WP.

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SECTORAL ACTIVITIES PROGRAMME Working Paper

THE CONSTRUCTION INDUSTRY IN CHINA: ITS IMAGE, EMPLOYMENT PROSPECTS AND SKILL REQUIREMENTS

Lu You-Jie

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and Paul W. Fox

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Working papers are preliminary documents circulated to stimulate discussion and obtain comments

International Labour Office Geneva October 2001

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Department of Civil Engineering, Tsinghua University, Beijing, China 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

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CONTENTS 1. 2. INTRODUCTION BACKGROUND TO THE CURRENT INDUSTRY FRAMEWORK 2.1 History 2.2 Reform programmes for the construction industry in China 2.3 Environment for the construction industry in China 2.4 Legal Frameworks THE VOLUME AND COMPOSITION OF CONSTRUCTION OUTPUT IN CHINA 3.1 Fixed capital investment in China 3.2 Contribution of construction to GDP CONSTRUCTION PROJECT IMPLEMENTATION 4.1 Historical perspective 4.2 New procurement methods 4.3 Construction contracts 4.4 Selection of designer 4.5 Selection of construction companies 4.6 Calling for bids 4.7 Construction marketplaces or ‘Construction Project Transaction Centres’ STRUCTURE AND OWNERSHIP OF CONSTRUCTION ENTERPRISES 5.1 Overview 5.2 Structure of construction industry enterprises in China 5.2.1 Types of construction company by ownership 5.2.2 Types of construction company by size 5.2.3 Types of construction company by trade 5.2.4 Types of construction company by qualification 5.2.5 Types of construction company by sector 5.2.6 Types of construction companies by contractual relationship 5.3 Industrial associations EMPLOYMENT IN THE CONSTRUCTION INDUSTRY IN CHINA 6.1 Numbers employed and distribution 6.2 Permanent versus temporary workers 6.3 "Cradles of building craftsmen" and "Construction Labour Bases" 6.4 Incoming construction force administration offices 6.5 Resident offices of construction workforce supplying governments 6.6 Trade unions 6.7 Terms and conditions of work in the construction sector TRAINING AND SKILL REQUIREMENTS FOR CONSTRUCTION 7.1 Overview 7.2 Informal skill acquisition 7.3 Role of various organizations in the provision of training 7.4 Views of employers on the 'quality' of the labour force and skill requirements Page 1 3 3 3 4 5 8 8 10 13 13 14 15 16 16 17 18 19 19 19 20 26 26 26 27 28 28 29 29 31 32 34 35 35 36 39 39 40 41 42

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HEALTH AND SAFETY IN CONSTRUCTION 8.1 Legislation on safety and health in construction 8.2 Safety administration in construction 8.3 Safety performance in construction 8.4 Injuries and deaths caused by accidents in construction in 1997 8.5 Other safety activities DISCUSSION, SUMMARY AND CONCLUSIONS

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FIGURES 1. Administrative hierarchy of the construction industry in China

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

8 9 9 10 11 12 14 20 20 22 23 25 25 26 27 29 30 30 31 33 34 37 38 44

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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.

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

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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.

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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;

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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

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(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

Ministry of Construction

Provincial, Autonomous Regions, & Municipalities immediately under the 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

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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,

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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

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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.

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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 108 Yuan 667.5 115.2 178.3 1.7050 845.3 174.3 210.8 1.8930 952.0 156.3 321.8 1.9780 1185.2 238.7 409.0 2.3200 1680.5 327.5 535.2 2.9440 2079.4 391.7 649.4 3.4530 2448.8 547.0 795.9 3.7220 3020.0 711.7 1022.1 3.7220 2808.2 570.0 1032.3 3.7660 2986.3 529.5 1001.2 4.7957 3713.8 697.8 1182.9 5.3360 5498.7 1232.9 1242.7 5.5287 9278.8 2231.3 1476.2 5.7763 12312.6 2664.7 1970.6 8.6187 14169.7 3289.4 2560.2 8.3507 16102.2 3660.6 3211.2 8.3142 17660.8 3850.9 3429.4 8.2780 20469.6 4192.2 3744.4 8.2770 21719.0 4190.0 3967.0 8.2770

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: State Statistics Bureau, A Statistical Survey of China - 2000, China Statistics Press, Beijing, 2000

108 Yuan 108 Yuan % of GDP 4862.4 961.0 19.8 5294.7 1230.4 23.2 5934.5 1430.1 24.1 7171.0 1832.9 25.6 8964.4 2543.2 28.4 10202.2 3120.6 30.6 11962.5 3791.7 31.7 14928.3 4753.8 31.8 16909.2 4410.4 26.1 18547.9 4517.0 24.4 21617.8 5594.5 25.9 26638.1 8080.1 30.3 34634.4 13072.3 37.7 46759.4 17042.1 36.4 58478.1 20019.3 34.2 67884.6 22974.0 33.8 74462.6 24941.0 33.4 78345.1 28406.2 35.8 81910.9 29876.0 36.4

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 nonstate owned sectors to make capital investments on an increasing scale.

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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 Stateowned 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
Year Total State Investment Appropriation Domestic Bank Loans Foreign Investment (108 Yuan) Equity Others

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 (108 Yuan) Growth (%)

Year
(108 Yuan)

Technical upgrading Real Estate Development projects rate (108 Yuan) Growth rate (108 Yuan) Growth rate (%) (%)

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 12312.6 6436.7 1994 39.5 2918.6 32.9 2554.1 31.8 14169.7 7403.6 1995 15.0 3299.3 13.0 3149.0 23.3 16102.2 8610.8 1996 16.3 3622.7 9.8 3216.4 2.1 17660.8 9917.0 1997 15.7 3921.9 8.5 3178.4 -1.2 20469.6 11916.4 1998 20.0 4516.8 15.2 3614.2 13.7 21719.0 12618.7 1999 5.9 4418.8 -2.2 4010.2 11.0 Source: State Statistics Bureau, A Statistical Survey of China - 2000, China Statistics Press, Beijing

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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.

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Table 5 GDP and its construction component, 1978-1999
Year 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 GDP Current prices 108 Yuan 3624.1 4048.2 4517.8 4862.4 5294.7 5934.5 7171.0 8964.4 10202.2 11962.5 14928.3 16909.2 18547.9 21617.8 26638.1 34634.4 46759.4 58478.1 67884.6 74462.6 78345.1 81910.9 GDP Index 100.0 107.6 116.0 122.1 133.1 147.6 170.0 192.9 210.0 234.3 260.7 271.3 281.7 307.6 351.4 398.8 449.3 496.5 544.1 592.2 638.4 683.7 Construction Current prices 108 Yuan 138.2 143.8 195.5 207.1 220.7 270.6 316.7 417.9 525.7 665.8 810.0 794.0 859.4 1015.1 1415.0 2284.7 3012.6 3819.6 4530.3 4810.6 5231.4 5442.7 Construction Index 100.0 102.0 129.2 133.3 137.9 161.4 179.0 218.7 253.4 298.7 322.5 295.3 298.8 327.4 396.2 467.5 531.5 597.4 648.2 665.2 725.1 756.2

Source: State Statistics Bureau, China Statistical Yearbook 2000, China Statistics Press, Beijing, 2000

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Table 6 Percentage contribution of major sectors to GDP, 1978-1999
Year
GDP (108 Yuan) % Agriculture Construction Transportation, Post Commerce Mining, manufacture, power, & telecommunications gas, water

% % 1978 3624.1 100 28.1 1979 4038.2 100 31.2 1980 4517.8 100 30.1 1981 4862.3 100 31.8 1982 5294.7 100 33.3 1983 5934.5 100 33.0 1984 7171.0 100 32.0 1985 8964.4 100 28.4 1986 10202.2 100 27.1 1987 11962.5 100 26.8 1988 14928.3 100 25.7 1989 16909.2 100 25.0 1990 18547.9 100 27.1 1991 21617.8 100 24.5 1992 26638.1 100 21.8 1993 34634.4 100 19.9 1994 46759.4 100 20.2 1995 58478.1 100 20.5 1996 67884.6 100 20.4 1997 74462.6 100 19.1 1998 78345.1 100 18.6 1999 81910.9 100 17.7 Source: State Statistics Bureau, China Statistical 2000

% % 44.3 3.8 43.8 3.6 44.2 4.3 42.1 4.3 40.8 4.2 40.0 4.6 38.9 4.4 38.5 4.7 38.9 5.2 38.3 5.6 38.7 5.4 38.3 4.7 37.0 4.6 37.4 4.7 38.6 5.3 40.8 6.6 41.4 6.4 42.3 6.5 42.8 6.7 43.5 6.5 42.6 6.7 42.7 6.6 Yearbook 2000, China Statistics

% 4.8 7.3 4.6 5.5 4.5 4.7 4.3 5.3 4.5 3.8 4.5 3.9 4.6 5.8 4.5 9.8 4.7 9.2 4.6 9.7 4.4 10.8 4.6 10.0 6.2 7.7 6.5 9.7 6.3 10.3 6.1 8.9 5.7 8.7 5.2 8.4 5.1 8.2 5.1 8.3 5.3 8.4 5.4 8.4 Press, Beijing,

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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.

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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 1. Number of projects undertaken 699661 2. Number of contracts obtained through bidding 188001 3. Item 2/item 1 expressed as a % 26.9 Source: State Statistics Bureau, A Statistical Survey of China 2000 1997 678767 223488 32.9 2000, China 1998 1999 649512 257273 260506 102799 40.1 40.0 Statistics Press, Beijing,

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

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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 4

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

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In addition to the Conditions of contract for works of building construction (GF1999-0201) 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.

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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.

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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.

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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.

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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

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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.

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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 (108 Yuan) Number of units Number of losing units Share of losers (%) Per capita productivity (Yuan) By gross output 13,820 14,509 16,171 20,250 27,419 37,079 44,525 48,604 54,627 59,731 66,052 By added value 4,277 4,514 4,895 5,871 7,379 11,064 13,414 15,186 15,897 17,032 18,440

1989 26.4 3,927 1990 16.6 4,275 1991 15.9 4,638 1992 25.5 4,985 1993 40.9 6,363 1994 34.7 7,251 1995 30.9 7,531 1996 20.7 9,109 2,352 22.3 1997 16.7 9,650 2,625 27.2 1998 6.6 9,458 2,639 28.6 1999 24.1 9,394 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

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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 profit (108 Yuan) Number of Units Number of employees (104) Number of losing units Share of losers (%) Per capita Productivity (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

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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 foreignowned 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.

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Table 12 Number and origin of overseas contractors with active projects in China
Country of contractors Number of contractors 1996 3 24 1997 3 18 1 4 2

The United States Japan United Kingdom France 3 Germany 6 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

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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

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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.

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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:

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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

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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
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 Year

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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

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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”.

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

6

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

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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 province 1996

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

6.4 Incoming construction force administration offices

7

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
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
7

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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 9

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

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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

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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)
State-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 Year National average

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 12

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

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Table 23 Schedule of standard pay rates valid for November of 1998 in Shanghai
Position 1 Skilled worker/operative 2 Sub journeyman/unskilled labour 3 Erection/installation work Skilled worker/operative 4 Sub journeyman/unskilled labour 5 Fitting out/finishing work Skilled worker/operative 6 Sub journeyman/unskilled labour 7 Municipal work Skilled worker/operative 8 Sub journeyman/unskilled labour Source: Construction Times, 19 November 1998, pp.4. Trade Builder’s work Rate (Yuan/working day) 23-29 17-23 31-37 19-24 32-38 19-25 25-30 19-24

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 wellventilated 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.

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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 Beijingexperience of Beijing Construction Commission in training incoming construction workforce, Beijing Press, June 2000

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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

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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 15

China Building Industry Yearbook 1996, China Construction Industry Press, Beijing 1996, pp.40-45 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.

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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 stateowned construction company headquartered at Beijing. The property development field has become more attractive to them than construction work.

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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

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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
General safety administration External lifts, portal frame (head frame) for hoisting purpose Protective clothing and dangerous openings Use of electricity Tower cranes Construction equipment and tools Site orderliness and housekeeping External scaffoldings Excavation shoring and form work Total

1999 651 574 805 1,067 526 580 244 1,023 147 5,617

1,881 1,484 1,558 2,357 505 1,293 2,110 11,188

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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

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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.

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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

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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)

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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

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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.

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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