Sinomach seeks to invest more abroad

Zheng Chao, former commercial counselor at the Department of Outward Investment and Economic Cooperation at the Ministry of Commerce, once told China Daily that as Chinese firms became more capable, and desire for globalization and competition in the global contracting market becomes fiercer, Chinese contractors are diversifying from merely working on contract engineering projects to expanding investment deals and seeking engineering contract project management programs.

More investment will help domestic contractors get more engineering deals abroad," said Zheng.

By the end of 2012, China's cumulative signed external contract engineering projects were valued at $998.1 billion, according to the ministry. In 2012, the nation's newly signed contracts grew 10 percent year-on-year to $156.5 billion.

Ren Hongpeng, vice-president of China Road and Bridge Corp, said the company's long-term strategy is to shift into investment, and such a transformation is unavoidable, especially for Chinese contractors, although contracting for engineering projects is still its traditional business.

According to Xu from Sinomach, the company mainly targets energy and infrastructure projects in developing countries, led by Southeast Asian nations, and manufacturing deals in developed markets through mergers and acquisitions.

In 2012, Sinomach's sales reached 221.4 billion yuan, and profits were 8.5 billion yuan, said Xu.

The company is aiming for sales revenue of 500-600 billion yuan by the end of 2020, with profits reaching 25-30 billion yuan.

Xu said the company has an ambitious plan to invest abroad, without elaborating on the budget, and he attributes this to its aspirations to improve its technology and research capabilities and expand its market presence overseas.

"China still lags far behind its Western counterparts in many high-tech manufacturing industries, but we can learn from them, especially the European countries including Germany and France," he said.

As part of its 12th Five-Year Plan (2011-15), the central government has pledged to add investment to innovation and industrial upgrading. While China became the world's largest exporter and manufacturer in 2009, it is challenged by industrial overcapacity and shrinking global demand for Chinese goods.

But developed countries and regions, including the United States and European Union, have placed restrictions on shipments of a wide range of high-tech goods to China.