China: A Revised Construction Law For China

Last Updated: 7 October 2004

On August 27, 2004, the People’s Republic of China ("PRC" or "China") Ministry of Construction ("MOC") issued a letter soliciting comments on a draft of a revised Construction Law. The MOC has been reviewing the Construction Law for some time, and this document is the result of the review.

Background to the Changes

The existing Construction Law was promulgated by the National People’s Congress of the PRC on November 1, 1997 and came into effect on March 1, 1998. It was the first general national legislation covering construction activities in China. Prior to the enactment of the Construction Law in 1997, the State Council, the MOC, and many local and regional governments had enacted a substantial body of regulations covering a wide range of matters in the construction industry. The Construction Law codified the basic principles of these pre-existing construction regulations and also introduced a number of new principles, such as allowing consortiums to bid for construction projects.

Over the six years since the introduction of the Construction Law, the MOC identified a number of areas where problems with the implementation of the Construction Law had arisen. Accordingly, in order to help resolve these problems, the MOC announced on November 20, 2003 a number of directions to deal with issues such as:

  • Owners reducing the contract price and contract period
  • Illegal sub-contracting
  • Enforcement of the project supervision system.

The directions were intended to strengthen the enforcement of the Construction Law and to improve the regulation of the PRC construction market. At the same time as issuing the directives, the MOC indicated that it would be reviewing the Construction Law with a view to issuing a revised and consolidated law.

The Revised Construction Law

The revised Construction Law has now been published, and it contains some very important changes from the original. In this Commentaries, we will highlight some of the most significant issues.

The Scope of the Revised Law. The original Construction Law applied to all "construction activities" in China, which were defined in Article 2 as the construction of all types of building and auxiliary facilities as well as the installation of ancillary circuitry, ducts, and equipment. Accordingly, the original Construction Law only covered building works and electrical and mechanical ("E&M") works associated with building works. It did not apply to civil engineering projects.

The revised law, on the other hand, applies to "construction projects or construction works," which are defined as "building construction, civil works and associated facilities." Therefore its scope would appear to be wider than that of the original. Similarly, the definition of "construction activities" has been significantly expanded: It now covers "survey, design, construction, installation, decoration, maintenance and repairs as well as dismantling in relation to construction projects; production and supply of construction structures, accessories and fittings; project management services, construction supervision, tendering agency services, construction costing advisory services, engineering technology consulting services, inspection and measurement services conducted in connection with construction projects."

This is a very significant expansion for the following reasons:

  • For the first time, civil works are brought within the ambit of the Construction Law and the jurisdiction of the MOC.
  • Project management services are now specifically included under the scope of the Construction Law, as are quantity surveying services insofar as they can be classified as construction costing advisory services or inspection and measurement services.

We will expand on the significance of these points in the specific sections that follow. Suffice to say, we believe that the revised Construction Law could have a considerable impact on the manner in which foreign contractors presently conduct their business in China.

Licensing Requirements. A new section on the licensing requirements for individuals has been added in the revised Construction Law. This requires that "professional and technical personnel engaging in construction activities" must hold the appropriate skill qualification certificate. Accordingly, architects, surveyors, engineers, costing engineers, supervision engineers, construction engineers, and landscape architects can only conduct professional and technical activities after being certified and only within the scope of their certification. This provision will apply to foreign professional and technical staff if they are involved in construction activities (which now includes project management) in China.

Firms engaging in survey, design, construction, supervision, costing consultancy, tendering agency, inspection, or measurement for construction activities are also required to have appropriate skill qualification certificates before they will be permitted to conduct construction activities within the scope of their certificate. Firms are classified into categories depending on their registered capital, the number of professional and technical staff, equipment, and project track record.

Professional Liability Insurance. The revised Construction Law encourages individual certified professional and technical practitioners as well as construction and design firms to purchase and maintain professional liability insurance. This is a new requirement, and although it is not mandatory, it is understood that the State promotes professional liability insurance.

Procurement and Contract Award. Tendering and bidding activities must be conducted with openness, fairness, and equality. The revised Construction Law specifically refers to the PRC Tendering and Bidding Law, which will apply to the tendering of construction works, where the Construction Law is silent.

A new requirement is that construction works that are publicly funded or financed must use the standard forms of construction contracts published by the MOC. Construction contracts are also required to specify the scope of work, time for completion, quality, and price (including provisions concerning advance payments and progress payments).

New provisions have also been added to require the payment of interest where payment under the construction contract is late. Interest is to be calculated on the basis of two times the amount of the late payment at the prevailing bank lending rate. In addition, the owner may be required to compensate the contractor for other losses (including liquidated damages) as a result of the late payment. These provisions appear very harsh but are no doubt designed to encourage prompt payment and discourage non-payment of workers, which has been a major problem in China recently.

The signed construction contracts must be filed by the owner (the procuring party) with the local construction administrative authority within 30 days of execution, and where there is a significant change to the contract (no indication is given as to what would constitute a significant change), this must be filed by the owner within 15 days of the change. The requirement to file the contract is enforced by the fact that if there is a dispute over contract terms, it is the contract filed with the local construction administrative authority that will govern.

The revised Construction Law emphasizes that the State promotes general contracting and depending on the nature of the construction works, the owner may procure the entire package of survey, design, construction, and operation from a general contractor. This follows on from the MOC Guidance Opinion on EPC & Project Management issued February 13, 2003, which encouraged Chinese contractors to undertake more general contracting-type operations.

Contracting. Article 42 of the revised Construction Law states that companies with the relevant survey, design, or construction qualifications may undertake general contracting for construction works in accordance with the scope of their qualification certificate. The use of the word "or" appears to suggest that any one of surveyors, designers, or contractors can undertake general contracting or even EPC-type work in China (the MOC Guidance Opinion on EPC & Project Management refers to EPC as a form of general contracting). However, Article 44 appears to limit this, by stating that in the case of general contracting for the entire works, the general contractor must subcontract the survey, design, or construction, as applicable, where it is not qualified to perform such work. In other words, a general contractor with a Class 1 skill qualification certificate may not be qualified to undertake survey and/or design work as part of the scope of that skill qualification certificate. Accordingly, until such time as combined design and construction skill qualification certificates can be issued, the position of EPC contracting in China remains very unclear. As such, EPC contractors remain the square peg that will not fit into the MOC’s round hole.

Subcontracting. The prohibition on subcontracting the whole of the works remains, as does the requirement for the main contractor to complete the construction of the main structures of the construction works itself. However, the prohibition on sub-subcontracting has been removed. This is surprising, although the requirement for the contractor to manage the subcontracted works perhaps mitigates this. Although not a new provision, the liability of the subcontractor is dealt with somewhat differently when compared with the usual Anglo-American practice. Under Article 45 of the revised Construction Law, the main contractor and the subcontractors are jointly liable to the owner for the subcontracted works. This represents a fundamental difference from the common law rule of privity of contract upon which the "chain of liability" arrangement in Anglo-American jurisdictions is structured.

Project Management. Article 50 of the revised Construction Law provides that firms with relevant survey, design, construction, or supervision qualifications can undertake project management work within the scope of their qualification certificate. As mentioned above, the inclusion of project management in the revised Construction Law is a new approach. Our reading of Articles 13 and 50 as well as the definition of "construction activities" suggests that firms that engage in project management services must obtain a survey, design, construction, or supervision qualification before they can conduct any project management services in relation to construction projects. It would seem therefore that what was previously a grey area has now become more colorful for foreign contractors!

These comments should also be considered in the context of the new Code of Management of General Project Contracting for Construction Projects that was issued by the MOC on July 1, 2004, which is essentially a PRC National Standard on project management.

Safety. There are extensive provisions on safety, which expand on the original Construction Law taking into account the Rules on Safety Administration in Construction and Engineering, which came into effect on February 1, 2004.

Quality. As with safety, the provisions concerning quality are an important part of the revised Construction Law. For example, Article 76 provides that the owner must engage a qualified review agency to review the relevant design and construction documents and such documents can only be used after they have been ratified by the review agency as compliant. The establishment and scope of the review agencies is set out in the Administrative Measures for Review of Construction Design Documents for Building and Municipal Infrastructure Works, which came into effect on August 23, 2004.

Article 78 specifies that a quality warranty program is to be adopted for construction works. The warranty period is to commence on the date of satisfactory completion, and construction firms are encouraged to obtain quality warranty insurance. The scope of this provision is somewhat vague, as the details of the quality warranty measures are still to be formulated by the State Council.

Penalties. Numerous penalties are imposed for breaches of the revised Construction Law in areas such as: disobeying quality or safety standards or arbitrarily compressing the work schedule (fines of between RMB200,000 and RMB500,000), awarding construction works to unqualified entities (fines of between RMB30,000 and RMB100,000 and voiding of the contract), failure to provide payment security (if required) (fines of between 2 percent and 5 percent of the securitized amount), and illegally subcontracting or transferring the works (fines of between 0.5 percent and 1 percent of the contract price). In addition to fines, offending contractors are liable to have their skill qualification certificates downgraded or cancelled.


The revised Construction Law consolidates a number of regulations issued previously and to this extent is very welcome. The extensive provisions on safety and quality and the prohibitions against bribery are also welcome, particularly in an environment where there are many temptations for owners and contractors to cut corners and save time and money at the expense of safety and quality.

The inclusion of civil works within the ambit of the Construction Law is also an improvement, although depending on the nature of the civil works, there may still need to be input from other ministries (e.g., Ministry of Railways etc.) and compliance with other laws will need to be considered.

Foreign contractors may be concerned about the inclusion of project management within the scope of construction activities governed by the revised law, but this is not entirely surprising given the recent regulations that have been issued on this subject.

In 2003 China’s construction industry contributed 7 percent of China’s GDP. There are more than 100,000 construction enterprises in China employing more than 35 million staff. In Beijing alone there are 240 contractors. The construction industry is therefore a very important driver of China’s economic growth. For this reason alone, the revised Construction Law is an important piece of legislation, which will likely have far-reaching consequences for Chinese as well as foreign construction enterprises operating in China.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
13 Dec 2017, Seminar, Cleveland, United States

Jones Day partners Harold Gordon and Tony Dias, and Associate Courtney Snyder will explore the significant role New York's Attorney General and its Department of Financial Services (DFS) play in the financial services industry and why these two state-level agencies will continue to exert significant power over the financial services industry, especially with federal oversight potentially shrinking.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions