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A recent deal bagged by a state-owned Chinese builder for a major construction project in Korea is causing local construction firms to feel the heat, according to industry sources close to the matter.
Greenland Group, China’s largest real estate developer, said on Tuesday it had commissioned China State Construction Engineering -- the world’s third-biggest construction firm -- to erect Jeju Dream Tower on Jejudo Island.
The Chinese developer got authorization to build the two 38-story buildings by the Jejudo regional government in May of last year.
Greenland Group, China’s largest real estate developer, said on Tuesday it had commissioned China State Construction Engineering -- the world’s third-biggest construction firm -- to erect Jeju Dream Tower on Jejudo Island.
The Chinese developer got authorization to build the two 38-story buildings by the Jejudo regional government in May of last year.
The builder will reportedly cover all the construction costs valued at around 700 billion won ($605 million). Work is set to begin in May, with an estimated duration of 18 months.
“It was shocking to see that China State Construction Engineering beat out locals by meeting the challenging financing conditions,” Ahn Sung-hyun, manager at the Construction Association of Korea’s market development team, told The Korea Herald.
He added that it will become the first foreign builder to handle a construction project in Korea.
Greenland Group initially approached local companies, including POSCO E&C and Hanwha E&C, but none could meet its financing conditions.
“We had given up the project as they had no project financing and required us to work on credit -- which is unusual here,” said one POSCO E&C official. Hanwha E&C said it declined the job for the same reason.
There was no foul play detected, and industry insiders admitted it makes sense for the Chinese builder to take the project since no other Korean firm was willing.
But they still appeared to be uneasy about the growing presence of Chinese construction firms in the local market.
Local builders were particularly worried since they are struggling from dwindling demand at both home and abroad amid a global economic slowdown.
“This is going to be a growing pain for us, especially if these big Chinese construction firms start to use their capital to make further forays into the local market,” said one executive at a Korean construction firm who declined to be identified.
By Shin Ji-hye (shinjh@heraldcorp.com)
“It was shocking to see that China State Construction Engineering beat out locals by meeting the challenging financing conditions,” Ahn Sung-hyun, manager at the Construction Association of Korea’s market development team, told The Korea Herald.
He added that it will become the first foreign builder to handle a construction project in Korea.
Greenland Group initially approached local companies, including POSCO E&C and Hanwha E&C, but none could meet its financing conditions.
“We had given up the project as they had no project financing and required us to work on credit -- which is unusual here,” said one POSCO E&C official. Hanwha E&C said it declined the job for the same reason.
There was no foul play detected, and industry insiders admitted it makes sense for the Chinese builder to take the project since no other Korean firm was willing.
But they still appeared to be uneasy about the growing presence of Chinese construction firms in the local market.
Local builders were particularly worried since they are struggling from dwindling demand at both home and abroad amid a global economic slowdown.
“This is going to be a growing pain for us, especially if these big Chinese construction firms start to use their capital to make further forays into the local market,” said one executive at a Korean construction firm who declined to be identified.
By Shin Ji-hye (shinjh@heraldcorp.com)
