CSCEC: Transformation and Development

Abstract

In his report to the 2010 annual meeting of CSCEC (China State Construction Engineering Corporation), Mr. Jun Yi, President, CEO & CPC Secretary of the giant SOE (state-owned enterprise) and one of the biggest construction corporation in China, expressed deep satisfaction with the company's achievements during the “11th Five-Year Program” period (2006–1010). He was especially pleased with 2010, the first full year after the world economic recovery from the global financial crisis in 2008 and the company's IPO in 2009. In 2010, CSCEC's new contract value, business revenue, and total profit increased by 74.5%, 42.3%, and 47.5%, respectively. The average annual growth rates of the three indicators in the past 5 years were 38.5%, 25.8%, and 42.6%, i.e., profit had been growing much faster than revenue. Facing the future, President Yi cautioned himself and his colleagues to think of danger in peace, because “too big to fail” is never reliable. The greatest danger of a big company is its own past success. Yi proclaimed that in the coming “12th Five-Year Program” period (2011–2015) and beyond, CSCEC would strive to become a first-rate SOE and one of the leaders in China's construction industry. Will CSCEC, however, be really able to achieve its goals? The company has witnessed remarkable changes in itself for a decade. Facing a more uncertain environment and more intense competition, how should the company renovate its management control system?

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Professional composition of CSCEC's employees (2010)

Types of employees

Shares in total

Generalized management staff

11.7%

Engineers & technicians

46.8%

Specialized management staff

20.5%

Service & operating staff

21.0%

Total formal employees

100%

Source: Annual Report of CSCEC

Exhibit 2: Financial Situations of CSCEC

Source: Annual Reports and Internal Documents of CSCEC

Figure

Exhibit 3: Growth Rates of CSCEC's Financial Indicators

Source: Annual Reports and Internal Documents of CSCEC

Figure

Exhibit 4: Revenue Shares

Source: Annual Reports and Internal Documents of CSCEC

Figure

Exhibit 5: Profit Shares

Source: Annual Reports and Internal Documents of CSCEC

Figure

Exhibit 6: Stockholding system and main subsidiaries of CSCEC, Ltd. (2010)

Notes: SASAC: State-owned Assets Supervision and Administration Commission of the State Council

CNPC: China National Petroleum Corporation

Source: Annual Reports of CSCEC

Figure

Exhibit 7: Organization structure of CSCEC, Ltd.

Figure

Exhibit 8: China's Investment, Construction and Real Estate Sector

Source: China Statistical Yearbooks

Figure

Exhibit 9: The Top Chinese Contractors (2011)

RANK

Firm Name

1

China Railway Construction Corp. Ltd.

2

China Railway Group Ltd.

3

China State Construction Engineering Corp. Ltd.

4

China Communications Construction Company Ltd.

5

Shanghai Construction (Group) General Co.

6

Sinohydro Group Ltd.

7

Dongfang Electric Corp.

8

GuangSha Construction Group Co. Ltd.

9

China National Machinery Industry Corp.

10

Zhejiang Construction Investment Group Co. Ltd.

Source: ENR1

Notes

1. Engineering News Record magazine

Exhibit 10: Revenues of China's Leading Construction Companies

Source: Annual Reports of Relevant Companies

Figure

Exhibit 11: Profits of China's Leading Construction Companies

Source: Annual Reports of Relevant Companies

Figure

Exhibit 12: Net Assets of China's Leading Construction Companies

Source: Annual Reports of Relevant Companies

Figure

Exhibit 13: World Investment and Construction

Source: UN data

Figure

Exhibit 14: Fulfilled value of overseas contracted projects by Chinese enterprises

Source: China Statistical Yearbooks

Figure

Exhibit 15: Contracted Value Of Overseas Contracted Projects by Chinese enterprises

Source: China Statistical Yearbooks

Figure

Exhibit 16: The Top Global Contractors

(based on total firm contracting revenue)

RANK

FIRM NAME & LOCATION

2010

2009

1

1

HOCHTIEF AG, Essen, Germany

2

2

VINCI, Rueil-Malmaison, France

3

3

STRABAG SE, Vienna, Austria

4

5

Bechtel, San Francisco, Calif., U.S.A.

5

6

BOUYGUES, Paris, France

13

17

China Communications Construction Group (Ltd.), Beijing, China

22

25

China State Construction Engineering Corp., Beijing, China

Source: ENR

Exhibit 17: The Top International Contractors

(based on contracting revenue from projects outside home country)

RANK

FIRM NAME & LOCATION

2010

2009

1

4

China Railway Construction Corp. Ltd., Beijing, China

2

2

China Railway Group Ltd., Beijing, China

3

1

VINCI, Rueil-Malmaison, France

4

3

BOUYGUES, Paris, France

5

7

China Communications Construction Grp. (Ltd.), Beijing, China

6

6

China State Construction Eng'g Corp., Beijing, China

7

5

HOCHTIEF AG, Essen, Germany

8

9

China Metallurgical Group Corp., Beijing, China

9

10

Bechtel, San Francisco, Calif., U.S.A.

10

8

Grupo ACS, Madrid, Spain

Source: ENR

Exhibit 18: Future Investment Plan of CSCEC

(100 million yuan)

Business fields

2010

2011

2012

Total

Building construction

25.25

20.00

20.00

65.25

Infrastructure

73.02

54.04

20.00

147.07

Real estate

274.98

86.53

67.17

428.68

Total

373.25

160.58

107.17

640.99

Source: CSCEC's Internal Documents

Exhibit 19: Assets and Liabilities of CSCEC, Ltd. (consolidated)

Assets

(10 thousand yuan)

Items

2010/12/31

2009/12/31

2008/12/31

2007/12/31

Amounts

Shares

Amounts

Shares

Amounts

Shares

Amounts

Shares

Current assets

32,515,726

81.79%

25,212,576

86.17%

17,492,022

85.67%

14,201,634

85.58%

Monetary fund

8,209,860

206.52%

7,897,382

26.99%

3,415,577

16.73%

2,598,844

15.66%

Account receivable

4,806,384

12.09%

3,928,444

13.43%

3,310,336

16.21%

3,089,151

18.62%

Imprested funds

1,782,343

4.48%

2,768,487

9.46%

1,074,359

5.26%

962,625

5.80%

Other AR

951,398

2.39%

955,509

3.27%

1,062,250

5.20%

945,276

5.70%

Inventories

11,567,858

29.10%

5,864,948

20.05%

5,710,446

27.97%

4,319,378

26.03%

Unsettled funds for completed projects

4,427,412

11.14%

3,314,244

11.33%

2,625,929

12.86%

2,133,038

12.85%

Others

770,471

2.62%

Non-current assets

7,238,186

18.21%

4,045,839

13.83%

2,924,756

14.33%

2,392,273

14.42%

Long-term AR

2,302,416

5.79%

1,261,732

4.31%

593,055

2.90%

460,405

2.77%

Long-term stockholder's rights

1,565,826

3.94%

438,358

1.50%

344,398

1.69%

335,432

2.02%

Real estate investment

822,500

2.07%

442,109

1.51%

253,446

1.24%

138,504

0.83%

Fixed assets

1,116,878

2.81%

1,052,188

3.60%

829,576

4.06%

710,453

4.28%

Intangible assets

602,815

1.52%

423,112

1.45%

315,387

1.54%

309,353

1.86%

Others

827,751

11.44%

Total assets

39,753,912

100.00%

29,258,416

100.00%

20,416,777

100.00%

16,593,908

100.00%

Liabilities

(10 thousand yuan)

Items

2010/12/31

2009/12/31

2008/12/31

2007/12/31

Amounts

Shares

Amounts

Shares

Amounts

Shares

Amounts

Shares

Current liabilities

22,118,356

75.16%

16,249,981

79.56%

13,369,649

77.08%

11,326,028

80.95%

Short-term loans

1,061,151

3.61%

590,591

2.89%

1,396,919

8.05%

1,250,846

8.94%

Account payable

10,045,538

34.14%

7,225,789

35.38%

5,421,844

31.26%

4,757,209

34.00%

Advance receipt funds

4,379,768

14.88%

3,809,040

18.65%

2,830,588

16.32%

2,089,559

14.93%

Settled funds for uncompleted projects

952,833

3.24%

752,444

3.68%

592,011

3.41%

422,949

3.02%

Other AP

1,700,490

5.78%

1,335,934

6.54%

1,143,675

6.59%

1,318,735

9.43%

Others

3,978,576

13.52%

Non-current liabilities

7,309,509

24.84%

4,175,730

20.44%

3,975,763

22.92%

2,665,851

19.05%

Long-term loans

3,368,430

11.45%

2,343,141

11.47%

2,286,007

13.18%

1,568,171

11.21%

Bond payable

2,806,241

9.54%

1,147,570

5.62%

1,124,607

6.48%

523,723

3.74%

Others

1,134,838

3.86%

Total liabilities

29,427,864

100.00%

20,425,711

100.00%

17,345,412

100.00%

13,991,879

100.00%

Net assets (owners' equity)

10,326,048

8,832,705

3,071,365

2,602,029

Source: Annual Reports of CSCEC

Appendix: Representative architectures completed or under construction by CSCEC in recent years

Figure

Figure

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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