China in our hands?

The world's biggest construction market got a lot bigger last year, after two decisions of global importance were taken. First, Beijing went into wild celebrations after it was chosen as host for the 2008 Olympics, and plans for a construction bonanza were put into operation. Second, in November, China was finally allowed full membership of the World Trade Organisation, which integrated it more fully into the global economy. The message to foreign firms is clear – China is well and truly open for business.

There has certainly been no shortage of foreign interest. "Everybody's got an eye on China – you should see the number of people we meet in Shanghai and Beijing on trade missions," says John Bell, a partner in Gardiner & Theobald.

It's easy to see what the allure is. Thanks to average annual GDP growth of 9% over the past two decades, Beijing has £23bn in hand to spend on the games, and is in the middle of a three-year £345bn infrastructure investment programme. New airports and business districts with foreign backing are springing up in dozens of cities.

Although China has a multitude of homegrown professionals, there are opportunities for Western architects, engineers and construction managers who can often offer something special. "A lot of my clients like to show off that their building is designed by a famous foreign architect," says Joe Wong, a QS with WT Partnership, who works in Beijing and Shanghai.

Specialist engineers are flying in from overseas to advise on projects such as the German-led magnetic levitation train that will shuttle between downtown Shanghai and Pudong airport. And there is a lack of commercially minded construction managers, because, until the 1990s, construction professionals were trained to operate in a centrally planned economy.

At the Beijing Olympics, the competition for contracts will be just as fierce and just as international as the competition for medals.

The starting gun went off on 2 April this year with the launch of the competition to masterplan the Olympic Village, which attracted more than 100 expressions of interest. "We suspect the next 18 months will be key – we envisage them issuing tenders fairly soon. People need to be laying the groundwork now," says Caroline Akers of Trade Partners UK, the DTI's export promotion agency. The first wave of construction for Beijing's 19 venues, including an 80,000-seat stadium, is due to begin next July.

"The Olympics is good news for people working in China, not just for picking up work but also for promoting openness and foreign interest," says Ken Cooke, managing director of architect Llewelyn-Davies.

Obstacles to business are being removed thanks to China's WTO entry. Foreign architects, engineers and construction managers can now take majority shares in local joint ventures, and in three to five years they will be allowed to set up wholly owned Chinese subsidiaries. China is also committed to phasing in the foreign ownership of rail companies. These promise big business: foreign participation is invited on projects such as the £37bn upgrade of the Xian-Nanjing line, and a £12bn Shanghai-Beijing line.

The Germans are leading the way in winning work in China's burgeoning public transport network, but other countries are pushing hard. US management consultants boast of access to top-level officials in Beijing, and the French government used its influence to help state-owned architect ADP win the design contract for Shanghai's Pudong airport. Australian firms, including Bovis Lend Lease, this month held a four-day conference on Olympic construction at Beijing's Tsinghua university.

Not to be outdone, a trade mission led by the British Consultants and Construction Bureau has been in China for the past two weeks, with deputy prime minister John Prescott scheduled to lead the charm offensive in Beijing. British successes to date include Llewelyn-Davies' winning designs for airports in Shenzhen, Chongqing and Beihai. WSP has completed a number of large projects in China, including the Shanghai stock exchange and Beijing's largest shopping mall. Both firms are likely to bid for work on the new terminal at Beijing airport, which should go to competition later this year.

Another Sino-British link-up is the gloriously named Zoomlion Powermole, an Anglo-Chinese construction equipment maker formed last year when Chinese firm Changsha Zoomlion bought Powermole, a British specialist in trenchless technology. This is the first time a Western company has been taken over by a Chinese firm. The new company is working on designs and prototypes in the UK for drill rigs, moles and related equipment to be produced in China, and plans to market them worldwide.

But for every success story there are unhappy tales. Just ask Sir Terry Farrell, who got his fingers burned twice. He lost the competition for the Beijing opera house to French rival ADP in 1999, even though he followed the design brief and ADP did not. He was twice appointed to design a £100m public building project in Guangzhou, but the scheme was scrapped both times.

Even when a project goes ahead, there's no guarantee it will make money. Skidmore Owings & Merrill lost £2.6m on Shanghai's Jin Mao tower – completed in 1999 – the world's third tallest building. Winning work often requires co-operation with local design institutes, which serve as one-stop shops for architecture, engineering and compliance with planning regulations. Such institutes have been known to collaborate with Western firms in the early stages of a competition, then use the knowledge they have gained to win the competition on their own, leaving their Western partners high and dry.

"Anyone going to China must recognise from the beginning that the Chinese will not do you any favours, and you'll have a very tough negotiation," says Hugh Davies, a former British diplomat who now advises firms doing business in China. His advice is simple: "Always keep your mind on the bottom line."

Gardiner & Theobald partner John Bell is coy when asked whether the firm is making profits in China. He says: "We're looking to the long term. It's not a goldmine. Clients are committing to it in the long term, with the likes of Royal & SunAlliance and Royal Bank of Scotland opening branches. We have to satisfy our client base worldwide – it's the name of the game."

So how does one go about winning work in China? "There will be a lot of wining and dining; you have to get used to that," says Davies. "Chinese culture requires a lot of getting to know each other, with copious swigs of firey liquor." Even President Nixon's historic mission to China was helped along by maotai, a heady brew made of fermented rice. Davies adds: "The chief executive or chairman must come to China from time to time to show sincerity.

One long-term strategy to gain close contacts in the right places is to sponsor a construction student under the Chevening Scholarship Scheme, run by the Foreign Office to enable Chinese students to study for postgraduate professional degrees in the UK. They are aimed at future decision-makers in business and government, and cost companies £5000 per scholar. Mott Macdonald has already signed up to the scheme, and British universities are keen to find more sponsors. One former Chevening scholar is now mayor of Shanghai, a post previously held by president Jiang Zemin and premier Zhu Rongji.

But there is a fine line between connections and corruption, and it is vital not to cross it, says Andrew Halper, a lawyer with City firm Denton Wilde Sapte, who spent seven years in Beijing. "The government is trying to crack down on corruption, but it has probably increased in the past 10 years. Cleaning it up is an incredibly difficult task," says Halper. "The important thing is to stay away from it. It's a slippery slope: once you've succumbed you'll be seen as an easy take."

Halper predicts the Olympics will represent a coming of age for China on the world stage. "Anybody who knows Beijing has seen vast infrastructure changes in the past 10 years, and that will accelerate as it moves towards the Olympics. It's not just a showcase of how good the Chinese can be at staging major international events. It's also an opportunity for China to show the world that it can handle complex tendering processes even-handedly and appropriately."

But so far, he reckons, British firms have not been trying hard enough to win medals. "It's really time for Team UK to get in there and win something."