Chinese infrastructure giants set sights on increased Israel activity

BEIJING – Traveling through China’s bustling metropolises and picturesque rural regions, you cannot help but wonder at the impressive sight of towering highway bridges under construction, whole new towns being built from scratch and the transformation of natural resources into mammoth energy projects.

Through the eyes of visitors from little Israel, the scale and pace at which Chinese infrastructure is progressing is hard to comprehend. We wouldn’t have space for even a fraction of it all.

Yet looking around Israel today, you would be hard-pressed to miss the Chinese flag flying over the country’s latest, more modest, flagship infrastructure projects – from the Jordan Valley to Ashdod. If the Tel Aviv-Jerusalem railway had been constructed by Chinese state-owned construction firms, trains would almost certainly have been shuttling commuters between the two cities much sooner.

The companies behind the infrastructure development in Israel and across the world, supported by China’s unprecedented Belt and Road initiative, are determined to demonstrate their apparently unrivaled capabilities to their target markets. Showing off their award-winning projects across China to foreign diplomats and international media is proving an effective strategy.

China’s infrastructure construction giants, unrivaled globally in both experience and size, promise high-quality and affordable construction, attention to environmental concerns and timely project completion. The companies provide thousands of Chinese workers who can relocate en masse in order to carry out the projects.

And while there may be reluctance in some parts of the world to foster the growing involvement of foreign state-owned enterprises in constructing national, and sometimes critical, infrastructure projects, the efficiency, affordability and reliability of Chinese construction is a major advantage for both developing and advanced nations alike.

In October, Chinese construction firms – a complex web of state-owned or controlled parent companies and subsidiaries operating in a range of fields – established the Chinese Enterprises Association in Israel (CEAI), an umbrella body accompanying them in interactions with government institutions and local authorities and to promote deepening binational commercial and economic ties.

Showcasing their immense domestic projects and grand Beijing headquarters, the heads of some of the world’s largest construction firms told a visiting Israeli media delegation of their great satisfaction from their first ventures into the Israeli market. Moreover, they are eager to put pen to paper on additional infrastructure deals.

In April 2016, a consortium including SinoHydro, a subsidiary of PowerChina, was awarded a contract to construct a 344-MW capacity hydroelectric pumped storage power station at Kokhav HaYarden in the Jordan Valley, adjacent to Kibbutz Gesher. Due to be completed in November 2022 after more than four years of construction work, the station is a third of the size of PowerChina’s 1,280 MW mega hydro plant already in operation in Qingyuan, Guangzhou.

The company has large contracts valued at a total of $120 billion in 121 countries, so what attracts PowerChina to the modest Israeli market? Executive vice president Chen Guanfu said their motivation is twofold.

First, Israeli construction and operation regulations are the same as those applied in Europe. Should their Israeli project in partnership with General Electric prove successful, it could act as a bridge to greater operations in Europe.

Second, the company says the Israeli energy market offers great opportunities beyond hydro power. Israel’s shift towards gas-based power following recent discoveries in the Eastern Mediterranean basin goes hand-in-hand with China’s current transition from coal power to reducing emissions in line with its Paris Agreement targets.

Satisfied by their early experiences, PowerChina is actively seeking its next Israeli opportunity. Although unsuccessful in the recent tender for the construction of Israel’s giant desalination plant, Sorek 2, the company is now actively looking at opportunities for gas-powered plants and subway construction.

China Railway Engineering Corporation (CREC) and its many subsidiaries boast projects in more than 90 countries worldwide, including infrastructure construction in locations as remote as Antarctica.

Rather closer to home, the Israel branch of its China Railway Tunnel Group (CRTG) subsidiary is responsible for constructing the western segment of the Tel Aviv Light Rail red line in a joint venture with Israel’s Solel Boneh Infrastructure subsidiary Shikun & Binui.

“Very few projects of this kind have been completed recently in the West,” said Steven Wang, vice president of International Business Division of CREC. “But here in China, we have the necessary experience.”

Despite initial delays caused by permit-related issues, CRTG is today pushing ahead to complete the project in line with its original commitment, assisted by its six advanced tunnel boring machines. While the subsidiary’s operations in Tel Aviv have so far been limited to the west of the city, it says it has been requested to assist the acceleration of projects in the east, too.

As a publicly listed company on the Shanghai and Hong Kong stock exchanges with overseas investors, Wang said the firm has become increasingly transparent and tightened its regulations in recent years. Like PowerChina, the company is also interested in further investment in Israeli infrastructure, as well as housing and energy projects.

In the east of the city, the remainder of the red line and the construction of the major Carlebach Station fall under the joint responsibility of China Civil Engineering Construction Corporation Israel Branch (CCECC), a subsidiary of China Railway Construction Corporation (CRCC), in joint venture with Israeli construction company Danya Cebus.

The Tel Aviv project is not CRCC’s first venture into the Israeli construction market, after previously completing the Carmel and Gilon tunnel projects, and other housing construction contracts, worth a total of $700m. While construction of the eastern segment of the light rail has been beset by disputes over working on Shabbat, CCECC president Zhao Dianlong said delays would be longer if a non-Chinese company was responsible for its construction.

Zhou said CRCC would like to play an “active part” in the realization of Israel Railway’s ambitious vision announced in June 2017 to more than double the country’s rail network by 2040. Should Israel Railways decide in the future to also construct a railway from Tel Aviv to Eilat, CRCC said it would be among those interested in winning the contract.

Shifting from the city to the shore, Tel Aviv-based Pan-Mediterranean Engineering Company (PMEC) is the future base of China Harbor Engineering Company (CHEC)’s operations in the region. CHEC, a full subsidiary of China Communications Construction Company, is currently conducting operations in 90 countries worldwide and its PMEC affiliate has been active in Israel since 2012.

In June 2014, PMEC won the tender to construct Ashdod’s new HaDarom port with a bid valued at NIS 3.3 billion and the company expects to finish the project ahead of its originally stated 7.5-year schedule.

“Everything is on track,” said Jason Dongbing, managing director and CEO of PMEC. “We have finished almost 70% of the construction work and we expect to finish one year earlier than planned.”

PMEC is now seeking further opportunities in Israel, and recently competed for the public-private partnership tender for Jerusalem’s planned Route 16 highway. Company executives stated their interest in participating in future light rail, desalination and northern rail projects in the country.

China’s ambitious approach to mass infrastructure construction abroad is undoubtedly a mirror image of its transformation at home, where state officials consider rapid infrastructure development as a key economic driver and invested in excess of $320 billion in transportation links in 2017 alone.

As the world’s most populous nation continues to develop domestically at lightning speed, it is also cementing its place globally as the leader in infrastructure construction.

As Israel continues to expand its infrastructure network, albeit a modest transformation in comparison to its Chinese partners, it is likely that we’ll be increasingly seeing the five-starred red flag flying in Israel’s skies. After all, it’s difficult to argue with their track record.

The writer was a guest of the Chinese Enterprises Association in Israel.

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