Study On Financing Strategy For Shanghai CG Group Overseas Expansion

As a large domestic construction enterprise, Shanghai CG Group has improved significantly due to rapid growth of Shanghai and national construction market. However, with construction facilities from Beijing Olympic Games and Shanghai World Expo gradually completed, and the government control of investments in fixed assets become tightened, there may be construction market downturn in the next 3-5 years. Besides, other construction firms of different ownership boost and large international construction contractors join in, which intensify the competition in the domestic construction market. Shanghai CG Group and other large domestic construction firms begin to adjust industrial layout, and actively implement the "globalize" strategy to expand overseas construction market. In this process, CG Group and many other firms have encountered bottlenecks of financing. Thus, how to make good financing strategy, help construction enterprises get funds with the lowest possible cost, and accelerate enterprisesto achieve internationalized operation becomes an important topic for each large domestic construction firm. Based on the study of Shanghai CG group, it was found that the existing financing strategy can not meet the requirements of overseas expansion. The followings are the major issues: The financing channels are very limited, mainly bank loan, which is vulnerable to the impact of macroeconomic policy and economic environment; Financing process lacks of unified planning, and there is no comprehensive, systematic, multi-dimensional financing strategy; Usage of internal funds and other resources is not very efficient; Professionals with financial knowledge as well as construction contract knowledge are in shortage; and so on. Many other domestic construction firms have these problems too, which greatly restricts the implementation of enterprise overseas development strategy. This paper did some systematic research on the existed issues. After explaining CG group current situation of taking overseas project, and using the basic framework of SWOT, the paper made the analysis on financial situation of the group overseas department. It also did some research on the main features of the offshore contract, discussed the overseas expansion situation for major domestic and international construction contractors, andforecasted the trends of the international construction market. Besides, it explored the internal and external financing opportunities and challenges, and analyzed the characteristics of major domestic and foreign financial market. Through the study, this paper presented the financing solutions of the Shanghai CG group overseas expansion. It can be summarized as: three principles, three steps. In other words, reunification, overall planning, and total control are needed in financing process. Based on these three principles as well as current situation of the enterprise, financing can be gradually carried out in three steps: firstly, taking full advantage of the parent company and strong relationship with domestic financial institutions to acquire internal financing and domestic financing; next, using local financial institutions and capital market of foreign country or region where the project goes; finally, pushing the firms to the international capital market provided conditions. This paper dwells on how Shanghai CG group carries out these three steps. There are many similarities between domestic construction firms. Therefore, study on Shanghai CG Group overseas expansion financing strategy will be beneficial for domestic construction companies to establish their financing strategy, and will be helpful in improving competitiveness of CG group and other construction firms in overseas construction contractmarket. This will also help construction firms enter the international market faster and better.