Market Access Report: Construction

China's US$400 billion construction industry already accounts for nearly 7% of the country's GDP, and anyone who has visited China in recent years will not be surprised to learn that it is the world's fastest growing construction market.  China is the building site for countless new residential and commercial buildings, gleaming industrial parks, record-breaking public infrastructure projects, and is expected to soon be home to the world's tallest building.  The country will build 10-35 million housing units annually over the next ten years (compared to less than two million annually in the US), and increase the average per capita urban living area from 13.6 to 23 square metres within the next five.  Infrastructure improvement is a key priority in the 10th Five-Year Plan (2001-2005), with up to US$400 billion being set aside for roads, railways, harbours, airports and power stations. In addition, US$25 billion worth of construction projects is slated for the 2008 Beijing Olympic Games. 

But foreign contractors' involvement in this market has been limited. China agreed in its Protocol of Accession to the WTO (Protocol) to gradually eliminate a number of existing restrictions on foreign investment in the construction sector, with perhaps the most notable commitment being the elimination of the prohibition on wholly foreign-owned enterprise (WFOE) construction companies by December 11 2004. The central government brought forward several measures when it promulgated the Administrative Regulations on Foreign Invested Construction Companies (Construction FIE Regulations). These regulations have lifted a number of restrictions earlier than its WTO commitment schedule, such as permitting WFOE construction companies from December 1 2002, a full two years ahead of China's Protocol commitment.

Pursuant to the 1998 PRC Construction Law, companies that engage in construction activities are generally divided into four categories: construction companies; design companies; surveying companies; and construction management companies. Contractors and construction professionals are subject to registration, licensing and tiered grading systems.