Saudi Arabia and China announce large-scale housing development

We are used to seeing Chinese companies deliver massive infrastructure projects, particularly in the third world, but far less is reported about their abilities to provide new homes outside of their own country, but all that is changing with news that the housing market in Saudi Arabia is about to experience a significant boost, writes John Ridgeway.

A recent agreement between the Saudi National Housing Company (NHC) and two major Chinese construction companies - China State Construction Engineering Corporation (CSCEC) and China Machinery Engineering Corporation (CMEC), is set to deliver a staggering 40,000 new housing units across various regions of the Kingdom, a move which highlights China’s growing impact on the world’s construction markets.

The agreement focusses on the Saudi government's commitment to increasing the real estate supply and meeting the housing needs of its citizens. NHC's ambitious target of delivering over 300,000 housing units by 2025, valued at over a quarter of a trillion riyals, is a testament to this commitment. These units are designed to cater to all segments of society, ensuring wider accessibility and affordability.

The China connection

The collaboration with Chinese construction giants like CSCEC and CMEC signifies a strategic partnership between Saudi Arabia and China. This is not an isolated event – Talk.Build understands that the Saudis have signed additional agreements to establish an industrial and logistics city specifically for building materials. This focus on securing a dedicated supply chain bodes well for the timely and efficient execution of these large-scale housing projects.

China has emerged as a major player in the global construction industry in recent years, leveraging its vast resources and expertise to undertake ambitious projects worldwide as part of its one belt, one road initiative. This ambitious infrastructure development programme by the Chinese government aims to connect China to other countries in Asia, Africa and Europe through a network of land and maritime routes. Construction projects associated with this initiative span continents, showcasing China's vast construction capabilities.

China has been instrumental in the development of several key infrastructure projects in Kenya, including the standard gauge railway connecting Mombasa to Nairobi. This project has significantly improved transportation efficiency within the country. It has also been a major partner in Sri Lanka's infrastructure development, contributing to projects such as the Colombo Port City, a large-scale land reclamation project intended to create a new commercial and financial hub.

Competitors would argue that China succeeds in these areas because its construction companies can often offer competitive pricing due to economies of scale and government support. China also has a vast pool of skilled construction workers and engineers. Decades of experience in large-scale infrastructure projects in their own country have honed their expertise in various construction methods and technologies.

In addition, the Chinese government actively encourages its construction companies to expand their operations overseas. This strategy serves a dual purpose: securing new markets for Chinese firms and fostering closer economic ties with partner countries.

Potential advantages of Chinese involvement

For developing nations, partnering with Chinese construction companies can offer several advantages. Chinese firms can provide much-needed capital for infrastructure projects that might not be readily available through traditional means. The country’s proven track record in delivering large-scale projects on time and within budget can also be a major draw for countries seeking rapid development.

Furthermore, collaboration with Chinese firms can expose local construction companies to new technologies and techniques, potentially leading to long-term advancements in the domestic construction sector. However, while Chinese involvement in international construction offers potential benefits, there are also challenges that need to be addressed

Some countries have fallen into significant debt after taking on large loans for Chinese-backed infrastructure projects. Careful financial planning and risk assessment are crucial to avoid unsustainable debt burdens. Large-scale construction projects can also have a significant impact on the environment. Partner countries need to ensure that environmental regulations and sustainability practices are adhered to during project execution.

All this means is that the increasing role of China in global construction presents both opportunities and challenges. To maximise the benefits and mitigate potential risks, responsible and sustainable partnerships are key. Clear contracts and transparent procurement processes are essential to ensure fair competition and prevent corrupt practices.

Environmental impact assessments and adherence to green building practices should also be prioritised throughout the construction lifecycle. Furthermore, partnerships should foster knowledge transfer and skills development for local workforces, promoting long-term sustainability and reducing dependence on foreign expertise.

That said, when you look at the Global expertise that China offers, it is easy to see the benefits the Saudi-China housing agreement will deliver. The influx of 40,000 new housing units will significantly improve housing availability and affordability in Saudi Arabia. Furthermore, the establishment of the dedicated building materials logistics city has the potential to streamline construction processes and contribute to overall infrastructure development.

It is also likely that collaboration with experienced Chinese construction companies, as already mentioned, could lead to knowledge transfer and the adoption of innovative construction techniques in Saudi Arabia.

However, this initiative may come at a cost. Concerns have been raised regarding the labour practices of some Chinese construction companies operating overseas. Saudi Arabia may have to ensure adherence to fair labour practices during the project execution. Overreliance on Chinese technology and expertise could also limit opportunities for local Saudi Arabian construction companies to participate and develop their own capabilities.

The agreement between NHC and the Chinese construction companies marks a significant step towards addressing Saudi Arabia's housing needs. The success of this collaboration will hinge on factors such as efficient project management, adherence to quality standards, and ensuring the involvement and development of the domestic construction sector. But it all seems to add up to a win-win situation, a partnership that can pave the way for a more sustainable and prosperous housing future for Saudi Arabia.