Chinese companies are unlikely to play a large role in the trillion-dollar infrastructure plan announced by US President Donald Trump, but analysts said that there are still contracts that they could bid for.
The comments came after Trump unveiled a large-scale infrastructure plan in his first State of the Union address on Tuesday (US time). The US president spoke of the need to rebuild the country’s crumbling infrastructure.
“Tonight, I am calling on the Congress to produce a bill that generates at least $1.5 trillion for the new infrastructure investment that our country so desperately needs,” he said.
The plan announced by Trump includes new roads, bridges, highways, railways and waterways, and any bill must also streamline the permit and approval process, getting it down to no more than two years.
“The Trump administration has focused on tackling the US trade deficit with China, and the bilateral trade order has been in a wobble since last year,” Wang Yongzhong, a research fellow at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told the Global Times on Wednesday.
There will be more tit-for-tat escalation this year, the expert predicted, and as a result, “granting a large amount of infrastructure projects to Chinese companies seems unlikely,” he said.
When it comes to construction contracts in foreign countries, Chinese companies export both equipment and workers to construction sites abroad, Wang said.
“If Trump wants to win this trade-deficit battle, increasing imports to the US may become challenging,” he said.
China is willing to make joint efforts with the US to encourage Chinese enterprises to participate in US infrastructure construction, China’s Ministry of Commerce (MOFCOM) said in a report published in May 2017. China’s infrastructure has late-mover advantages, as the scale of its highways, high-speed railways, subways, ports, tunnels and power grid all rank first in the world, the MOFCOM report said.
Infrastructure development in the US has fallen short of demand. Despite the efforts of Congress and some states, there is still a $2 trillion gap in terms of needed infrastructure, according to an annual report released by the American Society of Civil Engineers in April 2017.
In 2016, China signed a total of 1,319 contracts for projects in the US, with a total value of $4.3 billion, according to MOFCOM. Given the enormous scale of the US infrastructure market, the current market share of Chinese enterprises is relatively small, the report said.
Still, some Chinese firms that have localized their production in the US market have a positive view about Trump’s infrastructure plan.
“We have a 40,000-square-meter production base in the US and we manufacture, sell and support construction and material handling equipment such as crawler cranes and rough terrain cranes, so this massive infrastructure plan is good news for us,” Chinese multinational heavy machinery manufacturer SANY said in a note sent to the Global Times on Wednesday.
Chinese firms with a track record of participation in infrastructure projects in the US and other advanced economies such as the UK and Canada would have strong credentials to pitch for such work, possibly as part of joint ventures with US firms that are also bidding for the projects, Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, told the Global Times.
“Such joint ventures would also enable more cooperation between US and Chinese firms on other international infrastructure projects, such as China’s Belt and Road initiative projects in many developing countries worldwide,” Biswas said.
Due to the recent tightened scrutiny of Chinese investment in the US, the Trump administration is unlikely to approve a large amount of projects by Chinese firms, Wang noted. “But still, Chinese firms can bid for some small subcontracts,” he said.
Chinese firms could get contracts worth up to $15 billion as part of the massive plan, Wang predicted.
Chinese investors may have more ways to invest in infrastructure projects as contractors.
“For instance, Chinese investors could purchase US bonds or infrastructure bonds issued by the federal and local governments, or make equity investments,” said Liu Jianying, an associate fellow with the Chinese Academy of International Trade and Economic Cooperation.
Source: Global Times