980.5 29.3 257.2 71.6
1989 2808.2 1551.7 -1.4 788.8 -19.6 272.7 6.0
1990 2986.3 1703.8 9.8 830.2 5.2 253.3 -7.1
1991 3713.8 2115.8 24.2 1023.2 23.3 336.2 32.7
1992 5498.7 3012.6 42.4 1461.1 42.8 731.2 117.5
1993 9278.8 4615.5 53.2 2195.8 50.3 1937.5 164.9
1994 12312.6 6436.7 39.5 2918.6 32.9 2554.1 31.8
1995 14169.7 7403.6 15.0 3299.3 13.0 3149.0 23.3
1996 16102.2 8610.8 16.3 3622.7 9.8 3216.4 2.1
1997 17660.8 9917.0 15.7 3921.9 8.5 3178.4 -1.2
1998 20469.6 11916.4 20.0 4516.8 15.2 3614.2 13.7
1999 21719.0 12618.7 5.9 4418.8 -2.2 4010.2 11.0
Source: State Statistics Bureau, A Statistical Survey of China - 2000, China Statistics Press, Beijing

9
 Table 4 shows the breakdown of investment in new capital projects by SOEs by item
of expenditure. Procurement of works accounted for between 60% and 69% of total
investment each year, which is high by comparison with the norm in other countries.

Table 4 Fixed capital investment of state owned entities by cost items (108 Yuan)

Year Total investment Procurement of works Purchase of equipment etc Other expenses
1985 1074.4 726.7 217.4 130.3
1986 1176.1 770.6 260.3 145.2
1987 1343.1 856.8 325.2 161.1
1988 1574.3 1010.1 372.6 191.5
1989 1551.7 998.7 380.9 172.1
1990 1703.8 1045.4 453.8 204.7
1991 2115.8 1308.8 521.2 285.8
1992 3012.6 1889.4 667.3 455.9
1993 4615.5 3018.7 899.5 697.2
1994 6436.7 4123.9 1402.8 910.0
1995 7403.6 4757.0 1527.5 1119.1
1996 8610.8 5256.1 1778.9 1575.8
1997 9917.0 6273.0 1980.8 1663.2
1998 11,916.4 7040.8 2066.6 2796.8
1999 12,618.7 n.a. n.a. n.a.
Sources: State Statistics Bureau, A Statistical Survey of China-1999, 2000, China Statistics Press,
Beijing, 1999, 2000

3.2 Contribution of construction to GDP

The contribution of construction to the economy in China is evidenced by the

statistical data in Tables 5 and Table 6.

It can be seen from Table 5 that both GDP and construction output rose steadily in
real terms between 1978 and 1999. In the 20 year period, GDP increased 6.8 times and
construction output 7.5 times.

Table 6 shows that construction increased its share of GDP from 3.8% in 1978 to
6.7% in 1998, falling back slightly to 6.6% in 1999.

From Table 6 it can also be seen that there was fall in construction’s contribution to
GDP in 1989 relative to 1988. This fall is attributable to the austerity programme that the
Chinese government was forced to implement in order to cool down the overheated economy
and the inflation that occurred in 1988. The ‘property heat’ that occurred following the
speeches made by Deng Xiaoping when making his tour of southern China in the spring of
1992, urging reform and economic development, accounts for the sharp growth of
construction’s contribution to GDP in 1992 and 1993 relative to the previous years.

10
Table 5 GDP and its construction component, 1978-1999

Year GDP GDP Construction Construction

Current prices Index Current prices Index
108 Yuan 108 Yuan
1978 3624.1 100.0 138.2 100.0
1979 4048.2 107.6 143.8 102.0
1980 4517.8 116.0 195.5 129.2
1981 4862.4 122.1 207.1 133.3
1982 5294.7 133.1 220.7 137.9
1983 5934.5 147.6 270.6 161.4
1984 7171.0 170.0 316.7 179.0
1985 8964.4 192.9 417.9 218.7
1986 10202.2 210.0 525.7 253.4
1987 11962.5 234.3 665.8 298.7
1988 14928.3 260.7 810.0 322.5
1989 16909.2 271.3 794.0 295.3
1990 18547.9 281.7 859.4 298.8
1991 21617.8 307.6 1015.1 327.4
1992 26638.1 351.4 1415.0 396.2
1993 34634.4 398.8 2284.7 467.5
1994 46759.4 449.3 3012.6 531.5
1995 58478.1 496.5 3819.6 597.4
1996 67884.6 544.1 4530.3 648.2
1997 74462.6 592.2 4810.6 665.2
1998 78345.1 638.4 5231.4 725.1
1999 81910.9 683.7 5442.7 756.2
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press,
Beijing, 2000

11
Table 6 Percentage contribution of major sectors to GDP, 1978-1999

Year GDP Agriculture Mining, Construction Transportation, Post Commerce

manufacture, power, & telecommunications
gas, water
(108 Yuan) % % % % % %
1978 3624.1 100 28.1 44.3 3.8 4.8 7.3
1979 4038.2 100 31.2 43.8 3.6 4.6 5.5
1980 4517.8 100 30.1 44.2 4.3 4.5 4.7
1981 4862.3 100 31.8 42.1 4.3 4.3 5.3
1982 5294.7 100 33.3 40.8 4.2 4.5 3.8
1983 5934.5 100 33.0 40.0 4.6 4.5 3.9
1984 7171.0 100 32.0 38.9 4.4 4.6 5.8
1985 8964.4 100 28.4 38.5 4.7 4.5 9.8
1986 10202.2 100 27.1 38.9 5.2 4.7 9.2
1987 11962.5 100 26.8 38.3 5.6 4.6 9.7
1988 14928.3 100 25.7 38.7 5.4 4.4 10.8
1989 16909.2 100 25.0 38.3 4.7 4.6 10.0
1990 18547.9 100 27.1 37.0 4.6 6.2 7.7
1991 21617.8 100 24.5 37.4 4.7 6.5 9.7
1992 26638.1 100 21.8 38.6 5.3 6.3 10.3
1993 34634.4 100 19.9 40.8 6.6 6.1 8.9
1994 46759.4 100 20.2 41.4 6.4 5.7 8.7
1995 58478.1 100 20.5 42.3 6.5 5.2 8.4
1996 67884.6 100 20.4 42.8 6.7 5.1 8.2
1997 74462.6 100 19.1 43.5 6.5 5.1 8.3
1998 78345.1 100 18.6 42.6 6.7 5.3 8.4
1999 81910.9 100 17.7 42.7 6.6 5.4 8.4
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing,
2000

12
4. CONSTRUCTION PROJECT IMPLEMENTATION

4.1 Historical perspective

Contracting in construction in China dates back to the middle of the 19th century.
Following the Opium War (1839-1842) China was forced to open up to Western countries.
Many Western contractors came to China for construction contracts. Following the foreign
contractors’ example, a Chinese construction firm named Yan Rui Tai was formed in
Shanghai in 1880. Subsequently, many more contractors were incorporated in major cities of
China. They tendered for construction contracts in a manner similar to that practised in
Western countries. The construction contracting practice was still in use when the People’s
Republic of China was established in Beijing on 1 October 1949.

During the period from 1949 to 1957 a major portion of the construction projects was
carried out under a contracting system. During that period of time three major procurement
methods were used to implement construction projects, namely “internal contracting”,
“external contracting” and “direct labour”.

Most of the central ministries formed their own construction companies to implement
their capital projects since 1952. The ministries gave the construction contracts to their
construction companies, which was called the “internal contracting”.

A few central agencies, however, did not have their own construction companies. In
order to implement the capital projects for such central agencies, in August 1952, the State
Council demobilized a number of companies of the People’s Liberation Army and
reorganized them into construction companies. The newly formed construction companies
were then put under the administration of a new ministry, the Ministry of Construction. The
new construction companies undertook the construction works for the central agencies that
did not have construction forces, which was called “external contracting”.

During the period of the “first Five-Year Plan”, starting in 1956, 74 of 156 key
construction projects were completed through “internal contracting” and the remaining 82
through “external contracting”.

The term “Direct labour” means that the state owned enterprises (the owners)
implemented their capital projects using their own labour force, providing the supervision,
materials, and equipment themselves. On the other hand, the owners sometimes elected to
subcontract the entire project, taking the responsibility of coordinating and supervising the
work of the subcontractors.

The three procurement methods worked well during the first Five-Year Plan period,
but in subsequent years were abolished because they were viewed as a capitalist practice and
not suitable for the planned economy modelled after the Soviet Union. In the following years
the jobs of soil investigation, design, construction and installation were allocated by the
governments according to the annual fixed investment plans. In the beginning the method
worked quite well but it became less and less efficient as time went on. The major drawback
was a lack of adequate incentive for the construction enterprises to make efficient and
effective use of their resources.

13
 In 1980 a World Bank financed project, Lubuge Hydropower in Yunnan province
used international competitive bidding for its procurement of works. It turned out to be very
successful. In 1981 Shenzhen Special Economic Zone was chosen to try competitive bidding
for procurement of works. More than 90 percent of urban development and industrial
projects used competitive or selective bidding. As a result, the average completion time was
shortened by 20 percent and the average cost of works was reduced by 8 percent.

Encouraged by the success in Shenzhen, the MOC, in June 1983, issued "The
provisional bidding procedure for construction and installation works" to all the local
governments, encouraging construction enterprises to compete for their construction and
installation works through competitive bidding.

On 7 November 1984, the State Planning Commission and the MOC jointly issued a
more detailed "The provisional regulations on bidding for construction works". This
document was designed to promote competitive and selective bidding in order to shorten
completion time, ensure quality, cut down costs and make more effective and efficient use of
capital investment. The document set forth the guidelines and some particulars for bidding
and contracting activities.

The two central government agencies issued, on 14 June1985, "The provisional

procedure of bidding for design work" having previously, in November 1984 joined China
Construction Bank and the State Building Material Bureau in issuing "The procedure for
contracting of building material supply". In December 1992 the MOC prepared and issued
the Tendering procedure for works of building and civil engineering construction. These
three documents are acting as the guidelines for procurement of works and consultant service.

At present competitive or selective bidding is encouraged, but not mandatory. Table 7

shows how often the state owned construction companies have to obtain construction
contracts through competitive bidding.

Table 7 Number of SOE construction contracts obtained through bidding

1996 1997 1998 1999

1. Number of projects undertaken 699661 678767 649512 257273
2. Number of contracts obtained through bidding 188001 223488 260506 102799
3. Item 2/item 1 expressed as a % 26.9 32.9 40.1 40.0
Source: State Statistics Bureau, A Statistical Survey of China - 2000, China Statistics Press, Beijing,
2000

4.2 New procurement methods

In addition to the traditional design-bid-construction contracts, there have already

emerged other methods of procurement of works such as design-build, turnkey and Build
Operate Transfer (BOT) contracts. For example, U.K. based Airsys ATM has won the
design-build contract for the new passenger terminus at Beihai Airport in Guangxi Zhuang

14
Minority Autonomous Region in the south of China.3 It is expected to complete in December
2001.

In August 1995 the State Planning Commission, the Ministry of Power Industry and
the Ministry of Transport issued, in joint names, “The circular on granting concession to
foreign financed capital projects”. The first capital project concession that has been granted
to a foreign firm as a BOT contract is Laibin Power Plant that is to be built in Laibin,
Guangxi Zhuang Minority Autonomous Region. The concessionaire is a joint venture made
up of French contractors. The State Planning Commission approved the award in May 1995.
The People’s Government of Guangxi Zhuang Minority Autonomous Region entered into the
concession agreement in September 1997. The concession period is 18 years including time
for completion of the works. The works is now in smooth progress and it is likely to be
completed ahead of schedule. Shangsha Power Plant is another BOT contract entered into
following Laibin Power Plant concession contract. 4 It is believed that there will be more
concession contracts granted in the near future.

4.3 Construction contracts

The National People’s Congress ratified the Contract law of the People’s Republic of
China on 15 March 1999. This law governs all the contracts entered into within China’s
boundaries. Chapter 16 of the Contract Law covers the contracts for building and civil
engineering works.

Standard conditions of contract

Prior to 1991 there was no standard form of contract in China for construction works.
The MOC and the State Industrial and Commercial Administration Bureau jointly prepared a
standard form of contract for works of building construction in November 1991, that is,
Model conditions of contract for works of building construction (GF-91-0201).

On the other hand, FIDIC conditions of contract have been widely used in China for
the construction work (both civil engineering and building) financed by the World Bank,
Asian Development Bank and other international financial institutions. Now, more and more
China’s construction companies have become familiar with the FIDIC conditions of contract.

After eight years in use the GF-91-0201 has been modified, revised and renamed by
the same agencies. The undertaking was started in 1997 and based on feedback from the
users, with reference to other standard national and international conditions of contract such
as FIDIC conditions of contract and the requirements of Construction law, Contract law,
Tendering law and other laws enacted recently. The revised document, namely Conditions of
contract for works of building construction ( GF-1999-0201), was published formally on 24
December 1999. The revised edition comprises three parts, namely, Part I-Form of
Agreement, Part II-General Conditions and Part III-Conditions of Particular Application. Part
III shall prevail over Part II and comprise amendments, additions and details of Part II.

3
China Construction News, 30 August 2000, pp.1
4
Zhang Rui-Ying, “BOT in Power Sector in China”, Capital Investment and Construction in China, 1993/3, pp
32-34

15
 In addition to the Conditions of contract for works of building construction (GF-
1999-0201) published by the MOC and the State Industrial and Commercial Administration
Bureau, the other central ministries have also prepared and published the standard conditions
of contract suitable for the works of civil engineering construction under their supervision.
For example, the Ministry of Water Conservancy, the Ministry of Electricity and the State
Industrial and Commercial Administration Bureau jointly prepared and published the
Conditions of contract for works of hydraulic and water conservancy engineering
construction in September 1997.

Contractual arrangements
Just like in the other parts of the world the contractual arrangements in China fall into
three broad categories depending upon the means of arriving at the contract sum, these are
lump sum contract, measurement contract and cost reimbursement contract.

4.4 Selection of designer

According to the Tendering Law approved by the Standing Committee of the National
People’s Congress on 30 August 1999, competitive procurement of services such as site
and/or ground investigation, design, construction and construction supervision is required for
certain types of construction projects. Competitive bidding, however, is optional for all the
other construction projects.

The owner selects a design institute either in the same way as he does a construction
company or through a design competition. The winning design alternative will be accepted as
a starting point for the detailed design to be developed. The design competition is usually
limited to architectural schematic design including drawings, models, and preliminary
estimate. Design competitions are often used by the owner to choose a design institute,
especially in the cases of residential buildings, large sized public buildings, such as railway
stations, museums, theatres, exhibition centres, memorials, government buildings and so on.

4.5 Selection of construction companies

There are several methods for an owner to implement a project. If the owner chooses
to employ a construction company, there are in turn several options available, competitive
bidding, selective bidding, negotiating contract, and government appointment. In some
unusual cases, the government may appoint a construction company, or several companies, to
accomplish certain construction projects of social or political significance or unique nature.

4.6 Calling for bids

An owner is required by the Tendering law and the Provisional regulations on

bidding for construction works to have its project approved and included in the annual capital
construction programme of the government. In addition, detailed design documents have to
be complete and the funds available before the project is put out to bidders. In actual practice,
the tender administration office under the local construction commission imposes much more
detailed requirements.

16
 The process of calling for bids can be carried out as follows.
1. Preparation of bidding documents by the owner or their agents, such as a design
institute: Bidding documents should furnish all the information enabling the bidders
to prepare their bids for the works.
2. Estimating of project cost by the owner or their agent: The owner's estimate of the
construction costs is used for the owner to be aware of their financial obligations, to
determine the reasonability of the submitted bids, and for the supervisory agencies to
check the project's expenses. The owner’s estimate shall be based upon the various
norms prepared by the local construction commissions.
3. Invitation for bids: The invitation should be issued as soon as the owner's application
for putting out for bids is approved by the Tender Administration Office.
4. Pre-qualification of bidders: This step is intended to make sure that the bidders are
capable and have adequate resources to carry out the works, prevent the unqualified
construction companies from wasting their time and money and obtain information
that can be used in evaluating bids.
5. Clarification of bidding documents and pre-bidding meeting: The bidder's
representatives will be advised to attend a pre-bid meeting when the bidding
documents have been issued and the bidders have visited the project site.
6. Bid opening, evaluation and award of contract: Bids are usually opened in the
presence of the Tender Administration Officials. The owner or their agent opens the
bids after deadline for submission of bids in presence of the bidders' representatives,
the local notary, the China Construction Bank branch and other authorities that have
interests in the contract. At bid opening the owner will announce the bidders' names,
the bid prices, time for completion, amounts of key materials, such as cement, steel
and timber, construction alternatives and other conditions. The owner also prepares
his own minutes of the bid opening. The bid that is not substantially responsive to the
requirements of the bidding documents should be confirmed by the notary and
rejected before the evaluation panel reviews the responsive bids in terms of
technology and bid sums. Evaluation criteria are announced in public. The evaluated
bids are listed in ascending order by bid price and an evaluation report written
recommending the first three candidates of a successful bidder for the owner to make
awarding decision. The lowest bid is not necessarily the successful bid. In the case of
small and/or simple building works, the successful bidder may be chosen at bid
opening and announced and at same time the owner's estimate of the construction cost
is also announced. For a large sized or complicated construction project, the award of
contract will not be made until the owner negotiates and agrees with the candidates
the construction method, equipment, materials and other factors influencing the cost,
quality and construction duration of the project. There is no uniform requirement of
the period of time from bid opening to award of the contract, the length of the period
varies from one part of the country to another, ranging from 5 days to two weeks.
Notification of award should be issued to the successful bidder in writing as soon as
the award is made. The unsuccessful bidders will also be notified that their bids have
been unsuccessful. A performance security (performance bond) is usually required.
The owner and the successful bidder are required to pay a sum of money to the
Tender Administration Office.

17
 4.7 Construction marketplaces or ‘Construction Project Transaction Centres’

A construction marketplace is a physical place, usually a building. Tendering is

required to take place here. The objective is to bring the process under the exclusive
administration of the government. The buildings are called Construction Project Transaction
Centres as well. The necessity of the facilities stems from the fact that a significant portion of
construction contracts have not been awarded on the basis of open and fair competition as
required by the laws and regulations. This has caused problems such as unreasonably low
bids, unfair preference for the local bidders, collusion between (usually public) owner and a
bidder or between bidders, poor quality of construction and even cheating, bribery and
corruption.

The transaction centres are expected to perform the following functions:

1. Act as a centre to disseminate information about construction projects that call for
bids;
2. Provide the participants in bidding with a place for bid opening, negotiating between
owners and contractors and other activities;
3. Bring all the participants here to perform formalities required by laws and regulations
for procurement and delivery of construction projects;
4. Provide a place to examine the owner for qualification for calling for bids; to examine
and approve the tender documents; to review and approve the owner’s or an
independent estimate of the works;
5. Bring the bid opening and evaluation under the direct supervision of the tender
administration office of the government;
6. Make it easy and convenient to review and approve the tender evaluation report, keep
track of construction supervision, quality control and record the contracts entered into;
7. Provide to the owners and the contractors an easy access to legal and engineering
consulting services;
8. Provide a centre to settle disputes between the participants in the construction
industry;
9. Make it easy for the government to enforce laws and regulations.

By the second half of 1999, more than a half of major cities have set up their
transaction centres, amounting to 284. The MOC requires all major cities to set up this kind
of centre to ensure that the competitive bidding is carried out as required by the laws and
regulations.

18
5. STRUCTURE AND OWNERSHIP OF CONSTRUCTION ENTERPRISES

5.1 Overview

Construction enterprises should, according to the Construction Law, include all the
economic entities that carry out construction and the relevant activities, such as site and/or
ground investigation, design, construction, installation, and material and equipment supply
organizations. In China, however, it is commonly accepted that construction enterprises refer
to the businesses that undertake works of building and civil engineering construction,
installation of building services, machinery and equipment. Construction enterprises can
operate on their own if they hold corporate status, in which case they may be called a
building company, installation company, engineering company or engineering bureau
(department). Construction enterprises may also be in-house construction or installation units
of another productive enterprise, non-productive institution, or governmental agency.

Basically, the current state owned or collective construction force in China was
formed in the 1950’s by reorganizing the private contractors who existed prior to 1949. On
the other hand, in August 1952 the central government transformed eight army divisions of
the People’s Liberation Army into a number of construction enterprises and sent them to
undertake the key construction projects that are an integral part of the economic development
programme of that time.

During the1960s more than one million construction workers moved from the coastal
areas to the inland - southwest and northwest China - to carry out the construction projects.
These were called the ‘third-frontier projects’ aiming to restructure the national economy
geographically. The effort lasted for over a decade. To add more mobile construction forces
to the programme, a new corps, called the Capital Construction Engineers was set up within
the People’s Liberation Army in August 1966. The corps was demobilized from the army and
reorganized into a number of ordinary construction companies in 1983 and has become a
very competitive construction force now.

In addition, the People’s Liberation Army had another very famous construction force
before 1984, that is, the Railway Engineers. This force was demobilized from the army and
handed over to the Ministry of Railways in January 1984. Since then it has been reorganized
as China Railway Construction Corporation that oversees ten engineering construction
companies and over 30 other entities such a Railway Construction Research and Design
Institute. The corporation employs over 160,000 employees now and operates both at home
and overseas. In addition to railway engineering construction the corporation undertakes
other building and civil engineering construction, especially infrastructure projects.

5.2 Structure of construction industry enterprises in China

The construction enterprises in China can be classified in a number of ways, by

ownership, size, trade, qualification, sector and contractual relationship.

19
 5.2.1 Types of construction company by ownership

At present the construction industry in China is made up of eight distinct types of

construction enterprises in terms of ownership. They are state owned enterprises, urban and
rural collectives, private firms, joint venture, Hong Kong, Macao and Taiwan contractors.
The construction work force other than the above seven types is referred to as other firms.
The numbers of each type of company are shown in and Table 8 and Table 9.

Table 8 Number of construction companies by type of ownership

Type of ownership 1995 1996 1997 1998 1999

State owned 7,531 9,109 9,650 9,458 9,394
Urban collective 15,348 29,044 29,872 26,970 25,443
Rural collective 71,017 67,191 51,939 45,292 49,414
Private firms n.a. 535 810 2,416 n.a.
Joint venture n.a. 187 231 425 n.a.
Shareholders owned companies n.a. 1,601 2,245 5,741 n.a.
Foreign companies n.a. 388 454 337 341
Companies from Hong Kong n.a. 417 491 629 664
Other categories n.a. 83 264 50 n.a.
Total 93,896 108,555 95,956 91,318 n.a.
Sources :
1. State Statistics Bureau, Construction Statistical Yearbook of China-1996, 1997, 1998, 1999 China
Statistics Press, Beijing, 1996, 1997, 1998, 1999
2. State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing, 2000

Table 9 Breakdown of public construction enterprises by type of ownership

Year Total State owned Urban collective Rural brigades

1980 57,404 1,996 4,608 50,800
1985 93,750 3,385 7,765 82,600
1986 88,771 3,608 8,977 76,186
1987 87,474 3,788 9,837 73,849
1988 87,224 3,798 10,336 73,090
1989 80,106 3,927 9,179 67,000
1990 74,145 4,275 9,052 60,818
1991 73,094 4,638 9,187 59,269
1992 77,857 4,985 9,551 63,321
1993 94,582 6,363 14,130 70,486
1994 94,942 7,251 15,196 69,842
1995 96,935 7,531 15,348 71,017
1996 108,555 9,109 29,044 67,191
1997 95,956 9,650 29,872 51,939
1998 90,926 9,458 26,970 45,292
1999 96,648 9,394 25,443 49,414
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing,
2000

20
 It can be seen from Table 8 that the number of construction companies owned by
shareholders has increased rapidly in recent years. This is because the central government has
already permitted the denationalisation of small and medium state owned enterprises. Most of
them will be reorganized into companies with individual shareholders.

It should also be noted that the data on state owned and urban collective construction
enterprises have been, since 1996, limited to those of Class 4 and above, while the rural
construction brigades includes only those below Class 4 (see section 5.2.4 for details of the
classification). This could account for the apparent decline in number of each type in the past
few years.

State-owned construction enterprises [Construction SOEs]

State-Owned Enterprises (SOEs) in the construction sector are the primary
undertakers of the national fixed capital investment programmes. They are mostly highly
qualified, both managerially and technically, well capitalized and equipped. They can be
central or local government owned.

Most of the central ministries have their own construction companies to carry out
their construction projects, especially the line ministries, such as the MOC, the Ministry of
Railways, the Ministry of Metallurgy, the Ministry of Energy, the Ministry of Transport, and
the Ministry of Chemical Industry etc. The central ministries have decentralized the control
over their construction enterprises since the economic reforms. Many of the enterprises have
been given full autonomy and become commercial entities. China State Construction
Engineering Corporation (CSCEC) is a typical example of the ministry owned construction
enterprises. CSCEC is organized into 8 engineering construction bureaus, 36 subsidiaries, 15
overseas branches, 6 design institutes, a material and equipment supplying company, and
several affiliated organizations. The 8 engineering construction bureaus are headquartered in
Beijing, Tangshan, Wuhan, Guiyang, Changsha, Nanyang, Jinan, respectively.

The provinces, autonomous regions, municipalities and counties also have their own
construction enterprises to undertake their construction projects. The construction companies
owned by local governments are normally grouped in one or more corporations that report to
the local construction commission. The corporations plan, organize, direct and coordinate the
activities of the subordinate companies and other construction or installation associated units.

For instance, Beijing Municipal Construction Commission has four construction

corporations and a number of other municipal government owned construction or installation
companies under its control. One of the four corporations is the Beijing Construction
Engineering Corporation that oversees over two dozens of subordinate units. The major
subordinate units include six building construction companies and one installation company.
Two pre-cast concrete plants, one timber component factory, one construction machinery
factory and one marble-milling factory are also under the supervision of the corporation. In
addition, the corporation runs one design institute, one contracting company, one real estate
development company, one joint venture with a Japanese contractor, one fitting out and
decorating company, one research institute and one consulting firm. It also has a hospital, a
computer centre and a continuing education and training centre etc. It is clear that a
corporation not only operates in purely engineering construction and/or installation but also
in many other fields.

21
 The local government owned construction companies usually undertake works of
construction or installation within their administrative boundaries. They may obtain
construction contracts in the other parts of the country, provided the local construction
commission permits. However, the local protectionism has rendered it harder to obtain such
permission than before. The regions where incoming construction companies are allowed to
undertake their construction works are usually the special economic zones, the coastal open
cities and the open economic zones, such as Shenzhen, Amoy, Zhuhai and Shantou, because
of shortage of construction forces. The ministry owned construction companies are scattered
everywhere over the country and therefore may undertake the local construction projects
without need of obtaining the permission from the local construction commissions.

Table 10 gives a rough picture of the financial performance of the state owned
construction companies in China.

Table 10 Profitability of state owned construction companies

Year Total profit Number Number of Share of Per capita productivity (Yuan)
(108 Yuan) of units losing units losers (%)
By gross output By added value
1989 26.4 3,927 13,820 4,277
1990 16.6 4,275 14,509 4,514
1991 15.9 4,638 16,171 4,895
1992 25.5 4,985 20,250 5,871
1993 40.9 6,363 27,419 7,379
1994 34.7 7,251 37,079 11,064
1995 30.9 7,531 44,525 13,414
1996 20.7 9,109 2,352 22.3 48,604 15,186
1997 16.7 9,650 2,625 27.2 54,627 15,897
1998 6.6 9,458 2,639 28.6 59,731 17,032
1999 24.1 9,394 66,052 18,440
Sources:
1. State Statistics Bureau, Construction Statistical Yearbook of China- 1996, 1997, 1998, 1999 China
Statistics Press, Beijing, 1996, 1997,1998, 1999
2. State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing, 2000

Collective construction enterprises

Collective construction enterprises (known as collectives or brigades) developed
rapidly between 1952 and 1956. In 1956 they employed 1.26 million people. Since 1978
they have grown even more rapidly than before. In 1999 they accounted for 77% of all
construction enterprises and employed 60 percent of the construction labour force (see
Tables 8 and 9).

Collective construction enterprises are found in urban and rural areas. In the urban
areas they are under the administration of municipal, borough, district, town governments or
community committees. Rural construction brigades are owned and run by townships or
villages. They normally undertake housing and other small and/or simple construction works,
either for the local community or in other parts of the country.

Both urban and rural collective construction brigades are allowed to operate in urban
areas independently either as a general contractor or as a labour-only subcontractor on major
works, providing craftsmen or labourers for the state owned construction companies. Rural

22
collective construction brigades are more mobile than the urban ones and there are more of
them . They also employ the largest portion of the total construction labour force. According
to A Statistical Survey of China-1998, 23,727,000 rural people worked on the construction
sites or carried out other construction related jobs in 1997. This construction force plays an
important role in the national construction industry. Many county governments, especially
those in the remote and poor areas of the country encourage the local people to seek
construction jobs and take it as a source of revenue.

The financial performance of urban collective construction enterprises in China is

shown as in Table 11.

Table 11 Profitability of urban collective construction companies

Year Total Number Number of Number of Share of Per capita Productivity (Yuan)
profit of Units employees (104) losing units losers
(108 Yuan) (%)
By gross output By added value

1989 12.2 9,179 390.1 10,363 2,920

1990 16.6 9,052 389.7 10,743 3,164
1991 12.6 9,187 419.4 12,418 3,540
1992 20.5 9,551 476.3 15,304 4,110
1993 21.9 14,130 455.7 20,238 4,857
1994 33.8 15,196 601.9 25,243 6,474
1995 36.6 15,348 631.9 30,060 7,985
1996 77.7 29,044 1,171.4 4,715 16.2 31,549 8,458
1997 75.6 29,872 1,148.2 5,293 17.7 34,190 9,094
1998 67.8 26,970 1,008.9 4,772 17.8 37,310 10,133
1999 73.3 25,443 934.6 40,662 10,923
Sources:
1. State Statistics Bureau, Construction Statistical Yearbook of China- 1996, 1997, 1998, 1999 China
Statistics Press, Beijing, 1996, 1997,1998, 1999
2. State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing, 2000

Foreign contractors
The reform programmes and open door policy of China have provided plenty of
opportunities for foreign contractors and contractors from Hong Kong. More and more
overseas contractors have entered China’s construction market. There are now several
hundred foreign contractors who have opened offices in China, as shown in Table 8.

The foreign contractors are allowed to undertake construction works in China, subject
to the administration of the International Market Section under the Department of
Construction Industry of the MOC. The MOC and other ministries such as the Ministry of
Railways, the Ministry of Transport and the Ministry of Water Conservancy have already
prepared and issued a number of documents to regulate the overseas contractors. Two of the
documents are summarized as follows.

A. The Tentative Provisions On Certification Of Foreign Contractors For

Construction Works In China issued on 22 March 1994
According to the document, foreign contractors are allowed to form joint venture with
local Chinese construction companies. They are allowed to obtain engineering
contracts on their own as well. However, the foreign contractors are eligible only for

23
 those construction works that are entirely foreign financed including those financed
by international financial institutions such as the World Bank and those that are so
special that the local Chinese construction companies are unable to accomplish.
The overseas contractors shall set up a permanent office in China, be staffed with
adequate management and technical personnel and obtain a qualification certificate
before they bid for any contract. They can apply to the provincial government where
the works to be carried out. If a foreign contractor operates in more than two
provinces, he has to apply to the Ministry of Construction for the qualification
certificate.

B. The Provisions On Forming Construction Enterprises By Foreigners In China

issued jointly by the MOC and the Ministry of Foreign Trade and Economic
Cooperation on 18 September 1995
The construction enterprises refer to the businesses in design, construction,
installation, construction supervision, consulting services and land development.
The rules in this document do not allow the incorporation of any entirely foreign-
owned construction firm in China at present. Only the joint venture with local
Chinese construction companies as partners is permitted, subject to the Law On Joint
Ventures Using Chinese And Foreign Investment, The Law On Sino-Foreign
Cooperative Joint Ventures And The Qualification Standards Of Construction
Enterprises issued by MOC on 30 May 1989. The Chinese partners of a joint venture
must have obtained a qualification certificate higher than second class and are
required to submit the proposal and feasibility report to the provincial construction
commissions or the MOC for approval as the case may be.

Current status of foreign construction firms in China

Over 60 percent of the overseas contractors who have set up offices in Shanghai are
those listed as the 225 top international contractors in China such as John Brown (U.K.),
Fluor Daniel and Bechtel Group (USA) and some Japanese contractors. France’s Campenon
Bernard in joint venture won the US$ 450 million worth contract of the 420m high Jin Mao
Building in Shanghai.

Table 12 shows the origin of overseas contractors with on-going projects in 1996 and
1997. Even though China’s construction industry has been slowed down as compared to the
early 1990s, in the eyes of overseas contractors there is still a big development potential and
therefore they will stay in China.

All of the overseas contractors who have registered with the local industrial and
commercial administration bureaus have set up their offices and management teams. The
offices can be divided into two types based on their business scope. Most of them work only
as general contractors, hunt for contracts and then coordinate the construction and other
activities needed to complete the contracts. Others extend their management to the site
operations.

24
Table 12 Number and origin of overseas contractors with active projects in China

Country of contractors Number of contractors

1996 1997
The United States 3 3
Japan 24 18
United Kingdom 1
France 3 4
Germany 6 2
Canada 1
Australia 2
South Korea 9 2
Italy 6 2
Singapore 8 2
Denmark 1
Malaya 2
Switzerland 1
Hong Kong 69 50
Total 135 84
Sources: Data for 1996 are taken from China Construction Year Book 1997, pp. 698-703; while those
for 1997 from China Construction Year Book 1998, pp. 665-667.

Most of the projects that the foreign contractors undertake are large scale and
complicated technically. The overseas contractors have not only brought advanced
technology, management and equipment to China but also new challenges to the Chinese
domestic construction companies. In most cases, when the foreign contractors have become
successful in competitive bidding, been awarded a contract and entered into contract with the
owner, they send a project management team made up of a few managerial and technical
personnel to the site. The team subcontract elemental works to the local construction
enterprises. They select subcontractors by negotiation, not competitive tendering. They
employ local Chinese managerial and technical personnel and workers. It is easy to find
experienced engineers and skilled workers in China if they are reasonably paid.

Table 13 Performance of foreign contractors in China

1996 1997 1998

Number of foreign contractors 388 454 337
Number of losing contractors 147 179 144
4
Number of employees (10 persons) 8.62 9.56 7.48
Construction output (108 Yuan) 46.9 70.5 62.5
Number of individual works undertaken 4,165 4,539 2,127
Floor space undertaken (104 m2) 352.1 406.3 407.5
Total profit (108 Yuan) 1.2 1.4 1.9
Per capita productivity (Yuan) 58,630 73,715 83,537
Sources: State Statistics Bureau, Construction Statistical Yearbook of China-1997, 1998, 1999 China
Statistics Press, Beijing, 1997, 1998, 1999

Tables 13 and 14 provide data on the performance of foreign contractors in China. It

can be seen that foreign contractors employ only a small proportion of the total construction

25
workforce, 190,000 out of a total of 34 million, which is just 0.5%. This is in part because
much of the work is subcontracted. But also because foreign contractors are still responsible
for a relatively small proportion (2.8% by value) of the total construction output. 5 It is also
interesting to note that per capita productivity is higher in foreign than in state-owned
enterprises, which may be explained by the higher level of technology employed and/or the
greater prevalence of subcontracting.

Table 14 Performance of Hong Kong contractors in mainland China

1996 1997 1998

Number of contractors 417 491 629
Number of losing contractors 182 202 292
Number of employees (104 persons) 8.67 8.23 11.45
Construction output (108 Yuan) 46.9 63.7 91.9
Number of individual works undertaken 14,270 4,548 2,611
Floor space undertaken (104 m2) 449.0 315.2 391.9
Total profit (108 Yuan) 0.9 1.3 1.04
Per capita productivity (Yuan) 54,021 77,425 80,271
Sources: State Statistics Bureau, Construction Statistical Yearbook of China-1997, 1998, 1999 China
Statistics Press, Beijing, 1997, 1998, 1999

5.2.2 Types of construction company by size

The construction enterprises may also be classified by number of employees and

annual output. In China, a large sized construction enterprise usually employs at least 4,000
permanent staff and workers and completes a floor area of over 400,000 square metres
annually. A construction enterprise that employs less than 2,000 permanent employees and
completes less than 200,000 square metres of floor area annually counts as a small sized
construction enterprise. Those other than large sized or small sized fall into the category of
medium sized construction enterprises. There were in total 2,668 large or medium sized
construction enterprises in China in 1997, 218 of them are the enterprises that report to a
central agency.

5.2.3 Types of construction company by trade

By work undertaken, the construction enterprises can be classified into construction,

installation, fitting out and finishing, rehabilitation and maintenance as well as non-standard
equipment manufacture. A more detailed analysis divides the enterprises into 34 trades.

5.2.4 Types of construction company by qualification

Starting in 1989, the MOC has successfully issued the regulations on administration
on qualifications of construction enterprises, design institutes and supervision agencies. As is
required by the Regulations On Qualifying Construction Enterprises, issued in June 1989 and
with the assistance of line ministries and local governments, the MOC has evaluated all
construction enterprises and classified them into categories. There are 4 classes of
construction works, 3 classes of installation works, 3 classes of mechanized construction

5
Calculated from the output data in Tables 13 and 14 and Table 5

26
works and 3 classes of fitting out and finishing works, according to Qualification Standards
Of Construction Enterprises and Qualification Standards Of Fitting Out And Finishing Firms
issued in the same year.

The classification is based upon the length of time in the construction business,
previous performance, qualifications and percentage of managerial and technical staff, annual
outputs, fixed assets and working capital and so on. The classification is intended to keep
construction activities in order, restrict undesired growth of construction population, ensure
construction quality, improve qualifications of construction enterprises and facilitate
restructuring construction industry as a whole.

The Qualification Standards Of Construction Enterprises provides:

Class 1 can undertake all types of construction works,
Class 2 can undertake buildings lower than 30 floors and shorter than 30 m span and
structures lower than 100m,
Class 3 can undertake buildings lower than 13 floors and shorter than 21m span and
the structures lower than 50m, such as elevated water tanks, stacks, etc,
Class 4 can undertake buildings lower than 6 floors or shorter than 15m span.

According to the Regulations Of Qualifying Construction Enterprises, the

construction works awarded to Class 1, 2 and 3 construction enterprises can be subcontracted
out, while those awarded to Class 4 cannot.

Table 15 tells us the breakdown of the construction enterprises in China by the four
qualification classes. There is also a subclass of enterprises that can work only on small local
projects and on force account contracts. These are not shown in the table.

Table 15 Construction enterprises by class

1996 1997 1998

Class 1 construction companies 1,862 1,971 2,302
Class 2 construction companies 5,964 6,445 7,191
Class 3 construction companies 16,153 17,277 17,909
Class 4 construction companies 17,385 18,324 18,232
Total 41,364 44,017 45,634
Source: State Statistics Bureau, Construction Statistical Yearbook of China- 1996, 1997, 1998, 1999,
China Statistics Press, Beijing, 1996, 1997,1998, 1999

5.2.5 Types of construction company by sector

The projects that a construction enterprise may undertake differ significantly from each
other: housing, public buildings, highways, public utilities, power plants, metallurgical
facilities, chemical and petrochemical factories, railways, ports and airports and many others.
Most of the construction enterprises that used to be under the supervision of industrial
ministries are sector oriented. For instance, No.5, No.13, No.15, No.19 and No.20 Metallurgy
Construction Companies are metallurgical engineering companies. The sector oriented
engineering companies have ceased to restrict their activities to their own sectors and
extended their operations to other sectors since reform.

27
 5.2.6 Types of construction company by contractual relationship

Prior to 1984 most of the state owned construction companies were general construction
companies executing all trades needed to complete a construction works. It was subsequently
found that it is an inefficient industrial organization. A reform programme called “Separation
of management from field operations” was launched in 1984. Some of the companies were
reorganized as specialist companies, while the others are management-oriented. As a result,
the construction enterprises now in China can be classified as general contracting companies,
specialist companies and labour-only companies. General contracting companies normally
act as general (main, prime) contractors and represent the majority of the construction
enterprises in China. Specialist companies are further sub-classified into several
subcategories based upon their specialties, such as excavation, piling, foundation,
mechanized construction, equipment and machinery installation, fitting out and finishing,
urban utilities and public works.

5.3 Industrial associations

The industrial associations are intended mainly to promote the development of the
construction industry and protect the interests and rights of the member construction
enterprises. The following are currently in existence:

China Federation of Construction Industry: The federation was formed in Beijing on 16

October 1986 as a parent organization of the other construction industrial associations. The
members are construction enterprises, research and education institutions and government
agencies. It has provincial chapters. The broad objective of the federation is to promote the
construction industry in China.

China Collective Construction Enterprises Association: The association was formed on

21 September 1983 and its purposes include guiding, helping, coordinating and promoting
the collective construction firms so that their management can be improved and they
contribute more to the economic and social development. The association has set up 500
chapters around the country.

China International Contracting Association: It was established in 1988 to promote

overseas operations of the construction enterprises.

China Construction Equipment Association: China Installation Enterprises Association :

It was formed in November 1985 and it has 180 corporate members who operate in the
provinces and the central ministries.

China Association of Labour Norm Studies:

China Federation of Building Components Pre-fabricators:

28
6. EMPLOYMENT IN THE CONSTRUCTION INDUSTRY IN CHINA

6.1 Numbers employed and distribution

The overall picture of the construction workforce and its distribution is shown in
Tables 16 to 19.

The construction workforce shown in Table 16 covers everybody who is working in

the construction industry at the end of each year, whether they are being paid a salary, wage
or otherwise. It includes all the work force that takes on construction activity in both urban
and rural areas. It can be seen that in 1999 in excess of 34 million people were involved in
construction activity, comprising almost 5% of the total workforce in the country.

Table 16 Total workforce and construction workforce

Year Total (104 persons) Construction (104 persons) Construction/total (%)

1978 40,152 854 2.13
1980 42,361 993 2.34
1985 49,873 2,035 4.08
1986 51,282 2,236 4.36
1987 52,783 2,384 4.52
1988 54,334 2,491 4.58
1989 55,329 2,407 4.35
1990 63,909 2,424 3.79
1991 64,799 2,482 3.83
1992 65,554 2,660 4.08
1993 66,373 3,050 4.60
1994 67,199 3,188 4.74
1995 67,947 3,322 4.89
1996 68,850 3,408 4.95
1997 69,600 3,449 4.96
1998 69,957 3,327 4.76
1999 70,586 3,412 4.83
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing,
2000

Table 17 shows how this workforce is distributed between state owned enterprises, urban
collectives and rural collectives. It should be noted that the data refers since 1996 to employment
in SOEs and urban collectives of Class 4 and above and rural construction brigades below Class
4. Table 18 shows employment in private firms in the urban areas. The table shows that
employment in the private sector, although growing, is still only a tiny proportion of the total.

The statistical data given in Tables 17 and 18 refers to the construction workforce in
some sort of employment. But there is also an informal sub-sector in construction industry in
China just like in the other parts of the world. The rural and/or suburban inhabitants build
houses themselves for living and/or other purposes. The urban households repair or fit out
and decorate their apartment flats or houses themselves, with help of their relatives or friends
or by employing casual labour. The private shop, restaurant or other business owners employ
casual craftsmen and labour to refurbish their property. A major portion of such activities

29
usually is not recorded. The employment in the informal sub-sector of construction can be
roughly estimated by subtracting the construction population shown in Tables 17 and 18 from
that shown in Table 16. In 1999, the volume of this employment is estimated at 5.8 million
which is roughly 17 percent of the entire construction workforce.

Table 17 Distribution of public sector construction employees (104 persons)

Year Total State owned Urban collective Rural collective

1980 982.7 481.8 166.2 334.7
1985 1,701.4 576.7 334.8 789.9
1986 1,800.6 617.3 376.4 806.9
1987 1,852.5 618.2 405.9 828.8
1988 1,899.4 623.5 421.3 854.6
1989 1,773.4 614.7 390.1 768.6
1990 1,716.7 621.0 389.7 706.0
1991 1,783.3 638.9 419.4 725.0
1992 1,961.2 681.2 476.3 803.6
1993 2,156.7 657.1 455.7 926.8
1994 2,448.8 818.2 601.9 969.3
1995 2,511.9 824.3 631.9 980.4
1996 2,992.3 855.9 1,171.4 870.4
1997 2,804.6 828.6 1,148.2 703.1
1998 2,778.9 738.4 1,008.5 748.9
1999 2,765.7 690.9 934.6 739.9
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing

Table 18 Employment in privately-owned urban enterprises

Year All enterprises Construction enterprises Construction/total (%)

(104 persons) (104 persons)
1978 15.0 1.0 6.67
1980 81.4 0.4 0.49
1985 450.1 5.1 1.13
1986 483.1 5.1 1.06
1987 568.8 6.5 1.14
1988 659.3 9.7 1.47
1989 648.2 4.9 0.76
1990 670.5 4.6 0.69
1991 759.5 7.8 1.03
1992 837.9 5.9 0.70
1993 1115.7 10.8 0.97
1994 1557.4 17.9 1.16
1995 2045.0 28.1 1.37
1996 2328.8 33.9 1.46
1997 2669.0 38.8 1.45
1998 3231.9 55.2 1.71
1999 3466.9 64.9 1.87
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing

30
 6.2 Permanent versus temporary workers

Before 1984 the managers of state owned and collective construction companies had
to be appointed by the central or local government. All the staff and labour were recruited
through the Labour Bureau, a local government agency. Once employed the staff and labour
would gain a permanent employment status called “fixed worker”. Nobody could dismiss
them unless they committed a crime.

However, in a decree issued on 18 September, 1984 the State Council (the central
government of China) required to stop employment of “fixed worker”. The document is titled
“Tentative provisions for construction industry and capital investment administration system
reform [1984] No.123”. The heading of Clause 13 of this decree is “Employment policy of
construction and installation enterprises shall be changed” and the text reads: “The state
owned construction and installation enterprises shall reduce the number of “fixed worker”
gradually. In the future they shall not, in principle, recruit any ‘fixed worker’ except skilled
operatives necessary to keep the enterprise technically operational. They shall enter into an
employment contract with the recruits (‘contract workers’) for a limited number of years. The
enterprises shall increase the proportion of the ‘contract workers’ in their work force.”

On the other hand, because of the “Separation of management from field operations”
launched in 1984, the general contracting companies and specialist companies do not directly
employ a field workforce today. They just employ the labour-only subcontractors for field
operations.

Table 19 Total permanent workforce and permanent construction workforce

Year Total (104 persons) Construction (104 persons) Construction/total (%)

1978 9,499 623 6.56
1980 10,444 710 6.80
1985 12,358 900 7.28
1986 12,809 922 7.20
1987 13,214 946 7.16
1988 13,608 955 7.02
1989 13,742 900 6.55
1990 14,059 896 6.37
1991 14,508 940 6.48
1992 14,792 995 6.73
1993 14,849 1,153 7.76
1994 14,849 1,072 7.22
1995 14,908 1,053 7.06
1996 14,845 1,035 6.97
1997 14,668 1,004 6.84
1998 12,337 846 6.86
1999 11,773 778 6.61
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing

Table 19 shows the number of workers in the economy as a whole, and the number of
construction workers, who have more or less permanent employment status. They enter into
contract of employment with the employing enterprises for a certain period of time and

31
regularly renew it, usually at an interval of three years. They are in effect permanent
employees. The construction workers in this category include administrative, professional,
technical and clerical staff. Workers who have been retrenched and are now working for their
previous employers on a temporary basis are not included.

6.3 “Cradles of building craftsmen” and “Construction Labour Bases”

Cradles of building craftsmen

In many rural places, villages, townships or county towns, in China there has always
been a tradition of itinerant building craftsmen handed down from ancient times. The
building craftsmen have made their living by offering their building service. Building for
other people is one of their means of subsistence. For example, in Hebei province
surrounding Beijing there have been many families whose previous generations, as
craftsmen, were recruited by Yuan, Ming and Qing Empires to build and/or refurbish the
palaces, tombs and other facilities of royal families in Beijing, Chengde and other places. The
craftsmen, from generation to generation, have walked around the country to sell their
building service. In such places there has been established a sound master-apprentice system.

Huantai County in Shangdong province is one of such places and was named by a
former top government official in 1985 as a “cradle of building craftsmen” because many
people from there became well-skilled building craftsmen. Since then all the said places are
called by this name. Such craftsmen have been offering their service to urban employers
such as construction companies. The building booms that emerged in 1980’s and have
continued up to now have created a lot of employment opportunities for them. The people
from the cradles of building craftsmen are much more competitive than those from other
parts of the country. The cradles of building craftsmen are scattered in a few of provinces
such as Hebei, Shandong, Henan, Jiangsu and Sichuan. In Jiangsu province alone, 11
counties or cities have been given the name.

Construction labour bases

Contrasting with this tradition of skills from the rural areas, the urban construction
enterprises have become more and more management-oriented. It has become more and more
difficult for them to recruit cheaper labour force in urban areas. Consequently, they have to
rely on the rural areas for their labour force, especially unskilled and semi-skilled labour.

The existence and development of the cradles of building craftsmen can certainly
meet their needs for cheaper labour. However, the skills, knowledge and experience of the
rural building craftsmen and other labour are not keeping pace with the fast changing
environment and cannot meet the requirements of the modernized construction activities in
urban areas.

Since 1989, in order to raise their skills to meet certain standards, the sending of rural
labour to urban areas has become formalised between the respective local governments. The
labour-sending governments and the labour-receiving governments in the major cities that
need a great deal of construction labour have entered into agreements on training and
employment of the rural labour. The cradles of building craftsmen under this arrangement
have been designated as “Construction Labour Bases”.

32
 For example, four counties in Jiangsu province, i.e. Qidong, Jiangning, Jintan and
Suining were among the 30 counties that were first designated as Construction Labour Bases
by the MOC, the Ministry of Agriculture and the State Council Leading Group of Economic
Development in Poor Areas in 1989. The MOC has played an essential role in forming and
fostering the Construction Labour Bases. It issued in the joint names of the MOC, the
Ministry of Agriculture and the State Council Leading Group of Economic Development in
Poor Areas the “Circular on formation of first 30 Construction Labour Bases in China (No.
Jianshi [1989] 502)” in 1989. In 1992 the MOC issued the “Tentative Rules of
Administration of Construction Labour Bases” (No. Jianshi [1992] 34), intending to bring
the development of bases on the right track. By 1990 the number of Construction Labour
Bases amounted to over 60.

The Construction Labour Bases have already become major sources of the workforce
needed for construction activities in major urban centres in China, such as Beijing, Shanghai,
Tianjin, Chongqing, Guangzhou, Shenzhen, Wuhan, Chengdu and other coastal cities. For
example, there have been 7 major state owned construction enterprises under direct
supervision of Beijing Construction Commission since 1984. In 1989 the labour force
employed by the seven corporations from the Construction Labour Bases represented 34
percent of their total labour employment, while in 1995 this figure became 58.25 percent. The
labour force from outside Beijing represented 70 percent of the total workforce taking field
operations. 6

An historic perspective of the construction workforce employed in Beijing is shown

in Table 20.

Table 20 Breakdown of the incoming construction labour force employed in Beijing

Number of Estimated or registered Estimated number of Number of incoming

Construction number of incoming labourers from construction
Labour construction workers Construction Labour companies
Bases Bases
1989 22 100,000 - 143
1990 - 214,000 - -
1991 22 200,000 - 100
5/1992 33 - - -
7/1993 41 248,300 135,900 -
7/1994 - 345,000 189,600 -
6/1995 51 542,400 469,300 162
1996 49 423,700 276,500 -
1997 49 - - 146
1999 60 640,000 - -
Source: Reports prepared by Incoming Construction Force Administration Office under Beijing
Construction Commission from 1991-1997

6
Zhu He-Ping et al, Construction Labour Market in China, China City Press, Beijing, 1997

33
 Table 21 provides a breakdown of the total construction workforce in 1996 supplied
to Beijing by the source provinces that have set up the Construction Labour Bases.

Table 21 Number of bases supplying construction labour force to Beijing in 1996

Source 1996
province
Number of Construction Labour Number of persons from these labour bases
Bases
Hebei 23 127,000
Jiangsu 11 103,000
Henan 4 72,300
Sichuan 6 50,400
Anhui 3 26,700
Shangdong 1 19,800
Hubei 1 24,500
Total 49 423,700
Source: Incoming Construction Force Administration Office under Beijing Construction Commission

7
6.4 Incoming construction force administration offices

The two factors of increased agricultural productivity, mainly attributable to the

reform made in the rural sector in the late 1970s, and the growth of rural population have
been releasing a huge amount of labour force from agricultural production activities. The
surplus rural population has been migrating to urban and more developed areas, especially
the major and coastal cities such as Shenzhen, Guangzhou, Beijing, Shanghai, Tianjin,
Chongqing, Wuhan, Xiamen, and Shenyang etc. The urban construction companies are
among the major employers of them. However, the majority of them are not adequately
educated, skilled and trained, nor well-organized and disciplined, on one hand. A few of them
even make some unpleasant disturbance to the urban communities. On the other hand, some
construction companies take advantage of their lack of knowledge of payment and other
employment terms, paying them less than should be paid.

In order to bring the rural people seeking construction jobs under control and protect
their interests most of the municipal construction commissions have set up an office, called
Incoming Construction Force Administration Office. The Incoming Construction Force
Administration Office under the Beijing Construction Commission is a typical example of the
offices. It was set up in 1987 and is now staffed with 50 people with 40 formal employees.
The office has set up its branch offices in the districts or counties under Beijing Municipality.
It is responsible for handling applications of the construction workforce from outside of
Beijing for entering the construction labour market in Beijing and having them registered,
licensed and skill and/or qualification appraised. It acts as the intermediate between the major
employing construction companies resident in Beijing and under the supervision of Beijing
Construction Commission and the incoming construction workforce.
The office charges the incoming construction workers 24 Yuan per person a year for
its administration service. In addition, the incoming worker is charged by Beijing Labour
Bureau 95 Yuan for a work permit a year, by Beijing Public Security Bureau 98-188 Yuan

7
Interview with Wang Hong-Ming (an official from the Incoming Construction Force Administration Office
under Beijing Construction Commission) by Lu You-Jie, 29 November 2000

34
for a temporary residence permit a year and etc. 8 The offices provide various services to the
incoming construction workforce such as legal, technical and management training, as well
as settlement of industrial relation disputes. They charge the participants in the training
programmes enough to compensate the training cost plus overheads.

It is the existence of such incoming construction workforce offices that has brought
the flow of the rural construction labour force into urban centres under control of the host
governments. On the other hand, they are also responsible, in the authors’ view, for a
substantial shift towards labour subcontracting over the past 15 years. The offices require that
the main contractors and subcontractors hire ‘organised’ labour instead of casual, individual
labour. The ‘organised’ labour means the labour force is channelled through a mutual
arrangement of sending and receiving government agencies and such labour force is
organised as labour only subcontractors. In most cases, at least 90 percent, the main
contractors and subcontractors hire their temporary labour through 'labour subcontractors', as
opposed to employing temporary workers directly. But the main contractors and
subcontractors are allowed to employ a small amount of casual temporary labour, as needed,
directly from the labour markets under the administration of labour bureaus.

6.5 Resident offices of construction workforce supplying governments 9

The governments in the Construction Labour Bases have also set up their resident
offices in the urban centres employing their labour force. The resident offices are responsible
for organizing and coordinating the construction workforce from their own places in entering
the construction markets in the employing cities and bidding for construction contracts
therein. They work hand in hand with the incoming construction workforce administration
offices as mentioned above in order to meet the requirements of the host governments and
gain as big revenue from exporting their surplus construction labour as possible.

6.6 Trade unions

Generally speaking, each of the state owned and collective enterprises has a “trade
union”. The trade union is an organization under the close control of a branch committee of
the Communist Party of China in this enterprise.

The trade unions are not so independent as their counterparts in Western countries.
All the trade unions formed in the enterprises and the other organizations are organized into
one single multi-tier hierarchy. At the top of hierarchy there is China General Trade Union.
We can call such a trade union “party-led trade union”. As in the other sectors, all the
permanent employees of state owned and collective construction companies are in this
“party-led trade union”. The party-led trade union can do no more than the party committee
permits. It is hard to imagine that a party-led trade union could negotiate anything like wages
with the enterprise management appointed by the government.

The situation, however, is changing because of transition of China from a planned

economy to a market economy. More and more private and foreign firms or companies have

8
Zhu He-Ping et al., op.cit.
9
see footnote 7

35
emerged in China since 1980s. As a result, the Communist Party of China has lost direct
control over the employees in those private and foreign companies, on one hand. On the other
hand, the civil rights of the workers employed in the private or foreign companies cannot be
so fully protected as those who work for state owned and collective enterprises.

In view of this fact, a clause was included in the Company Law of the People’s
Republic of China that was passed by the Standing Committee of the National People’s
Congress on 29 December 1993. According to this clause the employees in all the firms,
companies and other organizations, whether state owned and collective enterprises, or private
and foreign companies, are allowed to organize their trade union. It will take time to see how
an independent trade union is formed, how many employees will be in that trade union and
what role it can play in protecting the rights of the employees.

The trade unions, either the party-led trade union or the independent trade union
being formed in private and foreign construction firms, are not any barriers to recruitment of
the construction labour force. Instead, it is the construction commissions and other
government agencies of both Construction Labour Bases and the urban centres in need who
keep control over the recruitment of the construction workforce.

6.7 Terms and conditions of work in the construction sector

As in other countries, the construction industry is not attractive to young people,

especially those holding urban resident status. Construction work is viewed as a 3D job
(Difficult, Dirty and Dangerous). China Academy of Social Sciences made an opinion poll in
July and August 1999. A sample of 2,599 young people of older than 16 and with urban
resident status in 63 cities of China were asked for their opinions of 69 selected occupations.
Being a construction worker was ranked the lowest. 10

It is another story, however, for the young people from rural areas. To be employed
on construction sites in urban centres is the only way for many of them to get rid of poverty
and become better off. Many young people have earned in a few years a sum of money
enough to make an investment in agriculture. Therefore, more and more young people come
to major urban centres to take the jobs on the construction sites.

The average annual pay for construction personnel in SOEs and urban collectives is
shown in Table 22. The average construction wage in 1999 was only slightly above that in
manufacturing, but well above the average agricultural wage of 4832 yuan.

However, the annual earnings of temporary workers are much lower than those of
permanent employees working on the same site and labour-only sub-contractors tend to pay
their employees, especially those from the rural areas, less than they should. Moreover, rural
construction workers cannot get full payment until the end of a year. During their
employment on a site the employers just make an on-account payment to them, hardly
sufficient to cover food and other daily expenses. The late payment is partly due to the late
payment from the project’s owner to the contractor, but mainly due to the fact that the labour-

10
Qing Lian-Bin, The sandwiched urban group in sociologist perspective, Beijing Youth Daily, 25 December
2000, p.18

36
only subcontractors use the late payment as a means of bringing the rural labour force under
their control and earn the interest on the sums that should have been paid timely.

Rural labourers work over 10 hours a day, on average, without holidays, according to
a survey and they are not always well paid. Many of the rural labourers do not pay enough
for food. They eat very simply, spending no more than 5 Yuan on meals a day. Many of them
just save money to take home. To save money they set up their own kitchens and cook meals
themselves. The kitchens are equipped and maintained very badly. 11 They complain to the
employing companies to seek better terms and conditions of work.

Table 22 Average annual payments to construction personnel at end of year (yuan)

Year National averageState-owned construction Urban collective construction

enterprises enterprises
1978 714 760 594
1980 855 924 716
1985 1,362 1,532 1,101
1986 1,536 1,731 1,232
1987 1,684 1,882 1,380
1988 1,959 2,192 1,597
1989 2,166 2,419 1,763
1990 2,384 2,667 1,935
1991 2,649 2,924 2,216
1992 3,066 3,406 2,554
1993 3,779 4,182 3,182
1994 4,894 5,498 3,936
1995 5,785 6,512 4,677
1996 6,249 6,992 5,092
1997 6,655 7,388 5,466
1998 7,456 8,171 5,941
1999 7,982 8,734 6,296
Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing,
2000

A part of the complaints have received active response. For example, the host
governments have imposed regulations on the pay rates to construction workers and
labourers. They set and publish the standard pay rates regularly to keep the labourers and the
public as a whole informed of how much they should be paid. Table 23 is a schedule of
standard pay rates, valid for November of 1998, prepared and published by the Construction
Norms Administration Office under the jurisdiction of the Shanghai Construction
Commission. These rates are roughly comparable with those in Beijing where a skilled
worker and a labourer should be paid 25 Yuan and 20 Yuan respectively, for an eight hour
working day. At the time of writing in January 2001, the pay rates in Beijing remained the
same as two years earlier. 12

11
Zhu He-Ping et al., op.cit.
12
see footnote 7

37
Table 23 Schedule of standard pay rates valid for November of 1998 in Shanghai

Trade Position Rate (Yuan/working day)

1 Builder’s work Skilled worker/operative 23-29
2 Sub journeyman/unskilled labour 17-23
3 Erection/installation work Skilled worker/operative 31-37
4 Sub journeyman/unskilled labour 19-24
5 Fitting out/finishing work Skilled worker/operative 32-38
6 Sub journeyman/unskilled labour 19-25
7 Municipal work Skilled worker/operative 25-30
8 Sub journeyman/unskilled labour 19-24
Source: Construction Times, 19 November 1998, pp.4.

The terms and conditions of work in construction industry vary from place to place.
Generally speaking, they are much better in major cities such as Beijing, Shanghai, Tianjin
and Shenzhen than in small cities and remote areas. However, the variations between cities
are not so big that labourers will move around just because of the differences in payments.

The conditions of work have been greatly improved in recent years. As required by
the governments and pressed by the growing competition for skilled workers the employing
construction companies in major urban centres have to make reasonable accommodation and
other facilities available to the labour force. Some living areas of construction workers have
been provided with amusement facilities such as reading room, table tennis, TV room and
etc.

Of course, there are still many construction sites where the living facilities are not as
satisfactory as expected. There is a great room for improvement. For example, the shabby
huts are dirty and crowded, prone to mosquitoes, rats and other pests. They are neither well-
ventilated in hot weather nor well-heated in cold weather. There are no proper places for
workmen to have meals. Workers are often found to have their lunch and supper outdoors,
exposed to dust in the air, without dining tables and seats.

38
7. TRAINING AND SKILL REQUIREMENTS FOR CONSTRUCTION

7.1 Overview

In China the formal education is a three-level system, i.e. primary, secondary and
tertiary. Primary education takes six years, while secondary education takes three years in
junior middle school and three years in high school. Tertiary education includes
undergraduate and graduate curricula. Undergraduate study takes three or four years.
Postgraduate study normally requires two years for a master degree and five years for a
doctoral degree. The education system in China is similar in many respects to its counterparts
in western countries with both general and vocational education. However, vocational
education and training can start for some students as early as completion of primary school.
Others transfer from general to vocational education after completing middle or high school.

According to a survey made by the Incoming Construction Force Administration

Office under Beijing Construction Commission, the rural construction work force is not so
well educated as their urban counterpart. Fifty percent of the over 600,000 rural labourers
working on the construction sites in Beijing have received no more than primary education.
Less than 40 percent of them have received an education higher than junior middle school.
Over 10 percent of them are illiterate or semi-illiterate. 13

Vocational education and training shall be carried out as provided in the Vocational
Education Law of the People’s Republic of China that was passed on 15 May 1996 by the
Standing Committee of the National People’s Congress. The law came into effect on 1 June
1996. It states that the labour force shall be trained at three levels, that is junior, middle and
senior level. Roughly speaking, the persons receiving junior level vocational training are
required to have received primary education; those receiving middle level vocational
education shall have already received the education in a junior middle school, while the
people seeking senior level vocational education shall have an high school education
background.

The Vocational Education Law identifies six purposes of vocational training, i.e.
prior-employment, occupation change, apprenticeship, on-the-job, job change and other
purpose training. The governments at county and city levels, industrial associations and
employing enterprises and other organizations are encouraged to provide training, separately
or jointly, if they meet certain requirements.

A well-organized vocational training network for the construction industry has

already been established throughout the country. The local governments at village, township,
town, county and city levels, especially those of Construction Labour Bases have made a
heavy input to various training programmes. While in the city where each of the 31
provincial (municipal or minority autonomous) governments meets there are at least two
formal construction-oriented vocational schools at high school level. These vocational
schools are usually under the joint supervision of the provincial construction commission and
the MOC.

13
Propaganda Section of Beijing Chapter Committee of Communist Party of China, Melting into Beijing-
experience of Beijing Construction Commission in training incoming construction workforce, Beijing Press,
June 2000

39
 The vocational schools can be divided into two major categories, construction
operative schools and construction engineering schools. All of them recruit the students who
have received junior middle school education.

The courses offered in the construction operative schools are very much site operation
oriented. The students can be employed in construction companies as skilled operatives when
they finish their three-year study. The trades of the operatives include carpenters,
stonemasons, bricklayers, plasterers, painters, asphalt tanking workers, steel bar fabricators &
fixers, structural steelwork fabricators & erectors, concrete placing workers, welders,
plumbers, pipe fitters, air conditioning ductwork fabricators, and electricians.

The students of the construction engineering schools are taught more science,
engineering and humanities than in the construction operative schools. They can get a job as
site supervisor or staff taking technical or managerial duties when they finish their three or
four-year study. They are able to take the national competition examination for entrance into
universities if they wish.

In addition to the formal vocational schools as above-mentioned, many large-scale

state-owned construction enterprises have set up in-house vocational schools at junior middle
school level and training centres. There are various other short-term training programmes,
many of them designed to address specific issues, such as construction safety, quality
inspection, construction site fire prevention, construction law, labour law etc.

The governments, at township, town and/or county level, of the Construction Labour
Bases have set up their own construction operative and/or skilled labourer schools or training
centres, at their own cost, since the early 1990s. The schools and training are intended to
make their construction labour force competitive in obtaining labour supply contracts for the
construction projects in urban centres. They offer training service either on full time or part
time basis. Many of the training centres are market oriented and recover the cost of training
by charging the employers of trainees.

The MOC has established long term bilateral academic links with six vocational
education organizations in the United Kingdom, the United States of America and Germany,
respectively.

7.2 Informal skill acquisition

Just like in the other parts in the world, the construction workers may acquire their
skills in a vocational school when they have received education in a junior middle school, by
taking on traditional apprenticeship training or simply on the job. In general, they choose to
attend the formal vocational schools if they hold urban residence status and can afford to,
otherwise they choose to follow an apprenticeship arrangement if they are born in rural areas
and can neither afford nor have access to the formal vocational education.

A significant part of the rural labour force working today on the construction sites in
urban areas of China has acquired their skills as craftsmen through traditional apprenticeship

40
training. Their skills thus acquired often do not fully meet the requirements of governments
and therefore have resulted in poor workmanship.

7.3 Role of various organizations in the provision of training

The governments at various levels, including the MOC, Ministry of Labour and
Ministry of Education, play a very active role in planning, organizing, directing and
regulating construction related vocational education and training.

For example, as early as in 1987, the MOC prepared and issued a course syllabus as a
guideline in preparing teaching materials for training foremen. In 1988 the MOC prepared a
classification standards of skilled operatives in the construction industry. The ministry then
gathered a group of people, including vocational school teachers, managers of construction
companies and government officials who wrote a series of textbooks with reference to the
syllabus.
On 2 March 1995 the MOC issued to the provincial construction commissions, China
Construction Education Association and a number of other organizations two documents
aimed at promoting construction related vocational education and training throughout the
country. The two documents are titled “The Outline Proposals For Reform And Development
Of Construction Education” and “The Proposals For Development Of Construction
Vocational Education And Training”, respectively. 14

On 8 December 1995 the MOC issued another document regarding construction

education and training that is titled “The Proposals For Implementation Of Academic,
Professional And Operative Leaders Preparation Programme (Jianjiao [1995] No.714)”.
Over ten million site operatives/skilled workers shall be prepared for construction industry by
the end of 2010, according to the programme. 15

On 29 November 1997 the MOC prepared and published “The Technology Policies
Towards Development Of Construction Industry For 1996-2010” that incorporates the
construction education administration policies as an important part. The latter requires
certification of construction operatives and skilled workers. Worker certification means that
all the site operatives shall be well trained before taking jobs on the sites. 16

The China Construction Related Education Association is an association affiliated to

the MOC that is also involved in various training activities such as writing and publishing
textbooks, and offering training programmes to the construction companies.

In addition, the local governments, especially those of the Construction Labour Bases,
are important sponsors of various vocational education and training programmes. For
example, the Construction Administration Bureau of Jiangdu Municipal Government in
Jiangsu province spends over one million Yuan every year on their construction labour
training programmes. 17

14
China Building Industry Yearbook 1996, China Construction Industry Press, Beijing 1996, pp.40-45
15
China Building Industry Yearbook 1996, China Construction Industry Press, Beijing 1996, p.531
16
China Building Industry Yearbook 1998, China Construction Industry Press, Beijing 1999, p.368
17
Zhu He-Ping et al., op.cit.

41
 The lowest level trade unions have never been involved in any construction related
training activity.

7.4 Views of employers on the ‘quality’ of the labour force and skill
requirements

As mentioned above, the work force used in the construction industry comes from
two major distinct sources. Generally speaking, the operatives educated or trained in
construction operatives’ schools perform quite well and can satisfy the requirements of their
employers. The skilled labour from the Construction Labour Bases is competent as well.
However, widely held views of the employers are that the unskilled labour from rural areas
are not trained adequately to meet the needs of the construction industry in view of
construction technologies becoming increasingly complex.

The construction communities in China have already felt the acute shortage of skilled
trades because of the increasing portion of the unskilled rural labour in the total construction
work force. The decrease in the number of skilled workers is in turn due to the fact that
construction work is becoming less attractive to the urban young people than two decades
ago. This is true even at management and professional level, let alone at site operation level.
For example, the students in civil/structural engineering from Tsinghua University, where
one of the authors teaches, wouldn’t accept a management position offered by a major state-
owned construction company headquartered at Beijing. The property development field has
become more attractive to them than construction work.

42
8. HEALTH AND SAFETY IN CONSTRUCTION

8.1 Legislation on safety and health in construction

China has put in place a relatively complete set of legislation in relation to safety and
health in construction. The major laws, regulations and ordinances in connection therewith
are listed as follows:
The Constitution of the People’s Republic of China (Article 42: The citizens of the
People’s Republic of China shall be entitled to work and perform obligations arising there
from. The state shall make all efforts to provide employment opportunities, protect against
damage and injury, improve terms and conditions of work and increase their remuneration
and benefits on a basis of increased output. Article 43: The working citizens of the People’s
Republic of China shall be entitled to rest.) (15 March 1999)
The Criminal Law of the People’s Republic of China (14 March 1997)
The Labour Law of the People’s Republic of China (5 July 1994)
The Construction Law of the People’s Republic of China (Chapter 5 Safety
Administration in Construction)(1 November 1997)
The Trade Union Law of the People’s Republic of China (Article 23: Trade union is
entitled to make comments on and suggestions to improve terms and conditions of work,
which the employing enterprise and the responsible government agencies shall carefully
consider and take actions in response to. Article 24: Trade union is entitled to take actions, as
appropriate, when workers are forced to work in dangerous conditions or there exist obvious
potential dangers and/or hazards.) (3 April 1993)
The Procedure Of Safe Site Construction And Installation Operations issued by the
State Council (24 May 1956)
The Instructions To Construction And Installation Operatives For Safe Site Operations
prepared and issued by the State Construction Engineering Bureau (the predecessor of the
MOC) (1 June 1980)
The Resolutions For Enforcement Of Construction Worker Body Protection issued by
the State Construction Engineering Bureau (9 April 1981)
The Provisional Regulations On Improvement Of Safety In Construction Of Collective
Construction Enterprises issued by the MOC (20 August 1982)
The Ordinances On Safety In Construction And Installation Of State Owned
Construction Enterprises issued by the MOC (27 May 1983)
The Procedures For Major Construction Accident Investigation And Reports issued by
the MOC (1 December 1989)
The Standards Of Construction Safety Inspection (JGJ59-99) approved by the MOC (1
May 1999)

8.2 Safety administration in construction

According to the laws, regulations and ordinances as listed above, the relevant
government agencies such as labour bureau and construction commission, construction
companies, trade unions and construction workers shall share the responsibility for safety in
construction. Safety personnel are appointed or safety organizations set up at various levels
on a construction site and within a construction company. Every person who is entitled to be

43
on a construction site shall be trained in safety knowledge and rules before he or she enters
on the site.

Every construction site is regularly inspected for compliance with safety regulations.
The inspections cover general safety administration, site orderliness and housekeeping,
scaffolding, excavation shoring, formwork, protective clothing, dangerous openings
(staircases, lift shafts, openings, pits and shafts), use of electricity, material hoists, external
hoisting lifts, tower cranes and other construction tools and equipment.

8.3 Safety performance in construction

The MOC launched a second five-year safety campaign in 1995 by issuing a

document numbered Jianjian [1995] No. 688 urging to meet the safety requirements set forth
in the laws, regulations and ordinances in force in the five years beginning from 1996. All the
construction activities throughout the country are required to be carried out in strict
accordance with the safety codes and standards in construction set by the MOC and other
central government agencies such as the Ministry of Railways, the Ministry of
Transportation, the Ministry of Water Conservancy. The MOC would examine the
construction sites for their safety performance every two years, as provided in the document.

A task force made up of the officials from the MOC and the representatives from
China Construction and Building Material Industrial Trade Union made a safety inspection
tour of the provinces, municipalities and minority autonomous regions, except Tibet, in June
and September of 1997. The safety inspection tour covered 543 construction sites of 461
construction related enterprises in 60 cities or towns. Their safety performance was appraised
in accordance with the Standards Of Construction Safety Inspection (JGJ59-88) that has been
updated and renamed as the Standards Of Construction Safety Inspection (JGJ59-99).
Overall, 432, that is, 80 percent of the 543 construction sites, turned out to have met all the
safety requirements. Of these, 272, that is, 50 percent of the 432 construction sites that passed
the inspection, had achieved a high safety record. The inspection revealed 11,188 problems
and potential dangers, classified as shown in Table 24.

Table 24 Safety problems revealed in 1997 and 1999

Safety Items Number of problems

1997 1999
General safety administration 1,881 651
External lifts, portal frame (head frame) for hoisting purpose 1,484 574
Protective clothing and dangerous openings 1,558 805
Use of electricity 2,357 1,067
Tower cranes 505 526
Construction equipment and tools 1,293 580
Site orderliness and housekeeping 244
External scaffoldings 2,110 1,023
Excavation shoring and form work 147
Total 11,188 5,617

44
 In 1999, another group of officials from the MOC and representatives from China
Construction and Building Material Industrial Trade Union made a second safety inspection
tour of the same areas as in 1997. 18 They inspected 506 construction sites of 468
construction enterprises in 59 cities or towns. Their safety performance was appraised in
accordance with the Standards of Construction Safety Inspection (JGJ59-99). The 468
construction enterprises included 264 state owned construction companies, 131 collective
construction companies, 36 shared construction companies and 37 construction companies of
other ownership. Overall, 491, that is, 97 percent of the 506 construction sites, were found to
have met all the safety requirements. Of those, 356, that is, 70 percent of the 491 construction
sites, achieved an excellent safety record. The defects found through this inspection
decreased in number significantly as compared with 1997, which can be seen in Table 24.

8.4 Injuries and deaths caused by accidents in construction in 1997

The MOC prepares and publishes an annual report on injuries and deaths in
construction, based on the returns submitted by the provincial, municipal or minority
autonomous region’s construction commissions. According to such an annual report prepared
in 1998, the injuries and deaths caused by accidents in construction in 1997 were reduced
significantly in comparison with the previous years. 19 There occurred 1,145 accidents in
construction that caused 1,280 deaths and 389 serious injuries in 1997, according to the
returns submitted from the 30 provinces, municipalities or minority autonomous regions,
except Tibet. The occurrences of accidents, deaths and serious injuries decreased by 387 (25
percent), 494(28 percent) and 163 (30 percent), respectively, as compared with 1996.

As pointed out in the annual report, the MOC worked out a proposal in 1997 to urge
construction companies to insure against accident to the workmen employed by them as
required under Article 48 of the Construction Law of the People’s Republic of China. The
Article reads like this: the construction enterprises shall insure against accident to the
workmen employed by them to operate in dangerous conditions of work and pay the
premium. The proposal was, among other things, intended to urge the construction companies
to improve their safety administration and performance. Shanghai, Shandong and Zhejiang
were chosen to test the proposal.

8.5 Other safety activities

In December of 1996, the MOC, the State Industry and Commerce Administration
Bureau and the State Quality and Technology Monitoring Bureau prepared and issued a
document entitled “Notice On Sample Survey Of Protective Clothing And Other Protective
Items Used For Construction ( Jianjian [1996] No. 616”). The document was intended to
mobilize a task force to control the illegal manufacturers of poor quality protective clothing
and other protective items. To ensure success the MOC called a meeting in Zhibo, Shandong
province, on 7 March 1997 to align the local government officials and make a coordinated
plan. During the period from March to July 1997 the MOC and the other two agencies
launched a quality survey and inspection campaign. The campaign touched 859 construction

18
MOC, “Summary of findings of a nationwide construction safety inspection in 1999”, Construction Safety,
April 2000, pp.6-9
19
China Building Industry Yearbook 1998, China Construction Industry Press, Beijing, 1999, pp.115-120

45
sites and 7,331 items of protective items. Only 4,658 items, equivalent to 64 percent, were
found to have met the standards set by the governments. Then actions were taken to remove
the defective items. The producers and sellers of the poor quality products were required to
take actions to improve quality or close down. The campaign has become very successful as a
whole.
The MOC prepared and issued another document entitled “Provisional Regulations
On Safety Training Of Staff And Workers In Construction (Jianjiao [1997] No. 83)” in May
of 1997, requiring that all the authorized representatives, project managers, full time safety
personnel, technical staff, special tradesmen and other workmen shall receive specified safety
training at specified times. According to this document, the MOC should be responsible for
preparation of the syllabus and textbooks for various training programmes for safety, for
training trainers. The Construction Safety Committee under the China Federation of
Construction Industry was asked to give effect to all the arrangements.

46
9. DISCUSSION, SUMMARY AND CONCLUSIONS

This paper has tried to capture the essence of the construction industry in China, in
terms of its image, its employment characteristics and skill requirements for the 21st Century.
The relationship of these three concepts has not been explored here, as this would be more
appropriate in a paper oriented towards theoretical content. Instead the paper has attempted to
capture the threads that link the image of the industry to the factors contributing to that image
in the case of China. It has also identified ways in which the image can be raised, and the
various stakeholders involved. Naturally, the nature of employment and skill requirements of
the people working within the industry are linked to its image. To clarify what the image of
the construction industry means, this discussion section starts off with a short explanation in
the following paragraphs.

Image is not well defined at the level of an industry, although it has been established
at the level of commercial and public sector organisations. An authority on marketing, Kotler,
defines image as:“the set of beliefs, ideas and impressions that a person holds of an object.”
20

But despite the difficulty of definition, there is growing recognition of the concept as applied
to the construction industry. 21

Several writers on the industry have captured the essence of the negative
characteristics when talking about the 3 Ds of construction: Difficult, Dirty and Dangerous. It
is interesting to note that in Japan, they have a similar triplet of the 3 Ks: Kitsui (hard), Kitani
(dirty), and Kiken (dangerous), which refer to occupations in the lowest status of society,
including construction. 22 It is well known that the Japanese construction industry has long
had difficulty in attracting workers to sites.23 Yet, regrettably, the positive characteristics of
challenging, satisfying work and task variety are less prominent in the public perception. This
has been attributed to the fact that the industry does not deal directly with most of the
public.24

A recent example of the two sides of this image is given in a report on the Hong Kong
construction industry (The CIRC Report). The opening statements of the Executive Summary
present a considerably positive nature:
“ The Construction industry has over the years produced numerous examples of
outstanding architecture and engineering excellence. It has collectively contributed to
the remarkable social and economic transformation of our society.” 25
Yet in the very next two sentences the report focuses on the negative performance and
widespread public concern. It was written after several highly-publicised construction
scandals forced the government to take some sort of action, notably in the public housing

20
P. Kotler, Marketing Management: analysis, planning and control, Prentice-Hall of India, private Ltd., New
Delhi, 5th edition, 1984, p.608
21
Sir Michael Latham, Constructing the team: Final Report of the Government/Industry Review of Procurement
and Contractual Arrangements in the UK Construction Industry, HMSO, London, 1994, pp.66,71-72
22
C. Makino, “Japan no party for Brazilian expats”, South China Morning Post, 28 January 2001
23
Y. Hippo, The construction industry in Japan: A survey, Asian Productivity Organisation, Tokyo, 1983
24
Sir Michael Latham, op.cit.
25
H.Tang, Construct for Excellence: Report of the Construction Industry Review Committee, Report of a
committee chaired by Sir Henry Tang for the Chief Executive, HKSAR, 2001

47
sector. 26 In Hong Kong at present, few people would claim that the image of the
construction industry is positive. The contrary would almost certainly be the case.

These examples illustrate the need for the construction industry to take care about its
image. Japan and Hong Kong are among the most highly developed countries in the world,
with the Hong Kong SAR newly emerging into developed country status. The construction
industries operate in a well-established market economy. Yet we can observe the common
characteristics of a weakness in the industry’s image in the eyes of the society each one
serves.

What can we say about Chinese construction industry and its image? First of all there
is a very active, vibrant industry growing very fast. There are regional variations, with the
major cities and coastal regions growing much more rapidly than the central and western
regions. Much is being achieved in terms of quantitative output, yet the quality is found
wanting in many cases. The transition from a planned to a socialist market economy is
steadily progressing, step by step. We agree with the views of renowned scholars Li and
Flanagan 27 in four key points they have made, namely:
1. Further reform of SOEs is needed;
2. The construction price system, although reformed, needs time for industry
participants to make adjustment in their thinking within a market oriented
framework;
3. Further strengthening of the legal system is needed to reduce the incidence of
corruption;
4. Market competition needs to go hand-in-hand with strong development of
professional skills.

The same four points are also supported by World Bank experts, in a key conference
speech, albeit with slightly different wording. 28

Further support is given to three of these points from another source, the Asian
Development Bank, namely:

“The problems encountered by the PRC CI include:

1. Contractors tending to be too specialized and not able to offer a diverse range
of services
2. The quality of bidding is not up to international standards
3. Estimates are based on Government’s regulations and pricing structures,
rather than market prices and actual site conditions; and
4. The numbers of experienced managerial and technical personnel are
insufficient to meet the demands of the industry.” 29

26
Hong Kong Housing Authority, Quality Housing:partnering for change, Consultative Document, January
2000, HKHA, Hong Kong
27
Li Shi-Rong and R. Flanagan, “How far away towards a market economy? Chinese construction industry in
transition”, Proceeedings of CIB W89 Beijing International Conference, 21-24 October, 1996 (CD-ROM)
28
A.Daud and Y.Zong, “An overview of the construction industry in China”, paper delivered at the CIB W89
Beijing International Conference, 21-24 October, 1996 (not included in proceedings)

48
 Some of the points made by Li & Flanagan have a stronger implication for the image
of the industry than others. For example, the first two relate more to the efficiency of the
process. An improvement in this is likely to raise the image positively. The last two relate to
the ethical behaviour of the industry. There are some observers of the Chinese construction
industry who believe that the personal values and behaviour, the values or morality of
society, are the most important factor contributing to its development. 30 One of the authors
has found good support for this view through a series of interviews. 31 As far as the authors
are aware, the effect of unethical behaviour by industry participants upon the image of the
construction industry is not a relationship that has been the subject of research. Yet from a
common sense viewpoint, we believe that there are very few people who would be positively
attracted towards the industry, because of its low ethics. Rather the reverse would apply.
However, this is not something that has been empirically tested.

In its own unique way, the Chinese construction industry is going through a very
significant transition, economically, as well as socially and in a business sense. Whereas in a
fully-fledged market economy there is a large group of principal stakeholders, each having
recognized roles, and thus have representation in social dialogue, the situation in China does
not fit that model. Instead we have strong leadership by the government through the MOC,
together with other levels of government. For example, representatives come from province,
autonomous regions and municipalities level, county and districts. The other players include
representatives of the SOEs, the urban and rural collectives. As described in the earlier
sections, the trades unions do not play a strong role in the social dialogue. The Construction
commissions and other government agencies of both Construction Labour Bases and their
urban centre counterparts control matters in the labour force. Although there are no obvious
barriers to social dialogue, the lack of representation of some stakeholders may slow down
the progress towards solutions when problems do arise.

Turning now to the concept of employment characteristics, the picture that emerges
from the literature and the authors’ own experiences, is also one of transition. It is a transition
from the comfort and security of permanent employment with SOEs towards contract work:
from the “Iron Rice Bowl” and “Fixed Workers”, towards flexible short-term contracts and
labour-only contracting. It is an ironic contrast that whilst, on the one hand, in China
mainland the way to improving the industry seems to be to move away from direct & secure
employment conditions, on the other hand the recommendation in Hong Kong is in exactly
the opposite direction! With experience and the more frequent contacts that are taking place
between the HKSAR and the mainland, there are surely lessons to be learned from each
other. Taking the best of both systems would appear to be the best choice. From the Hong
Kong perspective, the need is to change the image that the industry projects to the young
people. If employers can provide more permanent, safer, more satisfying and meaningful
work, this would attract a much better selection of people and it is believed there would be
benefits in all aspects of the industry’s performance.

29
Asian Development Bank, Technical Assistance to the People’s Republic of China for Policies and
Regulatory Framework for the Construction Industry, Paper TAR:PRC30411, 1998, ADB
30
Professor Lu Qian, interview with Paul Fox, 26 November 1999
31
P.W. Fox, “Construction Industry Development: Exploring values and other factors from a grounded theory
approach”, Proceedings of CIB W55 and W65 Joint Triennial Symposium, Cape Town, September 1999, VI
pp.121-129

49
 In the mainland, the informal sector of construction activity, something akin to Do It
Yourself (DIY) but on a larger scale, supplies a significant part of the total demand. It is
estimated that in producing its output it employs about one fifth of the total construction
workforce. Since this work is largely of small works, much of which is domestic/residential,
the closeness to the community of this work and the workers means that the image of
construction is very immediate. Whilst onlookers can see the work is very satisfying and
attractive if it is done well, the “cowboy” builders, or their equivalent peasant farm labourers
may produce such poor quality buildings that it is a discouragement to all potential recruits to
the industry. In Hong Kong, there exists a casual labour force in the renovation and
decoration business. There is widespread public concern over the quality and performance of
this activity. Thus the image has been very poor. The CIRC report, recommends a voluntary
registration scheme to assist customers in choosing a reputable firm.

It must be remembered that one image of the SOEs is that of enterprises overstaffed,
out-of date and being inefficient. At the same time, some members of this same group of
enterprises are competing in the international markets against world leading construction
conglomerates. Thus the image presented to the world is not consistent. The leading firms
are indeed learning quickly through their exposure to international competition.

The third and final aspect of the report concerns the skill requirements for the
industry. There is an acute shortage of skills at all levels, but especially at middle
management level. 32 The rural skills are not keeping pace with the demands, especially from
the rapidly modernizing urban areas. The establishment of “Construction Labour Bases” has
been good and these have become major sources of the workforce in the urban connurbations.
It is encouraging that recognition is given to centres where skills are developed. The “cradles
of building craftsmen” are something to be nurtured. These centres have played an important
part in meeting the demand from employment opportunities created in the sustained building
boom. The image of the industry is strong here, with society recognition given to useful skills
and the steady employment opportunities that these skills provide. The skills of rural workers
need to be enhanced through better education, better skills training, better organisation and
better discipline.

The image of the industry is not attractive to young people, especially urban residents.
By contrast, for young people in rural areas, they see construction occupations as an
opportunity to move out of poverty. However, at the level of the workers much needs to be
done to improve poor working conditions such as long hours, poor hygiene and
accommodation. The image of the industry also influences graduates, and their parents. Thus
positions in government and state-owned design institutes are their first choice for
employment. If these “ideal” jobs are not available, they may spurn employment in rural
construction enterprises, where their skills are much needed. 33 As in the developed world,
the image of the China’s construction industry is important to its future development.

32
J.J. Chen, “The impact of Chinese economic reforms upon the construction industry”, Building Research and
Information, 25:4, 1997, 239-245
33
Lui Feng-Ju et.al. “ Research information : China’s higher education for construction” Building Research
and Information, 27:1, 1999, 56-62

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