Multinational Operations Of The Large State-owned Construction Enterprise Groups Countermeasures

Against the backdrop of economic globalization and China's entry into WTO, most of thesuper-large construction enterprise groups under the direct administration of China's centralgovernment (hereinafter referred to as the CCEs, i.e., China's central enterprises) attempted toenter into the international construction market one after another, becoming an important forceto execute China's development strategy of "going out". This paper conducted an in-depthresearch, through case studies from the perspective of economics and other relevant theories,on the following issues: the necessity and inevitability for the CCEs to adopt a strategy oftransnational operation, the currently existing problems and restrictive factors, how to solvethose problems, etc., for the purpose of providing some references that are conducive to theacceleration of the CCEs' internationalization.The paper is divided into there chapters. In Chapter One, author elucidates the CCEs'status as the main and leading force in China's construction industry, summarizes theirdevelopment course and current conditions, and states that the CCEs' transnational operationin general is still in the initial stage. Then, he analyzes the motivations and causes for theCCEs' entering into the international market from two aspects of economic theories andcorporate management, demonstrating the necessity and inevitability for their doing so.Through epitomizing two representative economic theories, i.e., the international trade theoryand the international direct investment theory, this author tries to explain why the CCEs striveto enter into international market, pointing out that: as for the construction market in thedeveloping countries, the CCEs possess comparative advantages in various aspects includinglower labor cost, more appropriate technologies, relatively more advanced management, biggereconomy of scale, etc;and as for the developed countries' market, the CCEs enjoy somerelative advantages engendered by some factor endowments and corporate innovations. Tryingto tackle the issue from the perspective of corporate management, author points out that thefollowing are some fundamental factors impelling the CCEs' management teams to adopt thestrategy of transnational operation: "the sense of crisis caused by the contradiction between thelimited space for further development provided by China's domestic construction market andthe rapid increase of the production capacity of China's construction enterprises, therequirement of the CCEs' development strategies, and the need open up some new economicgrowth points". The last part of Chapter One analyzes the possibility for the CCEs to operateinternationally nowadays. The analysis on the five characteristics of the CCEs' externalenvironment shows that it is in general favorable for the CCEs to "go out" in the respect of theirexternal environment. A further analysis on the CCEs' own (dis)advantages demonstrates that:although still encumbered by some disadvantages, the CCEs, after having survived the intensecompetition in China's twenty year-odd market economy and preliminarily probed into theinternational market, have accumulated a certain degree of strength and resourcefulness forthem to "go out", which are mainly manifested in four aspects. Based on the above discussionfrom two perspectives, a conclusion is drawn that the conditions for the CCEs to acceleratetheir "going out" have formed.In Chapter Two, author firstly discusses the problems and difficulties in four aspects thatcurrently exist in the CCEs' transnational operation, 1) smaller scale of business that makes theCCEs not a match for their foreign counterparts;2) narrower business domain that is mainlyrestricted in the less profitable low-end markets;3) lower technological level on the whole andweaker core competitiveness;and 4) chaotic order in operation with the intra-CCE competitionoccasionally occurring. Then, he analyzes why the CCEs' transnational operation at present isnot satisfactory enough from two perspectives, ascribing the reasons to the society andgovernment on the one hand and the CCEs themselves on the other. The author points out that:some of the nation's supporting and encouraging policies are not systematic andcomprehensive enough and with inadequate magnitude;the social agencies and services inthe fields of finance, insurance, pledge, consultancy, etc., are not mature enough and can onlyprovide very limited categories of business and services;the social organizations such asindustrial guilds, the chamber of commerce, etc., currently fail to play their roles adequately.The shortcomings of the CCEs themselves mainly include: weak in intra-group cohesive force,they fail to bring into full play their advantage as a united whole;they lack a distinct overseasdevelopment strategy and are unable to carry out the assurance measures;they are deficientin capital and less capable in financing;investing disproportionately less in R&D, they are weakin innovation;they lack not only inter-disciplinary talents to do business internationally but alsoa rational configuration for their current employees;etc.In the last Chapter, this author firstly discusses the current state and characteristics of themarket of international construction and project contracting, pointing out that after goingthrough the rapid increase, basic stabilization and great fluctuation during the early, mid andlater 1990s respectively, the market of international construction and project contracting isagain in a state of accelerated development at the outset of the 21st century. Then, after takinginto the consideration the problems existing in the CCEs' transnational operation, he putsforward seven countermeasures from both the macro and micro levels, aiming to advance theCCEs to march internationally. In the macro level, both governmental organizations and socialservices should further improve their supporting and service system to push the CCEs to "goout". In the micro level, the CCEs should: improve their corporate governance structure andenhance their inter-group organic linking;accelerate their structural adjustment and strategicreorganization, and integrate all of their resources in doing business internationally;strengthenthe inter-CCE coalition and cooperation to seek a win-win road;to rapidly expand the scale oftheir overseas business through appropriate merger and acquisition;break through thebottleneck of capital shortage through taking various forms of financing and funding;complywith the trend of global market and actively expand their business domains;create world-classbrand names and build themselves into enterprises with good reputation.