Chinese Dam Builders

Going Overseas

Sinohydro continues to dominate China's share of the global dam building market with the world's largest dam builder, China's state owned Sinohydro Corporation estimated to have as much as a 50 per cent share of the international market. Over the past five years, the appetite for large hydropower projects by South-east Asian and African countries has increased significantly and created an opportunity for Chinese companies, supported by Chinese government loans to become involved in international dam building. This has paved the way for a new group of Chinese construction and energy companies to take on a very active role in international dam building.

Some Chinese companies have focused on only developing the hydropower potential of neighboring markets (mainly Burma and Cambodia). These companies are Huaneng, Datang and China Southern Power Grid Corporation . It is possible that some of this generating capacity will be used to meet the energy needs of Southern China, Thailand and Vietnam.

A second group of companies - mainly contractors and dam builders - is aggressively seeking out hydropower opportunities abroad. Like Sinohydro, they are being encouraged by the Chinese government's going-out policy. While the Three Gorges Project Corporation and its subsidiary China International Water and Electric Corporation has been active in the international construction market for around 10 years, other state-owned energy companies like China Guodian and contractors such as Gezhouba have made it clear in their most recent 5 and 10 year plans that they intend to rapidly develop their international business.

The high costs of developing and maintaining energy generation and assets in China has made international projects relatively attractive. Looking forward, there are indications that China's major power companies involved in international dam building desire to be more than just a contractor. Increasingly we are seeing companies like as Sinohydro and China Guodian looking for overseas projects to invest in, own and operate for 20 to 40 year period.As Chinese companies have pursued overseas business opportunities, they have gained new stakeholders, all of which have different expectations. Meeting the expectations of the local host country governments, project shareholders, project owners and local communities is by no means easy.

At the same time, these companies have reviewed their environmental and social commitments and policies as they build an image of themselves as leading international companies.

Environmental and social safeguards trends 

Unlike western large multinational companies, this international exposure has occurred over a very short period and as little as 5 years and as such, environmental and social safeguard policy development has not followed traditional trajectories or sometimes even any logical progression. Some Chinese companies adopted the UN Global Compact agreement (China Datang and China Power Investment ) and helped to develop industry guidelines such as the Chinese International Contractors Association. Others have launched themselves into philanthropy, paying for medicines and school supplies for the local communities, but have yet to commit to any standards such as observing China's international commitments or ensuring that local laws and regulations are complied with.

At this stage, environmental and social company internal guidelines and commitments are difficult to ascertain because they are developing often in a haphazard way. For example, almost all of the companies profiled conduct CSR activities and report on their progress on an annual basis. However, the standard and quality of reporting is generally low and even in some instances may contain fake information or be used to deliberately conceal negative or harmful information.

Contractor or developer - does it make a difference?

In our experience, there is much more motivation for a Chinese company to do more in the way of environmental protection and community development, if they are project developer rather than a contractor. With Build Own and Transfer (BOT) contracts, Chinese companies are present for a much longer period of time and want to build relationships with local communities, particularly if there is community hostility or resistance to their activities.

However, Chinese dam builders argue that when they play the role of a contractor they are not responsible for the full impact of the project. Depending on the size and nature of the contractor, if a company is responsible for all the civil works for example and implementing the construction site environmental plan, certain responsibilities exist to the community and the environment that cannot be ignored. Contractors, even though they have a less determinative role compared to a developer still stand to benefit and profit from their involvement and still have basic responsibilities to the community and the environment.