Skill Qualification Certificates Issued For First Foreign-Invested Construction Enterprises In China

Following on from the implementation of the Regulations on Administration of Foreign-Invested Construction Enterprises (Decree No. 113), the Ministry of Construction ("MOC") on April 5, 2004 issued Skill Qualification Certificates ("QQC") to 11 foreign-invested construction enterprises ("FICEs").

Thirteen enterprises had applied to become FICEs and had submitted the required documentation to the MOC to obtain the appropriate QQC. The 13 enterprises included five wholly foreign owned enterprises ("WFOEs") and eight sino-foreign joint ventures ("SFJVs"). The 11 FICEs that have received QQCs are spread around China, with two each in Beijing, Shanghai, Tainjin and Jiangsu and one each in Shanxi and Jiangxi.

The 11 FICEs that have received their QQCs are:

• Hip Hing Construction (China) Co., Ltd. (WFOE)

• NWS Engineering Co. Ltd. (WFOE)

• Honeywell (Tianjin) Co. Ltd. (WFOE)

• Tianjin Ruike Construction and Engineering Co., Ltd. (WFOE)

• Shanghai OTIS Elevator Co., Ltd. (SFJV)

• Shanghai Qingya Mechanical and Electrical Engineering Co., Ltd. (SFJV)

• Shanxi Yuxiang Foundation Engineering Co., Ltd. (SFJV)

• Jiangsu Yuanye Construction and Installment Co., Ltd. (SFJV)

• Suzhou Schindler Elevator Co., Ltd. (SFJV)

• Jiangxi Hantang System Integration Co., Ltd. (SFJV)

• Wu-Zhou TAIKISHA Engineering Co., Ltd. (SFJV)

The two FICEs that failed to obtain QQCs are:

• Zhongsheng Construction Machinery (Nanjing) Heavy Industry Co., Ltd. (WFOE)

• Kunming BSB Steel Structure Products Co., Ltd. (SFJV)

All of the successful FICEs (save for Wu-Zhou TAIKISHA Engineering Co., Ltd.) have received Class 1 QQCs, predominantly for building construction general contracting, E&M installation general contracting, E&M installation specialist works, ground and foundation works, decoration and fitting-out, curtain wall, and steel structure works.

Generally, a Class 1 QQC entitles the contractor to undertake works up to a value of five times its registered capital. For example, in building works, a Class 1 contractor must have a minimum registered capital of RMB50 million and can therefore undertake projects with a value of up to RMB250 million. In addition, a Class 1 contractor can construct buildings no higher than 40 storeys or 240 metres.

Of the 11 successful FICEs, four were from Hong Kong, namely, Hip Hing, NWS Engineering, Shanghai Otis and Shanghai Qingya, and thus were able to take advantage of the Closer Economic Partnership Arrangement between Hong Kong and Mainland China.

It remains to be seen whether other Hong Kong or international contractors will seek to establish FICEs in China, and only at that stage will we be able to determine whether the MOC’s commitment to Decree 113 is justified and in the best interests of China’s construction industry.