SHANGHAI - In early December 2010, China State Construction Engineering Corp announced a 27 percent rise in annual revenue to 330 billion yuan ($50 billion).
It was at this point that Meng Qingyu, the company secretary, told reporters that the outlook for 2011 was bright owing to expected growth in overseas contracts.
But his optimism appeared to have been severely tested after the company suffered setbacks in bids for highway construction projects in the Czech and Slovak Republics, which came to light later in December.
Jan Figel, Slovakia's minister for transport, post and telecommunications, reportedly told local media that Chinese construction companies, especially those backed by the government, were "unlikely" to succeed in Eastern Europe.
His statement was seen to have effectively blocked Chinese construction companies from the fast-growing overseas market.
The blow to China State Construction was particularly hard since the company had just won a road-construction contract in Poland, its first in Eastern Europe.
Industry experts in China said that the harsh line taken by the Slovakian government against awarding contracts to Chinese companies is a reflection of the "protectionist" sentiment prevailing throughout Europe, where governments are preoccupied with reviving economic growth to boost employment.
Chinese construction companies had high hopes in the Eastern European markets, where public works projects in Poland and Ukraine for the UEFA Euro 2012 soccer championship are expected to help kick-start an anticipated European economic recovery.
But recession-hit construction companies and officials in the region have put pressure on their respective governments to block Chinese companies from bidding for state projects, claiming that the companies are subsidized by the Chinese government.
Despite their limited presence in Europe, Chinese construction companies are widely perceived as an unstoppable force, outbidding their European rivals for jobs in Eastern European countries. The sentiment came to a head when China State Construction won a hotly contested battle for the Polish highway project in July 2010.
"Taking hold in Eastern Europe can help Chinese companies spread their business around the entire continent," David Gosset, director of international economic relations at China Europe International Business School, said at a forum in July 2010.
Data from Engineering News Record, a weekly magazine for the sector, show China's share of the $101 billion European market rose 23 percent to 1.6 percent in 2009. The country is the fourth-biggest foreign player on the European continent after the United States, Australia and Turkey.
However, China's growing presence in the region has stirred unease among European businesses and industrialists.
The German Committee on Eastern European Economic Relations warned in a 2010 report that China's increasing number of contracts in Eastern Europe seemed driven by "geopolitical rather than economic goals", with potentially "dire consequences" for the European Union.
In a list of "Chinese activities", the paper claimed that China State Construction won the highway project in Poland by undercutting the next-cheapest bid by one third.
The committee, which represents five industry associations and 140 top companies, said Chinese companies got the contracts mainly by means of "price-dumping, aggressive financing and generous risk-guarantees".
Luisa Todini, president of the European Construction Industry Federation (FIEC), told Reuters News Agency that she wanted the European Union to enforce infringement procedures where necessary.
"Over the last year they (China) have put in place a strong policy of penetration in Europe," she said.
Petr Hyl, executive chairman of the China Investment Forum, has said that politicians and businessmen in Eastern European countries have mixed feelings about Chinese contractors and investments.
"On one hand, they welcome Chinese companies because of their strong economic status and ample capital," he said. "But on the other hand, a lack of understanding of the Chinese conglomerates, especially those with a State background, also gives them a sense of fear."
Zhang Zuqian, deputy secretary-general of the Shanghai Institute for European Studies, said that Eastern European countries have little experience in working with developing economies and are vulnerable to xenophobia.
"Apart from adapting to local political and legal systems, Chinese companies should also make efforts to blend into local culture and society to give the people there a positive view of Chinese projects and investments," said Zhang.
