Cross-Border Industrial Projects
Cross-border projects represent a prominent feature of today’s global economy, and among the countries actively engaged in such projects, China stands out as most prolific. China has embarked on a mission to connect with countries across Asia, Africa, Europe, and beyond through a vast network of infrastructure projects.
This article includes comments from the dialogue with Bruno Lhopiteau, a French Entrepreneur in China, providing valuable perspectives on cross-border projects, offering insights into the challenges and opportunities in the operations of the cross-border projects and how Chinese infrastructure investment can benefit local economies.
What are the most technologically advanced infrastructural projects taking shape in the Belt and Road countries with the help of China?
It is intriguing that there exists a disparity in knowledge regarding certain projects. Some that I am involved in or know about, others may lack awareness of them, and conversely, there are projects I am unaware of that others are knowledgeable about. In terms of technologically advanced infrastructure, China is currently engaged in exporting advanced technology, notable examples being 5G networks and cybersecurity telecommunications technology which cannot be easily hacked. Green technology is another example and it is noteworthy that the Chinese government has issued a directive to prohibit big EPC companies from constructing coal-fired power plants abroad. Recently and for a long time, they have been involved in nuclear power plants, automated train systems, high speed rail and metro, ultra-high voltage direct current transmission lines etc. These are all examples of the state-of-the-art technology that China is exporting into African countries and other regions. This contribution is interesting as it enables local ecosystems and suppliers to acquire knowledge from these technologies. Additionally, the example of new cement plants in Europe highlights the most advanced technology and capabilities in this field originate from China.
What is the difference between a European approach to Africa in comparison to a Chinese approach?
This question encompasses a broad scope, integrating history and politics and can be approached from any different angle. China has historically maintained a very different relationship with Africa as part of the nonaligned movement. Over time, China has developed enduring partnerships with numerous African countries, and these historical ties continue to influence China's current engagements with these countries. Historically, France had a non-aligned position, however there has been a shift towards alignment with the US across various domains, creating a lot of difference. When examining our projects and considering the technical aspects, Chinese companies have a different construction approach. This derived from their extensive experience in constructing infrastructure at home, resulting in their unique methodology and practises that are different from Western counterparts. This approach has downsides, including the documentation and the maintenance preparation aspects, which we help compensate. However, overall it is mostly very positive, and we benefit from it as a supplier.
There may also exist a philosophical difference. The Chinese government believes in the advancement of humanity though science, which I don’t think is the case in EU and US politics. For example, the narrative surrounding the utilisation of solar panels and provision of rice bags for African communities, we don’t let them develop because we think development would doom humanity. This is how we deindustrialised most of France, stopped the nuclear power programs etc. This impacts our foreign policies as well. Whereas China really carries the philosophy that scientific progress is vital in fostering human development into their discussions with African countries.
What are the main challenges and opportunities you’ve encountered while operating in the context of the Belt and Road industrial projects?
Firstly, it is important to acknowledge the inherent complexity of both large-scale megaprojects and smaller infrastructure projects, such as large capacity power plants and metro lines, which can be a challenge in itself.For example, the largest power plant in Sri Lanka, the Norocholai Power Plant, built by China. This power plant was substantial in terms of capacity compared to the smaller-scale power plants in Sri Lanka and therefore had a huge impact on the power grid. When plants on the grid would trip or malfunctioned, the whole network would be disrupted and this brought significant challenges. Subsequently, a shift in the local government occurred, introducing political complications alongside existing technical challenges. Our involvement is very small in such projects, nevertheless we are impacted by various significant issues arising from the very complex nature of these projects, particularly the political and technical challenges.
Identifying projects which we can be involved on presents another challenge. Chinese construction companies also face challenges as some have approached us seeking potential opportunities for them, a request that we are unable to fulfil. The first consideration pertains to the necessity of establishing infrastructure in the target country, and there are often political struggles around that. Then, China's involvement should be considered, if they are involved either as a partner, a lender, or only in the construction or not at all. Additionally, Chinese construction companies will continue to compete both amongst themselves and with non-Chinese firms. The Chinese market is extremely competitive, particularly among domestic Chinese firms. There could be 30 companies bidding, cost cutting, entering a price war, leading to poor profitability for the winner. The Chinese government actually intervened by implementing measures and giving guidelines to reduce competition and so to avoid this kind of problem. At our level we also encounter many local suppliers trying to compete with us. We could receive early intelligence on a project, however the sales cycle can be very long, between the initial idea and final construction, construction could take multiple years or more and then there may be uncertainties arising throughout the course. For a SME, it is hard to follow that. We often need to communicate with both the final owner in the target country and the EPC company. As you can imagine it is hard to cover the world.
There are uncertainties at every stage: will the project happen, will Chinese companies win the contract and if not, who wins? We have a good example in Algerian power projects, where Chinese bidders with whom we involved from the tender stage were ultimately excluded due to geopolitical reasons. We were required to find strategies to work with Korean and Turkish EPCs with whom we previously had no contact. Incidentally, one project was terminated just before its completion, and we are still chasing money from the Turkish contractor. By the way, are these projects still Belt & Road without a Chinese contractor? Indeed, our successful entry into the market can be attributed to our active engagement in China. The skills and expertise we have acquired via our involvement in China have played a pivotal role in our success. Furthermore, our operations are primarily centred around sourcing and delivering products from China, positioning us as the Chinese counterpart in this business partnership.
These are the challenges; however, the opportunity is essentially the world, there are so many projects, and therefore is in proportion to the challenges. Engaging in this industry is characterised by significant challenges, primarily stemming from the inherent complexity of the projects rather than us being a foreign company. Entering the Chinese market can pose significant challenges for international companies lacking prior experience in working with Chinese infrastructure, unlike our organisation. Certainly, as a foreign company we have an advantage and expertise because of our long Chinese history and the skills we acquired here. However, even for us and for Chinese companies, it’s a difficult market to navigate.
How do Chinese investments and projects impact local industries and markets in the Belt and Road countries? How can the markets benefit from Chinese investments?
The obvious advantage of implementing new, critical infrastructure is its capacity to enable industrialisation and urbanisation. As Westerners, we used to hear about the need to send bags of rice to African children. Attention shifted towards the installation of solar panels on cabin roofs, enabling the charging of electronic devices such as phones or laptops donated by Bill Gates. But there is an existing idea that you cannot feed a large population or have them feed themselves without industrialisation. The process of industrialisation doesn't solely happen from just the installation of a few solar panels on rooftops; rather, it involves the construction of large capacity power plants and that is what China has effectively been doing. The presence of these power plants is vital as they serve the foundation for various activities, hence generating significant advantages that enable development and facilitate growth.
At our own scale, we contribute to enhancing the reliability, sustainability, and operational efficiency of these infrastructures. We ensure documentation and maintenance plans are in place, so the operator possesses the necessary knowledge regarding the required spare parts and the appropriate procedures for their acquisition. We could do the same with projects not involving a Chinese party, however our specific skills uniquely position us to effectively navigate and engage with them, so enabling us to provide valuable assistance in such projects.